With Epic Games and Apple appearing before a judge in their high-profile lawsuit in just a few weeks, new lawsuits from both companies outline the evidence and arguments each intends to make in detail.
Not surprisingly, each document paints a radically different picture of Apple̵
The disagreement between the two companies escalated publicly when Epic tried to implement its own payment system in the app in Fortnite, one of the most popular games on the Apple App Store. This triggered a series of incidents that led to Apple’s removal Fortnite from the App Store when Epic ran a social media campaign around the hashtag “#SaveFortnite”, exploiting angry gamers against the technology giant.
Epic then went to court against Apple, claiming that the latter iOS App Store is a monopoly, and its policy that app developers who publish to iOS must use Apple’s own payment system (among other limitations in Apple’s review process) is anti-competitive.
Both Apple and Epic were required to file “Findings of Fact and Conclusions of Law” prior to the trial. The documents are long and detailed, but find some important arguments summarized below.
The pinnacle of Apple’s argument (key aspects that we have already covered in some detail before) is that developers have the ability to develop and publish games for many other competing devices and platforms, including store fronts from companies like Sony or Nintendo that enforce similar rules and fees. Developers can also publish online, where experiences will still be available to iPhone users, even if developers choose not to comply with the rules in the App Store and publish there.
Because Apple is only one of many players in a broader competitive market for video game transactions, and it does not control the entire market, it does not have a monopoly, the company claims. Here is an excerpt from Apple’s archive:
Apple does not have a monopoly or market power in the relevant product market for gaming app transactions. And there is no claim that it had such power when the relevant restrictions were imposed around the launch of the App Store.
Apple has no obligation to license its intellectual property rights, and except for a limited exception that does not apply here, companies are free to choose the parties they want to negotiate with, as well as prices, terms and conditions for that trade.
Apple says the 30 percent commission charged to developers who earn more than $ 1 million a year in the app market is an industry-standard rate that does not represent an anti-competitive strategy.
The archive claims that a cut like this is reasonable because Apple has spent billions on developing and maintaining infrastructure that makes developers’ success on the platform possible, from the App Store itself to various APIs and other software development tools. Apple reveals that Epic earned $ 700 million on the iOS platform in just two years Fortnite to be available on iPhones and iPads.
Also the key to Apple’s argument is the claim that the special Epic update to Fortnite which led to the game being removed from the App Store, was planned months or even years in advance with the specific intent of waging a broad PR battle to make Apple look bad. If the judge agrees with that interpretation of Epic’s actions, it could weaken Epic’s case, which Apple unfairly removed. Fortnite from the App Store after Epic submitted the game for approval in good faith.
The biggest difference played in Epic’s own argument is that iOS is a whole market in itself and not just one of many competing products in a larger marketplace for video game transactions. If the judge agrees with this classification, it may be more likely that Apple will be seen as monopolistic.
Another important part of Epic’s argument involves comparing and contrasting iOS with macOS. Apple claims that its strict rules about what apps can and cannot do in the iOS App Store, at least in part driven by concerns about security and privacy for users. However, Epic points out that Apple claims that macOS is secure and private without imposing all the same restrictions on the Mac operating system.
This is the key to Epic’s case that Apple has enforced its iOS App Store rules for business reasons rather than user-centric ones such as security or privacy, which could undermine part of Apple’s case.
Epic claims that Apple’s controversial App Review process “does nothing to keep iOS devices secure”, and claims that Apple has on several occasions screened apps “primarily for non-security issues – including specifically for competitive purposes.”
Epic highlights Apple’s policy that apps must use Apple’s own payment system (and thus give Apple a 15 percent to 30 percent cut in revenue) as one that has no security benefits. The submission states:
There were no widespread or significant security issues regarding payment with the App Store prior to the introduction of IAP or the requirement that apps that sell subscriptions use IAP instead of alternative payment solutions, nor evidence that IAP is far better than third-party payment options in terms of Safety.
As a side note we thought it was worth mentioning, Epic says in its archive that its own PC-based gaming market will currently be profitable in 2023. The company spent significantly on marketing, user acquisition and exclusions to expand its installation base early in the year, as all led to expected losses in the first years of operation.
The judge’s decision could have far-reaching consequences for not only Apple and Epic, but many other companies that trade in digital software, from platforms to individual developers.
Both Apple and Epic themselves have made huge efforts in the outcome of this case. If the judge fully accepts Epic’s arguments, Apple will face an existential threat to a core part of the product development philosophy and business strategy that goes back many years, and the consequences of a full decision in Epic’s favor will be far-reaching for the future. by Apple.
Epic does not have much to lose when it comes to the status quo position, without a doubt, but the company has a huge amount to gain if it should come forward. If it defeats Apple on this battlefield, the floodgates could open for Epic to launch its own store on iOS – and perhaps, after setting a precedent, on other gaming platforms such as those owned by Nintendo, Sony or Microsoft.
The two arguments characterize Apple’s App Store completely differently, and it’s clear that the App Store has become something of a Rorschach test for spectators.
There are many dimensions to the case that could end up being critical of the judge’s conclusions, such as the question of whether Apple’s app review process actually provides security or privacy benefits for users, whether Epic pressured the app review policy insulting. Fortnite update in good faith and more.
Wait until May
But the lawsuit may first and foremost come down to this question: Does Apple’s App Store – despite a minority installation base in the mobile area (Google’s competing Android platform has more than 70 percent market share) and the presence of many strong competitors in the video game industry —Create its own marketplace that the company can have a monopoly on?
Or is the App Store just one of many digital marketplaces in a large and healthy competitive gaming industry, on a minority market platform – with the implication that Apple does not really restrict developers’ access to the market in a restrictive way, because Apple does not have that kind of power over it bigger marketplace?
We’ll see the arguments move forward when the trial begins May 3 in Oakland, California, provided there are no delays.