Can “Fortnite” maker Epic Games single-handedly bust up the longstanding 30% app “tax” levied by Apple and Google — fees Epic calls “exorbitant” and the result of “unlawful monopoly”? Not everyone believes the odds are in Epic’s favor.
In a highly orchestrated campaign Thursday, Epic Games set the bait for the legal — and public relations — battle by announcing it was giving “Fortnite” users a 20% price break if they purchased in-app game currency directly, bypassing the two big app stores. Citing the violation of their rules, “Fortnite” was promptly banned from Apple’s App Store and Google Play. And that’s exactly what Epic Games CEO Tim Sweeney and his team expected to happen.
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The booting of “Fortnite” off the app stores gave Epic the opening it needed to sue both companies, alleging anticompetitive behavior and unfair competition.
“Apple imposes unreasonable and unlawful restraints to completely monopolize both markets and prevent software developers from reaching the over 1 billion users of its mobile devices (e.g., iPhone and iPad) unless they go through a single store controlled by Apple, the App Store, where Apple exacts an oppressive 30% tax on the sale of every app,” Epic says in the lawsuit against Apple.
The Google Play store also amounts to a monopoly, accounting for more than 90% of Android app downloads, Epic says in the complaint against Google. Developers that distribute their apps through the Google Play Store are barred from offering alternate payment-processing options besides Google’s.
In a jujitsu-like flourish showing the “Fortnite” fight is as much about rallying fans — and winning in the court of public opinion — Epic Games turned idealistic rhetoric used by Apple and Google against the two giants.
Yesterday Epic released “Ninety Eighty-Fortnite” (pictured above) promoted with the hashtag #FreeFortnite, a spoof of Apple’s famous Orwellian “1984” Super Bowl ad in which the company styled itself as the free-thinking underdog to IBM’s Big Brother. Today, according to Epic, Apple is acting like Big Brother. “Epic respectfully requests this Court to enjoin Apple from continuing to impose its anticompetitive restrictions on the iOS ecosystem and ensure 2020 is not like ‘1984,’” the company says in the Apple complaint.
Meanwhile, citing Google’s founding “Don’t Be Evil” principle, Epic Games says in that lawsuit, “Twenty-two years later, Google has relegated its motto to nearly an afterthought, and using its size to do evil upon competitors, innovators, customers, and users in a slew of markets it has grown to monopolize.”
The Epic lawsuits had apparently been months in the drafting, and the company enlisted big-name antitrust lawyers, including Christine A. Varney of Faegre Drinker Biddle & Reath, who was U.S. Assistant Attorney General for antitrust in the Obama administration.
Such antitrust lawsuits by private companies aren’t unusual. But what was atypical was Epic’s highly coordinated attack, and the fact that the company is asking only for injunctive relief rather than monetary damages, said Vanderbilt University Prof. Rebecca Allensworth, who specializes in antitrust law.
“Epic is sending a clear message: It’s not seeking remedy for some harm specific to ‘Fortnite,’ but rather it’s taking on [Apple and Google’s] monopoly in a broad sense,” Allensworth said.
Epic’s legal gambit also is strategically timed to follow last month’s House Antitrust Hearing in which the allegedly anticompetitive practices of Apple’s App Store, in particular, were put under the microscope. In its complaint against Apple, Epic cited the critique of Rep. Hank Johnson (D-Ga.), who pointed out that app developers “have no choice but to go along with [Apple’s policies] or they must leave the App Store. That’s an enormous amount of power.”
To win the case against Apple, Epic will have to show that Apple’s policies aren’t just about the revenue that the 30% commission represents, “but rather are about keeping competitors like Epic — platforms that could compete with Apple’s ‘ecosystem’ — from gaining market share,” according to Allensworth.
Epic is taking an interesting legal tack in alleging that Apple’s iOS is an “essential facility.” Allensworth said that’s an antitrust doctrine that was disfavored in the early 2000s, but “may be making a comeback in light of the competition problems we now more fully recognize in dominant digital platforms.”
The “Fortnite” challenge to Apple and Google app stores is “not black and white, but full of gray, and it responds to public opinion, political pressure, and changes in economics and technology,” she noted.
In other words, the case is not a slam-dunk. And Epic’s bid to crack the edifice of Apple’s App Store, for one, is a long shot, according to Wedbush Securities analyst Dan Ives.
“[L]egally Apple has successfully defended its App Store moat again and again with this time being no different in our opinion,” Ives wrote in a research note. He called the situation “a high-stakes game of poker”: “Apple needs to make sure the Epic challenge, which is timely in light of antitrust swirls and growing opposition to Big Tech within the Beltway, does not create a ripple impact which developers globally are watching carefully.”
Separately, Apple and Google are among tech companies targeted by various government antitrust probes, including by the Justice Department, FTC and states attorneys general. In June, the European Union formally opened an antitrust investigation into Apple’s App Store business practices, following a complaint from Spotify.
And in 2018, Apple was socked with a class-action lawsuit alleging the App Store operates an illegal monopoly on iPhone apps, which the Supreme Court last year allowed to proceed.
“The American public’s tolerance for antitrust violations and monopoly control is waning fast,” Sandeep Vaheesan, legal director of progressive advocacy group Open Markets Institute, said in a statement Friday. “The recent Big Tech hearing was the rallying cry that Americans needed, and we’re seeing a quick payoff. This lawsuit between Epic Games and Apple epitomizes the serious dangers posed by unchecked tying and other exclusionary practices by monopolists and other dominant firms.”
Along with “Fortnite,” Epic Games is the creator of “Gears of War,” “Shadow Complex” and the “Infinity Blade” series of games. Founded in 1991, the company makes its multiplatform Unreal Engine technology freely available to game developers worldwide.
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