The Epic Games “Fortnite” versus Apple’s App Store antitrust trial starts on Monday. Here’s what you need to know before it gets going.
Within the space of a few weeks, a disagreement between the ambitions of Epic Games and the intention to maintain the App Store status quo by Apple has courted considerable controversy. The affair commenced with little warning to consumers but quickly led to international interest, as the battle sought to change one of the fundamental elements of the App Store: how much Apple earns.
Apple’s dominance has already led to an antitrust probe by the U.S. Justice Department into the App Store’s fees and policies. Still, the disagreement between Apple and Epic is being made in a more public way and directly affects younger customers.
While the fight is mostly between Epic Games and Apple, it has already seen other parties wading in with their observations and opinions on the matter, including developers of other apps included in the App Store. Simultaneously, as Apple received scrutiny over its policies, Epic itself has also come under fire for how it handled the situation, including forcing it to happen and orchestrating a premeditated response.
Here’s how it all came about.
Epic updates Fortnite, Apple pulls it down
The main triggering event occurred on August 13, when Epic updated the Fortnite app with a new feature, one that allowed consumers to pay Epic directly for in-app currency at a discount, rather than paying traditionally via Apple’s App Store payment mechanism. Offering the option enabled Epic to skirt App Store rules that demanded payments go through the App Store payment system, paying a 30% fee in the process.
The fee is a non-negotiable element for the vast majority of apps, but there are some exceptions. For a start, the rule pertains to digital goods, with exceptions made for physical goods, such as online retailers and restaurants. At the same time, subscriptions can pay a smaller cut of the transaction fee in many situations.
The change was not limited to just the iOS version of the game, as it was similarly applied to the Android version, again going against the Google Play Store’s similar policy and fees.
As was to be expected, Apple pulled the game from the App Store for violating the App Store guidelines within hours of the update’s appearance. Similarly, Google also pulled the game from the Google Play Store, though on Android, the game is still available via third-party stores and from Epic directly.
Lawsuit and Marketing
The same day as the removal, Epic filed a lawsuit against Apple in the U.S. District Court for the Northern District of California, in retaliation for pulling the game. It laid another lawsuit against Google for its “Fortnite” removal.
The complaint from Epic took an accusatory stance, declaring Apple had become a “behemoth seeking to control markets, block competition, and stifle innovation. The suit also went as far as to alleged Apple’s size and reach “far exceeds that of any technology monopolist in history.”
An important part of the suit is that it isn’t attempting to argue whether Epic was abiding by App Store guidelines but instead fought against the guidelines themselves. Its objections to the policies primarily include Apple’s “exorbitant” 30% commission for in-app purchases.
It also argues that the same policies are anti-competitive by forcing developers to use the App Store. If the rules weren’t there, Epic states it would have released its competing app store.
Epic’s argument disregards the fact that Apple’s App Store and ecosystem is relatively similar to those of Sony’s Playstation and Microsoft’s Xbox platforms, with each forcing the use of a single digital storefront, the usage of specific payment systems, and the taking of a 30% cut of transactions.
At this time, Epic has yet to file lawsuits against either Sony or Microsoft, demanding transaction fee cuts or the ability to operate its digital marketplace.
The filing seeks an injunction to prohibit “Apple’s anti-competitive conduct” and any “equitable relief necessary.”
At the same time as it filed the lawsuit, Epic Games attempted to raise support in the court of public opinion by releasing a video parody of Apple’s famous “1984” Super Bowl commercial. In this version, a Fortnite character smashes a screen displaying a cartoon talking apple, complete with a worm.
While the original framed Apple as the breaker of the aging oppressive IBM’s grasp on computing, the parody seemingly puts Apple in IBM’s place, with Epic instead being the breaker of Apple’s App Store control.
As of August 22, people had viewed the video 5.6 million times. Epic is also attempting to get the social media hashtag #FreeFortnite trending.
The timing of the lengthy lawsuit and the sudden marketing blitz within a few hours of Apple’s takedown of the game strongly suggested at the time Epic had prepared them beforehand, anticipating the app’s removal.
Developer account threat
On August 17, Apple made an offensive move against Epic, which was revealed to the public by Epic over Twitter. Epic alleged that Apple had informed Epic it would be terminating all developer accounts and cutting Epic off from iOS and Mac development tools on August 28.
Naturally, Epic filed a request for a temporary restraining order to prevent Apple from taking “any adverse action against it.” The filing also included a request for the court to prevent Apple from “removing, de-listing, refusing to list or otherwise making unavailable the app Fortnite, including any update thereof, from the App Store on the basis that Fortnite offers in-app payment processing through means other than Apple’s IAP or on any pretextual basis.”
The court filing published by Epic includes the letter sent by Apple to the company, which noted “several violations of the Apple Developer Program License Agreement” by Epic, and that access would be terminated unless the violations were dealt with within 14 days.
To Epic, the removal of developer tools extends far beyond Fortnite, as the company provides the Unreal Engine to thousands of developers for use in their games. By not using developer tools to maintain the macOS and iOS elements of the game engine, it effectively cannot provide support to third-party developers who licensed the technology.
The lawsuit declared, “Apple is attacking Epic’s entire business in unrelated areas.”
Sweeney before and after the takedown
Epic Games CEO Tim Sweeney has been a public critic of the App Store and its fee structure. In an interview in July, Sweeney outlined his insistence that Apple and Google stunt innovation with their respective app store policies.
In the case of Apple, Sweeney called the App Store an “absolute monopoly,” and that Apple “has locked down and crippled the ecosystem by inventing an absolute monopoly on the distribution of software, on the monetization of software.” At the time, Sweeney added that if developers were able to take their payments instead of paying the “30% tax,” the savings could be passed on “to all our consumers and players would get a better deal on items, and you’d have economic competition.”
Sweeney has railed against the transaction fee for quite some time, with comments from 2017 declaring the models “pretty unfair” and that companies like Apple are “pocketing a huge amount of profit from your order – and they aren’t really doing much to help [developers] anymore.”
Epic also operates its app store on PC, as a competitor to Steam and others. While it is beneficial to developers in taking a smaller 12% cut from transactions, the company has also performed activities some may deem as anti-competitive, including paying developers for exclusive game launches that are available only through its storefront and not rivals. Epic has also partnered with Facebook for a timed exclusive on one of its VR games, “Robo Recall,” on the original Oculus Rift.
In a June interview, Sweeney also suggested an Epic Games Store could arrive on mobile platforms in the near future, including an iOS version.
“We think it’s a good way to help the industry forward and it’s another way where Epic as a game developer had built up this audience around Fortnite and learned how to operate a distribution platform on P.C. and Android,” said Sweeney.
On August 15, after the takedown and initial legal action, Sweeney then made the case for the lawsuit in a series of tweets. Characterizing it as being more for consumer and developer choice than more lucrative financial deals, Sweeney suggested it was a fight 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.”
Sweeney also acknowledges the argument that some may see the fight as “just a billion-dollar company fighting a trillion-dollar company about money” before admitting “there’s nothing wrong with fighting about money.”
He qualifies it by declaring, “You work hard to earn this stuff. When you spent [sic] it, the way it’s divided determines whether your money funds the creation of games or is taken by middlemen who use their power to separate gamers from game creators.”
“The fight isn’t over Epic wanting a special deal, it’s about the basic freedoms of all consumers and developers,” Sweeney proposed.
It is worth remembering that Sweeney’s position may not necessarily be entirely altruistic. “Fortnite” is an extremely high earner for Epic, including through in-app purchases on iOS, and has been ever since it first appeared on the App Store in 2018.
