Fri, 14 Aug 2020 09:40:33
Game developer and publisher Epic Games has filed a lawsuit against Apple following the removal of the iOS version of its battle royale game Fortnite from the App Store earlier today.
The legal complaint, filed in the US District Court for the Northern District of California, seeks to establish Apple’s App Store as a monopoly, and the civil suit is seeking injunctive relief to “allow fair competition” in mobile app distribution. Epic effectively provoked Apple’s removal of Fortnite earlier today when it implemented its payment processing system into the iOS version of the battle royale hit, an apparent violation of Apple’s App Store guidelines.
“Epic brings this suit to end Apple’s unfair and anti-competitive actions that Apple undertakes to unlawfully maintain its monopoly in two distinct, multibillion dollar markets: (i) the iOS App Distribution Market, and (ii) the iOS In-App Payment Processing Market(each as defined below),” the complaint reads.
“Epic is not seeking monetary compensation from this Court for the injuries it has suffered. Nor is Epic seeking favorable treatment for itself, a single company. Instead, Epic is 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.”
Here are Epic’s primary claims in support of the argument Apple has violated US antitrust law:
Apple unlawfully maintains its monopoly power in the iOS App Distribution Market through the anti-competitive acts described herein, including by imposing technical and contractual restrictions on iOS, which prevents the distribution of iOS apps through means other than the App Store and prevents developers from distributing competing app stores to iOS users.
Apple unlawfully maintains its monopoly power in the iOS App Distribution Market through its unlawful denial to Epic and other app distributors of an essential facility—access to iOS—which prevents them from competing in the iOS App Distribution Market.
To reach iOS users, Apple forces developers to agree to Apple’s unlawful terms contained in its Developer Agreement and to comply with Apple’s App Store Review Guidelines, including the requirement iOS developers distribute their apps through the App Store. These contractual provision unlawfully foreclose the iOS App Distribution Market to competitors and maintain Apple’s monopoly.
Apple has unlawfully maintained its monopoly in these markets through the anti-competitive acts alleged herein, including by forcing, through its contractual terms and unlawful policies, iOS app developers that sell in-app content to exclusively use Apple’s In-App Purchase, and preventing and discouraging app developers from developing or integrating alternative payment processing solutions.
To reach iOS app users, Apple forces developers to agree to Apple’s unlawful terms contained in its Developer Agreement, including that they use Apple’s InApp Purchase for in-app purchases of in-app content to the exclusion of any alternative solution or third-party payment processor. Further, Section 3.1.3 of Apple’s App Store Review Guidelines unlawfully prohibits developers from “directly or indirectly target[ing] iOS users to use a purchasing method other than in-app purchase”.
Apple is able to unlawfully condition access to the App Store on the developer’s use of a second product—In-App Purchase—for in-app sales of in-app content. Through its Developer Agreement and unlawful policies, Apple expressly conditions the use of its App Store on the use of its In-App Purchase to the exclusion of alternative solutions in a per se unlawful tying arrangement.
Epic is alleging Apple has a monopoly in the form of the iPhone, the iOS ecosystem, and the App Store that binds them together, and that Apple places unreasonable restrictions on the distribution of iOS apps — again, the only way to get software onto the iPhone (or iPad). The complaint is also alleging Apple places unreasonable restrictions on payment processing within iOS apps.
Epic doesn’t take issue with the fact that Apple requires developers to use the App Store. Rather, the game studio thinks it’s unfair Apple requires you to use its payment methods, which thereby gives Apple 30 percent of all in-app revenue on the digital goods that make up the entirety of Fortnite’s business model.
“Apple is able to unlawfully condition access to the App Store on the developer’s use of a second product—In-App Purchase—for in-app sales of in-app content,” the complaint reads. “Through its Developer Agreement and unlawful policies, Apple expressly conditions the use of its App Store on the use of its In-App Purchase to the exclusion of alternative solutions in a per se unlawful tying arrangement.”
Epic in its complaint leans heavily on the Sherman Antitrust Act of 1890, a monumental piece of antitrust legislation in the US used to break up monopolies during the turn of the 20th century. It remains the pillar of US antitrust law, and Epic claims Apple has violated six separate accounts of the Sherman Antitrust Act: an “unlawful monopoly” in the form of the App Store; “denial of the essential facility” in iOS app distribution; “unreasonable restraints of trade” in iOS app distribution; and then similar counts for in-app payment processing on iOS.
The final count referencing the Sherman Act is over Apple “tying the App Store in the iOS App Distribution Market to In-App Purchase in the iOS In-App Payment Processing Market” — effectively creating what Epic sees as a monopoly harming competition and causing harm to consumers through inflated pricing. (The complaint also accuses Apple of three counts of violating the California Cartwright Act, a state antitrust law prohibiting price-fixing and trade restraint agreements, and one count of violating California Unfair Competition Law.) Epic can make the pricing argument because it specifically lowered prices on its in-game Fortnite currency when it implemented its payment processing system, saying it was passing the savings onto consumers in what is now a clear ploy to paint Apple’s decision as anti-consumer.
“In other words, app developers are coerced into using In-App Purchase by virtue of wanting to use the App Store. Apple’s unlawful tying arrangement thus ties two separate products that are in separate markets and coerces Epic and other developers to rely on both of Apple’s products,” the complaint explains. “Epic has been harmed by Apple’s anti-competitive conduct in a manner that the antitrust laws were intended to prevent. Epic has suffered and continues to suffer harm and irreparable injury, and such harm and injury will not abate until an injunction ending Apple’s anti-competitive conduct issues.”
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