Judge so far 'not convinced' on Epic's antitrust stance in 'Fortnite' battle

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The Apple versus Epic debacle reached another major milestone on Monday as a judge heard each company's cases before making initial rulings and trial dates.

Epic started the battle with Apple when the company snuck in a hot fix update to the popular app Fortnite. The update enabled a new purchasing system that bypassed Apple's 30% fee, which violated App Store guidelines.

Apple retaliated by removing the app from the App Store, but that is exactly what Epic was counting on. Fortnite's parent company had a lawsuit ready to go once the app was pulled, alongside a media campaign around the hashtag "Free Fortnite." A viral video was posted to mock Apple's own 1984 ad which told consumers to fight "Big Brother" and buy a Mac.

The obvious grab for global attention wasn't lost on Apple, which quickly revoked the developer accounts belonging to Epic, and threatened to do the same to their other properties like Unreal Engine. A temporary restraining order was placed on the action, forcing Apple to hold off on blocking the Unreal Engine account. Unreal Engine is used to develop a large portion of apps and games on Apple platforms and revoking its account could lead to catastrophic problems for developers.

Epic has since formed a Coalition of App Fairness which include Spotify and other vocal developers. Epic hopes to spurn as much public and developer support as possible before the hearings begin.

After lawsuit, counter suit, and much public discourse, Monday's injunction hearing is set to hear Apple's and Epic's case, and to determine initial rulings and set dates for the actual trial.

These are the main events of the hearing as they transpired:

Epic Games opening statements

  • Judge Gonzales begins, threatens to mute anyone presenting repeated arguments
  • Forrest and Bornstein are Epic's lawyers; Richard Doren for Apple
  • Judge opens by rebuking Epic for not producing documents of discovery, deems the action "convenient for Epic."
  • Judge says that Epic's definition of the market is a fail safe definition, because as defined Apple must be a monopoly
  • Bornstein says that Epic's definitions of market come from their lawyers, not an opinion of experts
  • Judge says the 30% rate is the industry rate— references Steam, Microsoft, Sony, and Nintendo have the same rate.
  • Judge says that Epic's lawyers fail to establish a market, stating they hope to narrow the view to evade addressing market practices
  • Epic's lawyers say that Xbox cannot be played on a bus, therefore should not be considered the same market as iOS platforms
  • Bornstien: "Our concern is there is no competitive market right now, and there is no constraint on what they can charge."

Apple's opening remarks

  • Apple lawyer Doren opens by discussing the "unicorn" case comparison with Kodak's
  • Doren cites Epic CEO Tim Sweeney— 10% of average daily players are on iOS, meaning 90% are on any other device
  • Doren rejects the Kodak comparisons: "there was an undisclosed change of terms that impacted plaintiffs in a negative way"
  • Doren insists that Apple's rules remain constant, that the 30% rule has always been in place since 2011
  • Judge asks why its 30% and not 10% or other
  • The 30% rule was made when the App Store was small, and remains as such despite its growth.

The litigation

  • Epic's Bornstein feels that Apple could alter its 30% stake at any time, saying that developers have no power to challenge such a change
  • Epic wants its own store to distribute apps, but cannot. Hence the anticompetitive case
  • Doren says that Epic opening a store on Apple's platforms would be "an indictment of Apple's entire business model, which has been committed to the safety, security, and privacy of its users"
  • Bornstein says 71 million users use iOS to play Fortnite and no other platform
  • Judge remarks that the trial will be fascinating due to each expert having compelling arguments
  • Judge says this is a "Wild West" that walled gardens have existed for four decades. References Sony, Microsoft, and Nintendo as examples similar to Apple creating a platform
  • Bornstein says that console markets taking 30% is fundamentally different than Apple, since consoles generally operate at a loss
  • Judge closes opening remarks stating that plaintiffs and defendants always want markets to be defined in their favor

Tying the App Store to IAP

  • Second portion of the hearing begins regarding how the App Store is tied to IAP
  • Apple's lawyer Doren: "IAP is simply the function within the App Store that administers the collection of a commission... It's never been marketed or sold separately."
  • Apple argues that IAP is not a separate product like Stripe or Paypal, that it is tied to the App Store, and Epic offers no evidence to the contrary
  • Judge agrees that it does not seem to be a separate or distinct product as Epic says
  • Epic's argument that there is demand for a separate payment system, that Apple's IAP should be a separate system
  • Epic says that 50% of people chose to use their payment system once introduced to Fortnite
  • Doren responds that people are likely responding to the price difference, $7 vs $10, which only exists since Epic avoided the 30% cut
  • Doren observes that the other 50% stuck with Apple's IAP despite the price difference because of security and safety

Other arguments

  • Epic's lawyer Forrest is now in the seat
  • Forrest says Apple is caused irreparable harm trying to ban Unreal Engine— citing developers went to Unity for fear of losing Unreal on Apple platforms
  • Judge says the argument is circular
  • Forrest says that Apple's claims to need to shutter Unreal Engine development is "straw man" and "irrelevant"
  • Judge takes Epic's side with this, says Apple's "sky is falling" approach is overblown
  • Apple's lawyer Boutrous is now in the seat, says that Apple usually blocks all affiliate accounts to prevent retaliation. If Unreal is allowed to operate, they could sneak more past Apple's review process.
  • Boutrous says that other developers may attempt the same, and it would unravel Apple's core business model. It's about protecting Apple's ecosystem
  • Moving on to the monopoly argument, Judge asks when Apple became a monopolist
  • Epic is not able to define a timeline, only asserts that Apple was already a monopolist when Epic entered the scene in 2018.
  • Forrest asserts that the question isn't "when did Apple become monopolist, since they always have been, its "when did it become unlawful?"
  • Forrest says it was unlawful to Epic at least as of 2018

Closing statements

  • Judge to Epic: "You were not forthright. You weren't. You were told you couldn't do it, and you did." Referencing the hot fix
  • Apple's Boutrous: "If Epic would just come into compliance, it can free Fortnite. It can free Unreal Engine by just complying with what it owes"
  • Judge offers to place the 30% owed to Apple in escrow, and let Epic get Fortnite up to spec with Apple's rules. Would it be allowed back?
  • Apple's lawyer says it would solve a lot of issues, but the decision is Epic's
  • Epic's Forrest disagrees: "this court should not give its assistance to unlawful provisions by monopolists"
  • Epic has no intentions of making Fortnite comply with Apple's rules

Judge Gonzalez ruled that the trial should be held in front of a jury, which will be determined based on filings made by Apple and Epic on Tuesday. The data needed for the trial will be due by January, and the trial will be held in July. Epic will not be bringing Fortnite back to the App Store before the trial despite being told how to do so.

 

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