As for Epic itself, Chinese tech giant Tencent has a 40% stake in the company. Tencent has been in disagreements with Apple in the past regarding payment processing, with a 2018 spat involving WeChat money transfers between individuals outside of Apple’s payment systems resolved with a “mutual understanding.”
To try and strengthen its position, Epic reportedly sought to find other companies with a similar opinion of the App Store. Epic allegedly contacted other companies in a matter of weeks to try and create a so-called “coalition” of Apple critics.
The list of companies supposedly included Spotify, who did come out in support of Epic’s legal action shortly after it was filed. Spotify is already engaging Apple via an antitrust complaint since 2019.
While it is neither clear if a coalition exists nor what its specific purpose would serve, Epic has seemingly received what it wants in the form of multiple hot-takes criticizing Apple from various corners of the tech industry.
On August 20, a group of major newspaper publishers contacted Tim Cook to urge a change to subscription fees, spurred on by the Epic fight. Current policy has the App Store commission fee set at 30% for the first year’s subscription to a publication via an app, but for subsequent years it reduces down to 15%.
The group of publications, including the Wall Street Journal, the New York Times, and the Washington Post, instead want the 30% charge removed in favor of a reduction down to 15%.
As part of the letter written by trade body Digital Content Next, the group refers to a deal Apple made with Amazon in 2016 that would take a 15% cut of transactions for customers signing up for a Prime Video subscription as an in-app purchase. The letter asked that Apple “clearly define the conditions that Amazon satisfied for its arrangements so that DCN’s member companies meeting those conditions can be offered the same agreement.”
Korean investigation demands
Meanwhile, in Korea, a group of companies has petitioned the Korean Communications Commission, claiming Apple and Google’s in-app purchase rules are illegal. The group, the Korea Startup Forum, objected to how much Apple and Google charge and the lack of alternative payment options.
“While the 30 percent commission rate is too high in itself, it is more problematic that they force a specific payment system for the app markets,” said the consortium. Furthermore, this is said to be more unfair to smaller companies who cannot try and negotiate different commission rates with the app storefronts.
It also suggested that both Apple and Google could raise their fees without consultation, potentially reducing developers’ profits or making apps more expensive to consumers.
Apple’s first statement
Apple’s initial public salvo in the battle on August 18 was a relatively straightforward affair, consisting of a plainly-written statement that accuses Epic of being in the wrong, by not rectifying “the problem Epic has created for itself.”
The statement starts with Apple assuring the reader that the App Store is “designed to be a safe and trusted place for users and a great business opportunity for all developers.”
Apple then mentions how Epic is “one of the most successful developers on the App Store, growing into a multibillion-dollar business that reaches millions of iOS customers,” and that Apple wants to keep Epic in the Apple Developer Program and offering apps in the App Store.
“The problem Epic has created for itself is one that can easily be remedied if they submit an update of their app that reverts it to comply with the guidelines they agreed to and which apply to all developers,” reminds Apple.
The statement concludes, “We won’t make an exception for Epic because we don’t think it’s right to put their business interests ahead of the guidelines that protect our customers.”
More public marketing
In a further bid to capitalize on the anti-Apple sentiment of part of its player base, Epic launched the “FreeFortnite Cup” tournament“FreeFortnite Cup” tournament that starts from August 23. The tournament offers a selection of prizes, including digital items such as the “Tart Tycoon” skin resembling the Apple character from the parody ad.
Physical prizes are also offered by Epic, though again with a decidedly anti-Apple leaning. Approximately 20,000 “Free Fortnite” hats, in a design reminiscent of Apple’s “Think Different” merchandise, are being given away. At the same time, 1,200 other prizes include consoles and computers that are also platforms players can play Fortnite on without going down the Apple route.
Epic has also made its “Free Fortnite” graphic available to players to print onto their clothing and other items in the event they didn’t win. The asset pack does, however, require users to confirm they will leave the text “Free Fortnite” in place on the graphic when used and not to edit it out to leave the rainbow-colored llama head.
Email chains and Apple’s filing
Apple’s first legal response to the Epic lawsuit on Friday was lengthy and interesting for many reasons. It chiefly urged the U.S. federal court in San Francisco to deny Epic’s claims for an “emergency” restraining order that would put Fortnite back in the App Store.
At its core, Apple called out Epic’s behavior of adding its own proprietary payment system that allowed it to bypass the 30% fee as being similar to that of a shoplifter. “If developers can avoid the digital checkout, it is the same as if a customer leaves an Apple retail store without paying for shoplifted product: Apple does not get paid,” the filing states.
The complaint goes on to state Sweeney contacted Apple’s executives asking for a “side letter” from Apple that it would create a “special deal for only Epic that would fundamentally change the way in which Epic offers apps on Apple’s iOS platform,” said Apple App Store chief Phil Schiller.
Specifically, Epic said it wanted to bypass App Store fees by gaining permission to implement direct payment systems. When denied, Sweeney responded informing Apple that Fortnite “will no longer adhere to Apple’s payment processing restrictions.”
The filing, which included a selection of emails between Apple and Epic, refutes Sweeney’s earlier claim of not wanting a “special deal,” as he is seemingly shown to be asking for one.
The email chain starts with a June 30 message from Sweeney to Tim Cook Phil Schiller, Craig Federighi, and Matt Fischer outlining Epic’s intention to use a competing payment processing option. The email also states a wish to create “a competing Epic Games Store app available through the iOS App Store and through direct installation that has equal access to underlying operating system features for software installation and update as the iOS App Store itself has, including the ability to install and update software as seamlessly as the iOS App Store experience.”
Epic gave Apple two weeks to confirm “in principle” to permit the competing app store and payment processing. “If we do not receive your confirmation, we will understand that Apple is not willing to make the changes necessary to allow us to provide Android [sic] customers with the option of choosing their app store and payment processing system,” Sweeney’s message concludes.
On July 10, Apple Vice President & Associate General Counsel Douglas G. Vetter contacts Epic’s general counsel Canon Pence about the “disappointing” email, with a lengthy message outlining why Epic is wrong on this occasion. Pointing out how Epic has earned great success with the App Store, including earning “hundreds of millions of dollars from sales of in-app content,” Vetter outlines “Epic could not have achieved this success without great apps, but it nonetheless underscores the value Apple brings to developers like Epic.”
Vetter points to the security and trust of consumers with the App Store, in his argument against the creation of an Epic Store app, including Apple’s investment in significant resources to ensure app “privacy, security, content, and quality” standards. Apple doesn’t allow other app stores to be offered as Apple would have “no reliable way” to maintain its commitments to consumers over the four areas, and consumers would “hold Apple to account for any shortfall in performance.”
Despite assurances the Epic Store would offer protections on device security and consumer privacy, Apple “cannot be confident that Epic or any developer would uphold the same rigorous standards of privacy, security, and content as Apple.”
Referring to a tweet from Sweeney on June 16 about how it is “up to the creator of a thing to decide whether and how to sell their creation,” Apple agrees with the sentiment. “It seems, however, that Epic wishes to make an exception for Apple and dictate the way that Apple designs its products, uses its property, and serves its customers.”
One week later, Sweeney acknowledges the clear answer to Epic’s requests, while also taking a swipe at the decision for the response to be handed over to Apple’s legal team to create “such a self-righteous and self-serving screed.”
