Epic Games v. Apple

Since as early as 2017, Epic Games' co-founder and CEO Tim Sweeney had questioned the need for digital storefronts like Valve's Steam, Apple's iOS App Store, and Google Play, to take a 30% revenue sharing cut, and argued that when accounting for current rates of content distribution and other factors needed, a revenue cut of 8% should be sufficient to run any digital storefront profitably.[1] While a 30% revenue cut was an industry standard across computers, consoles, and mobile platforms in 2019,[2] Sweeney stated that higher revenue shares made sense on consoles where "there's enormous investment in hardware, often sold below cost, and marketing campaigns in broad partnership with publishers", but did not extend to open platforms like mobile devices and personal computers.[3] Part of the reasoning for creating the Epic Games Store was to demonstrate that Epic could operate at a lower revenue cut (12%).[4]

As Fortnite expanded from personal computers to other platforms with the popularity of the Battle Royale mode in 2018, Epic Games sought to bring the free-to-play game to mobile devices. When Epic first released its Android client, it offered it as a sideloaded package rather than as a Google Play store app, as they did not want Google to take any revenue from the microtransactions in the game.[5] However, this resulted in a number of security concerns and numerous unscrupulous clones attempting to pass themselves off as the real Fortnite game in the Google Play store,[6] and by April 2020, Epic discontinued the sideloaded version and placed the game on the Google Play store.[7] As Apple does not allow sideloading on iOS devices, Epic had just released the client on the App Store directly in 2018.[8]

In mid-2020, Sweeney reiterated his stance on the 30% revenue cut that Apple and Google took, ahead of a large United States Congressional hearing investigating antitrust charges on the Big Tech companies including Google, and during similar investigations of Apple in the European Union.[9] Sweeney said in a July CNBC interview that "Apple has locked down and crippled the ecosystem by inventing an absolute monopoly on the distribution of software, on the monetization of software", and "Google essentially intentionally stifles competing stores by having user interface barriers and obstruction".[10] Sweeney further stated that "If every developer could accept their own payments and avoid the 30% tax by Apple and Google we could pass the savings along to all our consumers and players would get a better deal on items. And you'd have economic competition."[10] After Apple stated that cloud gaming services like Microsoft's xCloud were not allowed on the iOS platform as they would allow content that bypassed Apple's content review, Sweeney wrote "Apple has outlawed the metaverse. The principle they state, taken literally, would rule out all cross-platform ecosystems and games with user created modes: not just xCloud, Stadia, and GeForce NOW, but also Fortnite, Minecraft, and Roblox."[11]

On August 13, 2020, Epic Games updated Fortnite across all platforms, including the iOS and Android versions, to reduce the price of "V-Bucks" (the in-game currency) by 20% if they purchased directly from Epic. For iOS and Android users, if they purchased through the Apple or Google storefront, they were not given this discount, as Epic said they could not extend the discount due to the 30% revenue cut taken by Apple and Google.[12] Within hours, both Apple and Google had removed Fortnite from their storefronts stating the means of bypassing their payment systems violated the terms of service.[13][14]

Epic immediately filed separate lawsuits against Apple and Google for antitrust and anticompetitive behavior in the United States District Court for the Northern District of California.[15] Epic retained the legal counsel of Christine A. Varney, formerly lead of the Antitrust Division of the U.S. Department of Justice under the Obama administration, for both cases.[16] As part of the suit against Apple, Epic also released a video called "Nineteen Eighty-Fortnite", parodying Apple's "1984" advertisement using Fortnite assets, which Epic points out in their lawsuit had been used by Apple then to challenge the weight of IBM at the time.[15] In its suit against Apple, Epic accused Apple of antitrust behavior with its practices around the App Store and its payment system, charging that these were in violation of the federal Sherman Act and the California Cartwright Act.[17] In its suit towards Google, Epic challenged Google's past mantra of "Don't be evil" and claimed that its practices around the Google Play store and its payment system violate the Sherman Act and California's Cartwright Act.[18] Epic stated that Google's restrictions on the Android system interfered with deals for pre-loading Fortnite on phones from OnePlus and LG.[19] They state in the claim "Notwithstanding its promises to make Android devices open to competition, Google has erected contractual and technological barriers that foreclose competing ways of distributing apps to Android users, ensuring that the Google Play Store accounts for nearly all the downloads of apps from app stores on Android devices."[18] Epic did not seek monetary damages in either case but instead was "seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers."[17] In comments on social media the next day, Sweeney said that they undertook the actions as "we're fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly. The primary opposing argument is: 'Smartphone markers can do whatever they want.' This as an awful notion. We all have rights, and we need to fight to defend our rights against whoever would deny them."[20]