Almost a month later on August 13, Sweeney again emails Apple’s executive team and Vetter, advising Epic will “no longer adhere to Apple’s payment processing restrictions,” by introducing direct payments in the Fortnite app.
“We choose to follow this path in the firm belief that history and law are on our side,” writes Sweeney. “smartphones are essential computing devices that people use to live their lives and conduct their business. Apple’s position that its manufacture of a device gives it free rein to control, restrict, and tax commerce by consumers and creative expression by developers is repugnant to the principles of a free society.”
Sweeney signs off by claiming Epic will “regrettably, be in conflict with Apple on a multitude of fronts – creative, technical, business, and legal” if Apple takes “punitive action” by blocking the app or future updates.
Apple’s last two emails in the chain are from Apple, with one explaining how the Fortnite app is in violation of the App Store Review Guidelines in multiple ways, while the other is the email advising of a termination of Epic’s access to the Apple Developer Program, again for several violations.
Epic counter-argues and Microsoft agrees
On August 23, Epic filed a rebuttal to Apple’s court filing, attempting to poke holes in Apple’s arguments against Epic’s injunction motion the day before it takes place.
Epic’s reasoning included calling Apple’s argument Epic’s requested relief to prevent the revocation of tools as “mandatory rather than prohibitory” as incorrect. Epic stated it wanted to “preserve the status quo.”
On how Apple believes revocation is authorized by contracts, Epic says this is wrong, as Apple “fails to acknowledge the multiple contracts between Apple and Epic affiliates and programmers,” namely licensees.
Arguments about how the “balance of equities tips” in Apple’s favor and the motion’s harm to “the public interest” are both dismissed by Epic as they don’t include actual claims that apply to revoking access to developer tools to work on Unreal Engine.
For Apple’s claim Epic hasn’t provided evidence its Unreal Engine business would be “significantly harmed,” Epic refers to multiple declarations included with the original motion, as well as other elements that surfaced since the filing.
This includes a declaration from Microsoft, where it confirms it has an “enterprise-wide, multi-year Unreal Engine license agreement,” and that it has put significant resources into customizing the engine for its own products, including for iOS devices.
“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,” writes Microsoft.
Epic also goes as far as to declare “The breadth of Apple’s retaliation is itself an unlawful effort to maintain its monopoly and chill any action by others who might dare oppose Apple” in the filing.
On August 24, Apple and Epic met with U.S. District Court Judge Yvonne Gonzalez Rogers for the first legal hearing of the affair.
In the ruling, Epic was found to be unable to demonstrate irreparable harm from Apple’s ban of Fortnite, and that it was a situation of Epic’s own making. Epic’s arguments failed to outweigh “the general public interest in requiring private parties to adhere to their contractual agreements or in resolving business disputes through normal, albeit expedited, proceedings.”
Apple argued that Epic’s integration of direct payments was intentionally made to kick off the legal scrum, which Epic’s lawyers later admitted was true, as it was necessary to force Apple’s hand.
While Fortnite is off the App Store and will remain so for the immediate future, Apple was ordered to not take action against Epic Games International’s developer account. The SARL entity is responsible for licensing Epic’s Unreal Engine, and a ban on that account’s access would restrict updates to the engine, and would hurt developers licensing the software by extension.
“Apple has chosen to act severely, and by doing so, has impacted non-parties, and a third-party developer ecosystem,” wrote Rogers. “In this regard, the equities do weigh against Apple.”
“Epic Games and Apple are at liberty to litigate against each other, but their dispute should not create havoc to bystanders. Certainly, during the period of a temporary restraining order, the status quo in this regard should be maintained,” the motion states.
Apple applauds court
Following the California court ruling, Apple issued a statement to AppleInsider and other venues applauding the decision.
“We thank the court for recognizing that Epic’s problem is entirely self-inflicted and is in their power to resolve. Our very first priority is making sure App Store users have a great experience in a safe and trusted environment, including iPhone users who play ‘Fortnite’ and who are looking forward to the game’s next season,” Apple said.
“We agree with Judge Gonzalez-Rogers that ‘the sensible way to proceed’ is for Epic to comply with the App Store guidelines and continue to operate while the case proceeds. If Epic takes the steps the judge has recommended, we will gladly welcome ‘Fortnite’ back onto iOS. We look forward to making our case to the court in September.”
A hearing on a motion for preliminary injunction against Apple is scheduled for late September.
Epic says it won’t make changes
On August 26, Epic Games told players of “Fortnite” not to expect updates to the app, as Apple was “blocking” updates and new installations via the App Store. While true, the statement avoided mentioning how the situation arose after Epic baited Apple.
The season update on August 27 would be available on all other platforms the game can be played on, but not iPhone, iPad, nor Mac.
The addition to the game’s support pages suggests Epic will continue to refuse to comply with Apple’s guidelines for the foreseeable future, leaving the future of the game in doubt until after legal activities between the two companies cease.
New volleys between the two companies
On the same day that Apple was set to terminate Epic Games’ developer account, the Cupertino tech giant highlighted a prominent “Fortnite” competitor in a piece of editorial content for the App Store.
The editorial content touts a “new era” of “PUBG Mobile,” and is especially ironic amid the ongoing legal battle because “PUBG Mobile” is created using Epic Games’ Unreal Engine. Apple was also set to shut down Epic Games’ Unreal Engine developer account, which is separate from the one that maintains “Fortnite,” but a judge blocked that supposed retaliation.
Epic Games on the previous night had also sent out emails to macOS and iOS “Fortnite” players that accused Apple of being the sole reason that the popular battle royale title was not on the App Store. In fact, a court declined Epic’s request for a TRO because the situation appeared to be one of its own making.
German antitrust interest
On September 2, it was reported Germany’s Federal Cartel Office were keeping a close eye on the Apple-Epic legal wrangling, with a view to potentially launch an antitrust probe.
“This has most certainly attracted our interest,” said office chief Andreas Mundt. “We are at the beginning, but we are looking at this very closely.” Mundt went on to point out that the existence of the App Store and the Google Play Store represent “an interesting habitat, because they are the only two worldwide.”
Though it is possible for the Federal Cartel Office to impose fines, it is more likely that officials would try to force changes in the ways the app stores functioned instead.
“Incalculable harm to users”
Epic made a second attempt to convince the court to force Apple into keeping Fortnite available to download on September 5. While the initial attempt was an emergency measure by the company, the new version was a more formal petition to the court.
After being accused of antitrust violations for misusing its power, Apple then “used that same power to try and coerce Epic to abide by its unlawful restrictions,” Epic submitted. It followed up by suggesting Apple’s actions will “cause irreparable harm to Epic, as well as harm to countless third parties and the public interest.”
This apparently included the Fortnite community, in that removing the game from the App Store “cleaved millions of users from their friends and family” and prompting “deafening” user outcry. As of the filing, Epic claimed it had seen a 60% decline of daily active users on iOS.
Epic also reasoned that the “balance of harms tips strongly in Epic’s favor, in that it stood to lose considerably more than Apple, which would “at most lose some commissions from Epic.”
The filings included numerous declarations from key Epic staff, communications between the two companies, a document from a co-executive director of the Jevons Institute for Competition Law and Economics at University College London about Apple’s antitrust issues, and a selection of consumer emails.
Apple fires back at Epic, seeks damages for breach of contract
In a counterclaim on September 8, Apple called the Epic Games lawsuit “nothing more than a basic disagreement over money.” The Cupertino tech giant added that “although Epic portrays itself as a modern corporate Robin Hood, in reality it is a multi-billion dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the App Store.”
Apple reiterated that Epic fired the first volley in the legal saga with its direct payment system in “Fortnite.” The counterclaim, filed in the U.S. District Court for the Northern District of California, calls Epic Games’ behavior “willful, brazen, and unlawful,” adding that Epic has made more than $600 million from the App Store.
Additionally, Apple alleged that Epic’s implementation of a direct payment system bypassing its App Store comissions was a “sneak assault” on the app marketplace.
The filing asks the court to hold Epic liable for breach of contract, and seeks restitution of the revenue that “Fortnite” made through its direct payment system. It also asks for a permanent injunction banning the direct payment system across all of Epic’s apps on the App Store.
Goodbye “Sign in with Apple” — or not
On September 9 , Epic Games told consumers Apple “will no longer allow users” to authenticate using Sign in with Apple for Epic Games accounts as soon as September 11, warning consumers to update their accounts to move away from it.
The following day, Epic advised Apple provided an “indefinite extension” to Epic Games’ access to Sign in with Apple. However, it still recommended users update their accounts anyway.
In a statement, Apple said it wasn’t actively seeking to disable compatibility with Sign in with Apple.
Sweeney Twitter Thread
On September 9 , Epic Games CEO Tim Sweeney wrote about how Apple was missing the bigger point of Epic’s actions. The thread, which suggested Apple was oversimplifying Epic’s actions in its countersuit, attempts to sway the court of public opinion over the matter.
Sweeney claims Apple has overextended its reach over consumer devices, that all users should be able to install software freely, and developers should be able to create and share apps as they wish.
This is EXACTLY what Apple’s 1984 commercial was all about. Making computing personal, overcoming the awful precedent of IBM mainframes where computer owners were reduced to essentially just leasing devices controlled by an all-powerful company.
— Tim Sweeney (@TimSweeneyEpic) September 9, 2020
After poking at Apple’s famous 1984 commercial and insinuating the current situation is “exactly what” the ad spot was about, he goes on to say Epic’s parody was striking back against an unfair system. Apple allegedly erodes the rights of consumers and developers by being an intermediary to “exert control and extract money.”
App Store guidelines massaged for gaming services
On September 11, Apple adjusted some of its App Store guidelines to make it possible for online game streaming services to exist on iOS, such as Microsoft Xcloud and Google Stadia. Though not directly connected to the Apple and Epic fight, they are covering similar territory.
Apple doesn’t allow an Apple Store within the App Store, as Epic wanted to implement, but does allow for the games on such streaming services to be submitted to the App Store as an individual app, including having its own App Store product page, appears in charts, can be reviewed, managed with ScreenTime, and comply with other App Store rules.
The “catalog app” must also comply, including providing an option for users to “pay for the subscription with an in-app purchase” and use Sign in with Apple, as well as linking to games on the service by pointing users to App Store listings instead of its own website.
Crucially, the rules still allow a service to enable off-app purchase confirmations, allowing access to content without using Apple’s payment mechanisms, but that must be done outside the app completely, and not how Epic implemented it as a separate in-app payment option.
In a filing on September 16, Apple accused Epic of using the whole App Store “Fortnite” dispute as promotion for the game, which Apple thought was declining in popularity on iOS.
“For reasons having nothing to do with Epic’s claims against Apple, Fortnite’s popularity is on the wane,” says Apple’s filing. “By July 2020, interest in Fortnite had decreased by nearly 70% as compared to October 4 2019. This lawsuit (and the front-page headlines it has generated) appears to be part of a marketing campaign designed to reinvigorate interest in Fortnite.”
Apple also denied that Epic had suffered its claimed reputational harm, suggesting “Epic has engaged in a full-scale, pre-planned media blitz surrounding its decision to breach its agreement with Apple, creating ad campaigns around the effort that continue to this day.”
“If Epic were truly concerned that it would suffer reputational injury from this dispute, it would not be engaging in these elaborate efforts to publicize it,” it continues. “From all appearances (including the #freefortnite campaign), Epic thinks its conduct here will engender goodwill, boost its reputation, and drive users to Fortnite, not the opposite. That is not harm.”
Epic denies marketing exercise
In a rebuttal, Epic counters Apple’s claims as it had “cherry-picked” the data. Apple’s 70% claim apparently was sourced from Google Trends data for search volumes, which started with a spike in interest caused by a popular in-game event.
In reality, Epic insists it saw increased daily user figures over the same ten-month period of “more than 39%.”
The filing fired back by refuting Apple’s claim “it is no monopolist,” due to a comparison where smartphones were “interchangeable” with computers and gaming consoles for the comparison of digital stores. Epic declared “that assertion is contrary to basic antitrust principles and common sense: a Sony PlayStation does not fit in your pocket but a smartphone does.”
The Coalition for App Fairness
On September 29, the Coalition for App Fairness was formed by a number of big-name app developers. The non-profit aims to highlight issues developers face when developing for the App Store.
The group of developers includes Epic Games, Spotify, and Tile among its founding members, as well as Deezer, Match, News Media Europe, and ProtonMail, among others.
The creation of the group occurs at a sensitive time for Apple, due to it also being under multiple antitrust investigations over its App Store dealings.
It published a list of ten principles that should be followed by app stores, and include many gripes mentioned previously by Apple’s critics. They include a decentralization of app hosting, a prevention of self-preferential practices, and a lowering of Apple’s commission cuts.
The Next Hearing
Apple and Epic Games are due to attend a court hearing at the U.S. District Court for the Northen District of California over the affair. AppleInsider will report on arguments and rulings that take place.
During a lengthy and animated hearing on September 28 , Apple and Epic took turns trying to argue their case to Judge Yvonne Gonzalez Rogers. Epic was seeking a reinstatement of the Fortnite app in the App Store and for accounts linked to the Unreal Engine be protected from any further harm from Apple.
Judge Rogers was seemingly unconvinced by Epic’s arguments throughout the two-hour hearing. Among the issues was Rogers highlighting it was a matter of Epic’s own doing during times when Epic’s lawyers were urging there was harm suffered by Apple’s actions against it, and that Epic had forced Apple’s hand in the matter.
Rogers also pushed back against Epic’s repeated claims Apple was a monopolist, and admonished Epic for not being “forthright” with Apple itself. The judge even took time to call out Epic’s odd argument that Apple couldn’t compare a smartphone to a game console due to its size and portability, which Rogers countered by referencing that the Nintendo Switch exists in such a form.
The Judge made the suggestion the trial should be held in front of a jury, as it is a matter that are “important cases on the frontier of antitrust law.” Rogers also proposed the opinions of a federal judge may not be as useful as those of the general public, since “it is important enough to understand what real people think.”
Rogers set a deadline of January 6 for the filing of data for the trial, but the trial itself would take place sometime in July 2021, on a date to be determined.
A decision on Epic’s demands was to be declared at a later time.
Hearing 3 without a jury
On September 30, both Apple and Epic filed with the court that, after conferring, the decision should be made by the court itself and not the public.
Apple was originally pushing for a jury trial but withdrew its request to streamline proceedings. Mentioning Judge Roger’s admittance in a preliminary hearing that she didn’t want to “try two cases” and was “inclined to try both cases at once,” Apple said it was willing to forego a jury trial to get the ball rolling.
‘Fortnite’ stays out of App Store
On October 9, a ruling from Judge Rogers was published, with results mixed for both Apple and Epic. While Epic was able to protect the Unreal Engine-linked developer accounts, it was denied a request to force Apple to reinstate ‘Fortnite’ to the App Store.