Google, in response to the lawsuit, stated to The Verge that "For game developers who choose to use the Play Store, we have consistent policies that are fair to developers and keep the store safe for users. While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies. However, we welcome the opportunity to continue our discussions with Epic and bring Fortnite back to Google Play."[18] By August 17, 2020, Apple had informed Epic that it would terminate its access to developers accounts and tools for the App Store and iOS and macOS by August 28, 2020. This led Epic to file a motion for a preliminary injunction to block this as well as prevent Apple from delisting Fortnite from the App Store, asserting that lack of access to the development tools for iOS and macOS would affect Unreal Engine development and subsequently impact all developers that used the engine.[21][22] Apple stated in response to the request for preliminary injunction that Epic had approached them in June to ask for a special deal for Epic to operate Fortnite on the App Store to allow users to pay Epic directly, and when Apple had failed to grant them this, Epic had contacted them prior to updating the version on August 13, 2020, to state they were willingly going to violate the App Store terms. Apple further requested the court deny Epic the preliminary junction, calling the "emergency" situation one that Epic had created itself.[23] Sweeney stated in response that as his emails in Apple's complaint said, he was looking for Apple to extend to this type of exemption to all iOS developers and not just for Epic Games.[24] Epic filed a response to Apple's complaint with support of Microsoft, specifically asking the court to block Apple from taking away its iOS development tool access as this would impact all developers that have used the Unreal Engine. Microsoft wrote in their support, "Denying Epic access to Apple's SDK and other development tools will prevent Epic from supporting Unreal Engine on iOS and macOS and will place Unreal Engine and those game creators that have built, are building, and may build games on it at a substantial disadvantage."[25]

On August 24, 2020, after a court hearing Judge Yvonne Gonzalez Rogers granted Epic's request to prevent Apple from taking away its developer licenses for iOS and macOS, but did not grant the preliminary injunction to overturn Apple's decision to remove Fortnite from the iOS store. Rogers wrote that the removal of the developers licenses had "potential significant damage to both the Unreal Engine platform itself, and to the gaming industry generally" and Apple "has chosen to act severely" in threatening that step. On terms of Fortnite, Rogers agreed with Apple that "Epic Games has not yet demonstrated irreparable harm. The current predicament appears of its own making."[26] Subsequently, Apple terminated Epic's iOS developer account on August 28, 2020, thereby preventing the company from uploading further material to the App Store but otherwise still being able to develop for the platform.[27]

Prior to the first hearing on September 28, 2020, Epic filed paperwork ahead of the hearing in which they intend to seek a preliminary injunction to require Apple to rehost Fortnite.[28]

Companies like Facebook, Spotify, and the Match Group supported Epic Games in their lawsuit and spoke of their own past issues with Apple's App Store policies related to their services.[39] Digital Content Next, a non-profit trade group representing media outlets like The New York Times and The Wall Street Journal, also backed Epic's suit, asserting among other issues that Apple has given out uniquely favorable deals to some providers like Amazon but not to others.[40]

After the initial ban, some users attempted to auction iPhones with Fortnite still installed with prices as high as tens of thousands of dollars.[41] By the time the game was actually removed from the App Store, it did not surprise many users as most people were anticipating it from the beginning and it seemed that many players purely jumped "on board for the memes", according to Polygon.[42] In September 2020, Epic Games, together with other thirteen companies launched the Coalition for App Fairness, which aims for better conditions for the inclusion of apps in the app stores.[43]

On October 8, 2020, Microsoft announced a commitment to ten fairness principles in the operation of its Microsoft Store on Windows 10, which included promises of transparency over its guidelines, not blocking competing app stores from being used on Windows, and not removing apps from the store based on their business model, how they handle payments, or how their services are delivered.[44]

In December 2020, Apple announced that they would be lowering the revenue cut Apple takes for app developers making $1M or less from 30% to 15% if app developers fill out an application for the lowered revenue cut.[45]

The events and initial actions on Epic's lawsuit against Google were brought on the same day as Epic's suit against Apple, but Google stressed the legal situation around their case is far different. Google asserted that the Android operating system does not have the same single storefront restriction as Apple's iOS, and thus allows different Android phone manufacturers to bundle different storefronts and apps as they desire. Google said they are negotiating with Epic Games far differently from Apple in their case.[46]

In December 2020, Epic Games filed separate complaints against Apple and Google in the United Kingdom's Competition Appeal Tribunal related to the companies' anticompetitive behavior in both the UK and European Union, with similar charges as Epic asserted in their U.S. cases.[47] They have also launched legal action in Australia.[48][49]