“While consumers are feeling the impact of this litigation, the fact remains: these are business disputes,” said Rogers in the ruling about ‘Fortnite.’ “A punitive class action on behalf of all developers on these exact same issues was already in progress when Epic Games breached the agreements. Yet, Epic Games has never adequately explained its rush, other than its disdain for the situation. The current predicament is of its own making.”
For the Unreal Engine, Rogers feels removing access to accounts would be harmful to developers. “Apple’s aggressive targeting of separate contracts in an attempt to eradicate Epic Games and its affiliates fully from the iOS platform was unnecessary and imperiled a thriving third-party developer ecosystem,” wrote the Judge.
In a statement to AppleInsider, Apple expressed gratefulness on the court as it “recognized that Epic’s actions were not in the best interests of its own customers and that any problems they may have encountered were of their own making when they breached their agreement.”
Lack of discovery
A joint filing on October 13 ahead of a case management conference scheduled for October 19 had Apple and Epic complaining about how the other party is handling the discovery portion of the lawsuits. Both are claiming the other is being uncooperative, in different ways.
Epic accused Apple of failing to provide all of the needed documentation, with Apple’s list of custodians used to collate and supply relevant documents reportedly excluding co-founder and late CEO Steve Jobs and current CEO Tim Cook.
Epic also said Apple “repeatedly relied” on the two men during its earlier motion hearings, but Apple countered by pointing out they were referred to twice, namely Tim Cook’s statement to the U.S. House of Representatives Judiciary Committee and “an AppleInsider article quoting Steve Jobs.”
Apple says it has provided Epic with “the 3.6 million documents” produced by Apple during its developer class action and consumer class action suits, though Epic believes they could have been provided sooner.
Epic claims it has made “an initial production of more than 16,000 pages from the files of Timothy Sweeney,” Epic’s CEO, but Apple believes Epic may have “cherry-picked” the documents that may “omit a significant amount of relevant materials.”
Apple also claims Epic received a third-party discovery request before it formed its lawsuit against Apple, to which Epic allegedly told Apple to “just wait a bit,” then filed the lawsuit before responding to the subpoena.
Epic denies theft
On October 23 , Epic made another filing to the court, arguing its actions are a “far cry from the tortious – even purportedly criminal – conduct that Apple’s Opposition depicts.” This is in reference to Apple’s claims that “Epic’s flagrant disregard for its contractual commitments and other misconduct has caused significant harm to Apple.”
“Simply put, Epic did not ‘steal’ anything that belonged to Apple. Epic could not and did not ‘steal’ the proceeds from the sales of its own creative efforts. Nor did Epic interfere with any prospective economic advantage Apple sought to gain from ‘Fortnite’ users separate and apart from their interest in ‘Fortnite,” the filing claims.
Epic then accuses Apple’s theft accusation of boiling down to the “extraordinary assertion that Epic’s collection of payments by players of Epic’s game to enjoy the works of Epic’s artists, designers, and engineers is the taking of something that belongs to Apple.”
Epic was “forced to agree to make Apple its agent” for Apple Store sales as part of the license agreement, then openly admits “by offering ‘Fortnite’ users the choice of making purchases directly from Epic, Epic breached those contractual provisions (assuming they are legal.)”
Epic credits players
On November 10, Epic issued credits to macOS and iOS “Fortnite” players who bought the V-Bucks in-game currency, allowing them to use their purchases on other platforms while updates to the iOS and macOS versions of the game were effectively blocked.
Players on macOS received a credit the equivalent to unspent V-Bucks bought from Epic directly, while iOS players received the equivalent for the currency bought via the App Store itself.
Apple counterclaims limited to breach of contract
In a November 11 filing, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California granted Epic a motion for judgment on tort-based counterclaims leveled by Apple. In effect, this tossed all of Apple’s counterclaims, except those relating to a breach of contract.
Apple had defended its arguments by insisting Epic “is stealing money from Apple,” and “The victim of theft has always had the right to sue for conversion to get its property back from the thief – irrespective of the technical means by which the conversion is accomplished.”
The Judge believed Apple had failed to show any independently wrongful act on Epic’s part beyond a breach of contract.
The Fight in Australia
On November 18, Epic filed a complaint with the Federal Court of Australia, bringing the legal fight to a new continent. Apple was accused of “substantially lessening competition” and a “misuse of market power,” echoing arguments in its US-based lawsuit.
“Apple has locked down and crippled the ecosystem by imposing an absolute monopoly on distribution and through the restrictions placed on in-app purchases,” Epic argues. “They are preventing entire categories of business and software applications from being developed in their ecosystem and this excessive control is bad for competition, choice, and innovation.”
Just like the U.S. battle, Epic is not seeking damages in Australia against Apple.
Apple wants Australian case tossed
The following month in December, the first hearing in the Australian case had Apple arguing Epic Games had contractually promised to settle disputes and litigation in the U.S. District Court for the Northern District of California. As such, Apple wanted the case in Australia to be tossed.
Epic’s argument to the court was that the case concerned “great competition harm,” and breached Australian law.
Federighi and Cue depositions demanded
On December 16, lawyers for Epic Games demanded Apple’s Craig Federighi and Eddy Cue be deposed as part of the U.S. trial. Both companies worked on preparing testimony and depositions, with Epic’s request being part of its effort to discredit Apple.
Epic’s lawyers explained to U.S. Magistrate Judge Thomas S. Hixson that Epic should be permitted the depositions of the two executives. Hixson postponed the decision on the request, but told Apple it would need to prove “extraordinary circumstances” if the pair were not to be deposed at all.
At that time, Apple had reportedly accepted 14 calls for witness depositions, including a four-hour session with CEO Tim Cook.
Epic also added it was too early to decide which witnesses were needed for the case.
In another bid to garner support, Epic Games and Samsung organized a guerrilla marketing campaign on December 21. This involved sending out care packages to influencers branded with the “Free Fortnite” logo and text.
Packaged in an Apple-style box, the package included a $160 Alpha industries MA-1 bomber jacket with embroidery, and a Samsung Galaxy Tab S7.
Cook to undertake seven-hour deposition
Back in the United States, U.S. Magistrate Judge Thomas S. Hixson ruled on February 1 that Tim Cook must undergo a seven-hour deposition. At the same time, he denied an attempt by Apple to subpoena Samsung over how the game is distributed.
Hixson disagreed with Apple’s argument against it and in excusing Cook from the process, suggesting the argument “limits the length of a deposition, rather than barring it altogether.” Apple’s compromise of four hours was deemed inadequate.
“In these three antitrust actions, the facts of the case go way beyond the historical facts of what happened when,” the court concluded. “There is really no one like Apple’s CEO who can testify about how Apple views competition in these various markets that are core to its business model.”
On the request by Apple to subpoena Samsung for internal documents, Hixson denied it by describing it as “almost quirky.”
Samsung is not a party to the case.
“Frustrating” Apple to hand over payment processing info
On February 2, Magistrate Judge Hixson ordered Apple to hand over payment processing documentation, using its “best efforts” to produce them. This was in response to previous requests that Apple argued would take time to produce due to the size of the company.
“You’re not really offering a solution to this problem,” said Hixson to Apple’s counsel, Jay Srinivasan of Gibson Dunn & Crutcher. “You’re just saying No, we can’t do it.’ That feels frustrating and unsatisfactory to me.”
Apple countered that it had already produced some 10 million documents during the discovery process, versus Epic’s 5 million. Furthermore, it claimed some of the information requested by Epic could have been produced as part of the existing document haul, and that Epic was still holding out on some information.
Epic goes to the Australian Competition and Consumer Commission
With a lawsuit in Australia not enough for Epic Games, the company took its legal dispute to the country’s regulator on February 4 . It told the ACCC that Apple’s “unrestrained market power” is suppressing competition and innovation, and is artificially raising the price of iPhone and iPad apps.
The forced “30% Apple Tax” accentuates the pricing, Epic said, insisting the true commission should be closer to single digits.
“Apple’s conduct is symptomatic of unrestrained market power that results in significant harm to Australian consumers and the competitive process. In the absence of these anti-competitive restraints, app developers would have a greater ability to distribute their apps, leading to increased competition and innovation to the benefit of Australian consumers,” Epic’s submission reads.
Previously, Epic had praised the ACCC for investigating the App Store for alleged abuse of power.
Epic spent months planning App Store dispute
Epic’s decision to introduce a payment processing option to “Fortnite” was premeditated, Epic Games CEO Tim Sweeney confirmed in a February 10 interview. Months were spent on a battle plan, beginning in August 2020.
The planning enabled Epic to have a 60-page lawsuit at the ready, as well as a parody video, in what was known internally as “Project Liberty.”
“Epic’s frustration with Apple especially, and Google to some extent, had been building up for at least three years,” said Sweeney. “Ever since Fortnite grew to have a large audience, we felt stifled by several things.”
Sweeney goes on to claim the effort is to encourage free markets, and that the company was willing to invest heavily in the attempt to change the software industry. He did not reveal how much in legal fees or lost sales the project has cost so far, but did admit it cost “lots and lots” of senior leadership time.
Epic Games lobbyist-crafted App Store legislation rejected in North Dakota
A bill in North Dakota that would have forced Apple into allowing alternate payment mechanisms and app downloads outside the App Store was allegedly created with the assistance of Epic Games, it appears. On February 16, it was claimed draft legislation for Senate Bill No. 2333 was handed to lawmakers by a lobbyist hired by Epic Games.
Lobbyist Lacee Bjork Anderson, hired by Epic as well as the Coalition for App Fairness, is said to have provided North Dakota State Senator Kyle Davison the draft legislation of the bill. It was apparently equated as a way to “stop Apple and Google from forcing companies in the state to hand over a share of their app sales.”
Later in the same day that Epic’s alleged involvement leaked, the North Dakota State Senate rejected the measure.
The bill was seemingly crafted to hurt Apple the most if voted in and enforced. For example, it excluded game consoles from being affected by it, while the Google Play Store already allows alternate app marketplaces to exist.
While it failed in North Dakota, the fight over app store rules is far from over. The New York Times reports that lawmakers in Georgia and Arizona are considering nearly identical legislation. A state representative in Massachusetts said he was considering introducing a similar bill, and app store legislation is also being pushed in Wisconsin and Minnesota.
Epic Games files antitrust complaint against Apple in EU
After North Dakota rejected the anti-Apple bill, filed an antitrust complaint with the European Union against Apple, continuing the two companies’ dispute over the App Store. Despite being in disagreement with both Apple and Google, Epic Games singled out Apple for the complaint, which the “Fortnite” developer says has eliminated competition.
“What’s at stake here is the very future of mobile platforms.” says Epic Games CEO Tim Sweeney in a company blog post about the complaint. “Consumers have the right to install apps from sources of their choosing, and developers have the right to compete in a fair marketplace.”
“We will not stand idly by and allow Apple to use its platform dominance to control what should be a level digital playing field,” Sweeney continued. “It’s bad for consumers, who are paying inflated prices due to the complete lack of competition among stores and in-app payment processing. And it’s bad for developers, whose very livelihoods often hinge on Apple’s complete discretion as to who to allow on the iOS platform, and on which terms.”
The blog post says the company “has faced and been harmed by Apple’s anti-competitive restrictions.” It states that Apple’s removing “Fortnite” from the App Store was retaliation for Epic Games giving users a way to pay the developer directly.
Epic did not mention Google in the blog post or the E.U. complaint, despite Google removing “Fortnite” from the Play Store simultaneously, and for the same reason, as Apple. The post also implied that Epic Games has been forced into this dispute following Apple’s actions but does not mention that CEO Tim Sweeney has admitted spending months on a “battle plan” beforehand.
Apple has not responded to the E.U. antitrust filing. However, it has recently commented that “Epic’s problem is entirely self-inflicted and is in their power to resolve.”
Valve pushes back on Apple store data request
On February 19, a court filing revealed Apple had demanded Valve Software produce sales data relating to its Steam storefront. Apple wanted the data to demonstrate the sale and distribution of video games since 2015.
Apple wanted yearly sales of apps and in-app products, annual advertising revenue, sales of external products attributable to Steam, as well as annual revenues and annual earnings of Steam itself. There were also requests for lists of the name of each Steam store app, dates of availability, pricing, and in-app product details, as well as one for historical sales data.
Valve pushed back as the requests were burdensome, though technically available. With a large number of steps to be taken for each individual app, this becomes an overwhelming amount of work.
Furthermore, Valve claims that since it doesn’t make or sell smartphones or tablets, nor sells games for either, it shouldn’t be in the conversation at all. The Steam store sells PC and Mac games, not mobile titles, and it certainly doesn’t offer Fortnite, a game available directly from Epic’s storefront.
Apple’s requests stem from a repeated demand form the court for Apple and Epic to mutually define the market for the case to proceed. Apple believes this covers the entire gaming market, taking into account the similarity of App Store pricing to that of console game stores and Steam.
Epic favors a much narrower definition than Apple.
Epic’s UK complaint stumbles over jurisdiction
Epic’s January 14 complaint in the UK was stopped on February 22, following a ruling by the Competition Appeal Tribunal. Justice Roth ruled that Epic’s legal complaint couldn’t be properly tried in the UK, as the court lacks jurisdiction.
Epic’s complaint was against Apple UK and Apple US, with the former being a subsidiary of the latter. Both were being attacked in the complaint, with Epic reasoning the UK arm provided support to UK developers of apps that go into the App Store.
Justice Roth decided that Apple UK was “not a party” to developer agreements, nor responsible for the decisions of Apple US over which apps appear in the App Store. It was “difficult” to see how Apple UK could be liable for competition law breaches incurred by Apple US, the judge offered.
Furthermore, as the court didn’t have jurisdiction over the US arm, the complaint could not continue against Apple as it stood.
However, elements of the complaint were still able to proceed against Google, which was the second target of Epic Games.
Arizona bill tries to allow third-party payment systems
After a failure in North Dakota, another bill surfaced on February 22 that was similar in nature. The bill in Arizona, slated for a vote in the state’s House of Representatives, is limited in that it deals with payments, not third-party app storefronts.
The bill does try to push for third-party in-app payment systems to be adopted. In the bill’s language, companies whose downloads from Arizona users exceed 1 million are prohibited from requiring specific in-app payment systems be used as the only mechanism.
There are also provisions to prevent retaliation for app makers who use a third-party payment system. More pointedly, there is similar language used to carve out gaming consoles and music players from the proposed rules.
Bill co-sponsors State Reps. Regina Cobb and Leo Biasiucci, claim the bill could end the “monopoly” of Apple and Google on their respective mobile ecosystems.
An Arizona House Appropriations hearing was attended by Apple representatives, touting how the App Store has democratized software by bringing up earlier development and distribution burdens for developers, which would have been more costly before the advent of the App Store.
Scott Forstall goes missing
In a February 23 update to the US legal action, Apple advised it was having trouble getting in touch with Scott Forstall, the former SVP of iOS at Apple. Forstall was offered for a deposition in December, which Epic accepted and believed Apple would provide dates for it to take place.
By February 5, ten days before the end of discovery, Apple informed Epic that Forstall had failed to respond to inquiries for a deposition. Apple provided Epic with a PO Box and a Twitter handle when asked for contact details from Epic, but claimed it wasn’t authorized to share Forstall’s phone number.
Epic requested for Forstall’s deposition to take place after the discovery period, with Apple seemingly agreeing to an arbitrary deadline of March 10.
In a filing to the court, Apple claimed it didn’t object to a deposition of Forstall and that it indicated it expected its own counsel to represent Forstall at his deposition. Apple “never suggested” it would compel Forstall to attend.
Forstall has kept a very low profile, with his last major public outing occurring in May 2020. His Twitter account was last updated on October 29.
Apple “salted the earth” with data requests as the judge orders Valve to hand over data.
Valve Software failed in its bid to stop a request from Apple for data on games sold through the Steam gaming service, in a February 25 update to the US lawsuit. Magistrate Judge Thomas Hixson approved the request for data on 436 games sold on Steam, but limited it to a four-year period going back to 2017.
In his ruling, Hixston noted that Valve wasn’t the only company to have received a request from Apple, though didn’t state which others were affected. The judge’s response also suggested he was wary of Apple, with the iPhone maker having “salted the earth” with its many legal requests.
Valve has until a pre-trial hearing in March to produce the data.
Minnesota joins in with anti-App Store bill
Continuing the trend, a third bill surfaced in Minnesota on February 26 that wants to enable app developers to bypass the App Store’s in-app purchases mechanism. Echoing the other two states, the bill wants to allow developers to use third-party payment mechanisms, instead of being restricted to Apple and Google’s respective systems.
Like the Arizona bill, the Minnesota version steers clear of North Dakota’s inclusion of alternative app storefronts. It does include elements to prevent tech giants from retaliating against developers for using other payment systems.
Apple-Epic lawsuit trial to take place in May, possibly in-person
District Judge Yvonne Gonzalez Rogers decided that the trial between Apple and Epic in the Northern District of California should take place in May. Decided during a management conference on March 1, Judge Gonzalez indicated she preferred it to occur on May 3 at the earliest.
The trial is also one that Judge Gonzalez wants to hold in person, rather than doing it virtually. This would force witnesses to attend the physical courtroom in person, as well as quarantining for two weeks after the event.
The in-person trial was due to the case being important enough to do so in a non-virtual way, said the judge. There is also the suggestion that the witnesses may be more truthful in their testimony after being sworn in at the court itself.
Measures will be put in place to protect everyone involved, including appropriate social distancing and limiting admittance. Allowances for remote testimony would be provided, in cases of poor health or where travel is impractical.
While the court is intended to be a physical in-person session, the continuing troubles with COVID-19 could force the trial back online. Even so, Judge Gonzalez is keen for it to still take place in May.
Arizona voters appear to support App Fairness bill
A poll sponsored by the Coalition for App Fairness and conducted by Data Orbital suggests residents in Arizona are in favor of the state’s HB2005 proposals to break up App Store payment monopolies.
Results released on March 16 point to there being a 69% share of people for the bill, and 18.9% were not supportive. Another 11.8% of the 550 people surveyed were undecided on the matter.
When asked if tech firms have “too much power and influence over our lives,” 80.6% agreed overall, with 62.2% “strongly” doing so. 77.4% agreed that firms like Apple and Google “are large monopoly companies that put their own interest before the needs of small businesses and individuals.”
Elements of the survey are somewhat questionable, as participants weren’t given the whole story about the topics at hand. For example, while they were informed of the 30% commission fees, the policy of discounting the app commission down to 15% for companies earning less than $1 million wasn’t raised. Nor was the discounting of the same fee for app subscriptions that go on beyond a year.
Cook, Forstall, other executives set to testify
A tentative witness list submitted to the U.S. District Court for the Northern District of California on March 19 has Apple providing 11 current and former executives linked to the App Store for live questioning. A number of others will be available for deposition.
Those who will be offering live testimony include:
- CEO Tim Cook
- SVP of Software Engineering Craig Federighi
- Apple Fellow Phil Schiller
- App Store VP Matt Fischer
- Director of Commerce and Payments Eric Gray
- Senior Director of Developer Technical Services C.K. Haun
- Senior Director of Marketing Trystan Kosmynka
- Senior Director of Partnership Management and Worldwide Developer Relations Shaan Pruden
- Head of Game business Michael Schmid
- Head of Fraud Eng., Algorithms, and Risk Eric Friedman
- Former iOS chief Scott Forstall
Of the list, Cook is anticipated to sit for an hour apiece of examination and cross-examination, and a 10-minute redirect where he will speak on Apple’s corporate values, development and launch of the App Store, and industry competition. Federighi will be required for just over three hours, while Schiller will testify for 11 hours in total.
Epic is expected to bring their own current and former executives as witnesses, including CEO Tim Sweeney, COO Daviel Vogel, former CFO Joseph Babcock, and VP of marketing Matthew Weissinger.
The bench trial is scheduled to start on May 3.
Apple declares Epic as self-serving’ in Australia hearing
During a session on March 23 in an Australian court determining whether to postpone a case on the App Store complaint, Apple has described Epic Games as a Goliath that wasn’t trying to assist local developers. Instead, Epic was in a “self-serving”attempt to change the App Store itself.
Apple’s barrister Stephen Free SC told the court “and the essence of the dispute… is that Epic wants to redefine the terms of access in quite fundamental and self-serving ways.” Epic apparently wanted to ignore its “contractual promise to litigate only in the Northern district of California, he continued, and that Epic’s changes would fundamentally affect Apple’s business model.
In return, Neil Young QC speaking for Epic disputed the limited location litigation by claiming “Mandatory and protective laws of this forum override any private choice of jurisdiction.”
A decision wasn’t made at the time, but Justice Nye Perram said one would be delivered “pretty promptly.”
Court sets schedule for Epic-Apple trial
The March 23 pretrial order from the US District Court for the Northern District of California advised the court had reviewed tentative witness lists, and outlined the schedule for the trial itself.
Both sides are to be given 45 hours “to be used in whatever manner they choose for the bench trial.” On top of that, the court will also read up to four hours of deposition for each side, but any time used beyond the allotment will be taken out of the main 45-hour pool.
Deposition designations and counter designations are ordered to be supplied with all objections resolved by April 27, with copies of exhibits to be submitted by April 29.
The court has also ordered the parties to hire a retired judicial officer to resolve any objections. Both sides also must meet and confer to figure out if the deposition designation schedule must be resolved to allow for third-party arbitration of objections.
Trial attendees capped over COVID-19 concerns
On March 26, U.S. District Judge Yvonne Gonzalez Rogers limited the number of people who can attend the California trial in person. Apple and Epic will be limited to a maximum of six people per side in the courtroom at any time.
Attendees must wear masks, regardless of their status of coronavirus vaccination. Members of the press and the public will not be allowed into the courtroom, but will be able to listen to a live audio stream.
Epic adds complaint to UK competition regulator’s App Store probe
On March 4, the UK’s Competition and Markets Authority launched an investigation into Apple and its App Store, following a number of complaints over “unfair terms” for developers and other related accusations. On March 30, it was revealed Epic had joined the effort, by supplying its own complaint to the CMA.
In revealing its support for the investigation into alleged anticompetitive behavior, Epic declared Apple’s control over app distribution and payments “constitute a clear violation of the UK Competition Act of 1998.”
“By kneecapping the competition and exerting its monopoly power over app distribution and payments, Apple strips UK consumers of the right to choose how and where they get their apps, while locking developers into a single marketplace that lets Apple charge any commission rate they choose,” said Epic CEO Tim Sweeney.
Facebook and Apple quarrel over Epic dispute docs
A joint discovery letter filed with the U.S. District Court for the Northern District of California on April 5 reveals issues between Facebook and Apple’s legal team. Apple requested a “limited set of documents” required to cross-examine Facebook’s Vivek Sharma.
The request for around 17,000 documents supposedly relevant to the case is said by Facebook to be an’ untimely, unfair, and unjustified request to redo fact discovery,” with the social network having already provided more than 1,600 documents.
Apple claims Facebook has ignored its requests to send more documents. Facebook countered calling the timing “improper,” as the request was after the end of the discovery period.
Epic lays out its case as the injured party
Court filings from April 8 show Epic believes it has been damaged by Apple’s App Store control and its “arbitrary” review decisions. The lengthy 365-page submission from Epic sets out its case against Apple, with multiple arguments.
Among its arguments is the claim that while Apple says it has to operate the App Store in its current way to keep iOS safe, the same logic falls flat for macOS. In the case of Mac, Epic points out Apple says macOS is highly secure, and doesn’t force developers to sell only through the Mac App Store.
It also attacks assertions the App Review process is robust, including referring to internal documents where Apple’s head of Fraud Engineering Algorithms and Risk Eric Friedman likened App Store defenses to “bringing a plastic butter knife to a gunfight.”
Other items include Apple’s supposed bungling of the “Fortnite Chapter 2” launch, Epic’s knowledge that Apple would probably pull “Fortnite” from the App Store over payments, and surprise at Apple’s move to close Epic’s developer accounts.
Aus case pauses until US trial completes
On April 9, Australian Justice Nye Perram granted Apple a three-month stay of the country’s own Epic-Apple lawsuit. A permanent stay could occur if Epic doesn’t commence a lawsuit in the U.S. alleging contraventions to Australian Consumer Law during the period.
A further stay can be applied if Epic continues to pursue litigation in U.S. courts, though the case could be brought back in Australia if the California court declines to determine the allegations.
Tim Cook on Epic trial
An April 12 interview about developers in Canada had Tim Cook discussing the Epic Games lawsuit.
In the interview, Cook said of Apple’s supposed dominance “The view I have is Apple’s not dominant in any market it’s in. There’s fierce competition everywhere.”
Cook also believes the heart of the complaint is that Epic wants to use its own payment information, but “that would make the App Store a flea market, and you know the confidence level you have at the flea market.”
On Apple’s chances at the May 3 trial, Cook is upbeat. “I believe if we tell the story, the facts, if we can communicate those clearly, then I’m confident that we should prevail.”
Court warns against trial surprises
An April 12 filing at the U.S. District Court for the Northern District of California had Judge Yvonne Gonzalez Rogers denying a motion by Apple to prevent Epic from allowing certain third-party witnesses from taking part in the trial.
Apple wanted to exclude three witnesses from tech companies, claiming Epic had violated rules by listing employers instead of the actual witness names. Epic rejected the claim, saying it had properly disclosed of the names when it learned of the identities.
The Judge sided with Epic and denied Apple’s motion, before taking a moment to remind both sides of what the Court expects from the trial.
“The Court has repeatedly instructed that trial is not an opportunity for surprises,” the filing reads. “Instead, it is an opportunity for the Court to measuredly consider and weigh the relevant evidence to reach a final determination. This dispute presents no exception.”
Epic secures $200M from Sony
Epic completed a $1 billion funding round on April 13, raising more funds for the company ahead of its legal battle.
Of the disclosed funding, Sony is increasing its minority interest in the company with a $200 million infusion. Others include Appaloosa Management, Baillie Gifford, Fidelity Management, and funds managed by BlackRock, KKR, and ParkWest.
Witness Apple would have to modify software and hardware to enable third-party app stores
On April 14, Apple filed summaries from its expert witnesses ahead of its Epic trial. One of the filings is a rebuttal from Dr. Daniel L. Rubinfeld, claiming Apple would have to “redesign its hardware and software … to make the iPhone interoperable with alternative app stores and with apps that would not qualify under Apple’s app-review guidelines.”
Epic founder Tim Sweeney took to Twitter to call the statement “baloney,” in that iOS already “has a mechanism for users to install apps from the web,” via the Apple Enterprise Program. “Only contractual limitations prevent it from being sued for consumer software distribution.”
Apple provides written witness testimonies
On April 27, filings of Apple’s official written testimonies from its seven expert witnesses were delivered to the court ahead of the May 3 trial. The witnesses are made up of economics professors, legal representatives, and marketing experts.
- Lorin M. Hitt, Ph.D
- Francine Lafontaine, Ph.D
- Richard Schmalensee, Ph.D
- Daniel L. Rubinfeld
- Dominique Hanssens, Ph.D
- Aviel D. Rubin, Ph.D
- James E. Malackowski
Facebook gaming exec dropped by Epic
Facebook’s Vivek Sharma was previously listed to be a witness for Epic against Apple, but on April 28, it was found he was dropped.
The VP of gaming was at the center of a disagreement between Apple and Epic over documentation. Apple wanted a “limited set of documents” from Facebook for the cross-examination of Sharma, a request Facebook called “improper.”
Apple wanted court to block documents ‘inadvertently’ sent to Epic
A trio of documents were sent to Epic concerning Apple’s Small Business Program, which Apple said was inadvertently included in a pre-trial disclosure, a filing on April 28 showed. The three email threads concerned the development of the program, as well as legal discussions about securing the program against potential fraud and money laundering.
Apple claims the documents contained privileged information, and so should not be used by Epic in the trial. Epic reckoned the clawback was improper, and that Apple apparently reviewed the documents previously as being fine, before allegedly “reversing course.”
Epic kept “Fortnite” off MS xCloud over rival viewpoint, Sony’s a bigger Epic revenue source
Epic’s decision to keep Microsoft from hosting “Fortnite” on the xCloud gaming service was because Epic saw it as competition, a deposition that surfaced on April 28 revealed.
While Epic worked with Nvidia to include the game on the similar GeForce Now streaming service, the deposition revealed that Nvidiaagreed that all revenue “Fortnite” made on the platform went to Epic.
As Microsoft doesn’t allow rival app stores to use its platform directly, and doesn’t permit third-party payment platforms either, it is thought this may be another reason for Epic eschewing xCloud.
Documents also revealed that iOS isn’t Epic’s main source of “Fortnite” revenue. While iOS generated about 7% of Epic’s revenue, Sony’s platforms actually provided more revenue, and generated about 46.8% of its income.
App Store revenue estimates
Surfacing on May 1, testimony from Epic’s expert witness Ned Barnes, a financial and economics researcher, offers claims of how much Apple earns from the App Store.
According to the expert, using documents sourced from Apple, the App Store had an operating margin of 77.8% in the 2019 fiscal year, up from 74.9% in 2018.
Furthermore, as Barnes was allegedly informed by an Apple employee that the numbers didn’t show the full picture, the expert made calculations for new estimates. It was suggested the actual percentage was around 79.6% for both years.