The second part of this article can be accessed here.
The developer of the popular battle royale shooter game Fortnite, Epic Games has filed a federal lawsuit against Apple and Google. This came as a follow up to both Apple and Google removing Fortnite from their respective app stores.
A 20% discount was offered by Fortnite’s latest update on their V-bucks for in-app purchases; the exception being, that the buyers could only avail the so-called discount by purchasing from Epic’s payment portal directly, which meant bypassing Apple’s and Google’s in-app payment portals. This step taken by Epic was in violation of Apple’s and Google’s policies. Apple was first to ban Fortnite from its App Store, which left the players, high and dry, with no chance to install the game. This move by Apple was predicted by Epic since they almost immediately uploaded a video mocking Apple’s 1984 (A book by George Orwell) themed television advertisement. On top of that, Epic filed a detailed 64-page complaint against Apple claiming it to have committed Anti-trust violations in California District Court. Apple was soon joined by Google on banning the application from their Play Store as well, which followed with them being hit by a detailed federal lawsuit from Epic too. Epic obviously knew what they were doing, because it had a whole online marketing plan set up, to outclass Apple, if the Californian Giant did remove it from its App Store, which it did. Simultaneously, Epic was also ready with a very strong legal team aimed at taking Apple to court, forcing it to eliminate, or at least change, its policy, of a 30 percent share of all in-app (or in-game) purchases, going to Apple, for all apps and games of various developers, which have been put up by these developers on its AppStore.
Apple responded in court to Epic Games’ complaint against the company for the withdrawal of Fortnite from the Apple App Store in the U.S. register. District Court for the Northern District of California, Apple said that “having agreed that it would like to reap the rewards of the App Store without paying for them, Epic violated its agreement with Apple, through its own users and the operator of Apple users as leverage.”
Analyzing Epic’s Lawsuit
Some of the concerns posed by Epic in its complaint challenges Apple’s monopolistic policies against developers in the iPhone and iOS ecosystems and claim they breach US antitrust law. Apple has been mainly accused of three things:
- Posing anti-competitive restraints and monopolistic practices;
- The claim is apparently not for monetary compensation, it is for creating fair and just competition on different platforms. [i]
Epic has also filed a suit of a similar nature against Google; it voiced its concerns over Google’s powerful distribution system and its in-app purchasing billing systems. The suit on Google would be one with less of an impact as Android is more flexible and allows third-party apps to be installed via ways other than directly installing the app from its PlayStore.[ii]
The whole fiasco started when Epic allegedly broke the terms of the contract with Apple and Google by adding a different payment method, which would potentially bypass all payments from their respective app stores to a server controlled by Epic by the virtue of Epic providing with a 20% discount. This was clearly a violation of the terms of the contract in the eyes of both Apple and Google which was agreed upon by Epic willingly before signing the same. Epic’s defense to this move is that the contract which they signed is anti-competitive, thus being void ab initio. This would make the contract illegal and unenforceable in nature.[iii]
Apple and Google’s policy makes funneling of all apps mandatory through their respective app stores which is allegedly unlawfully competitive. Anti-trust law regulates business to promote competition to specifically benefit the consumers. This law is overmined mainly by 3 different Federal Statutes.
- Sherman Act, 1890
- Clayton Act, 1914
- Federal Trade Commission Act, 1914[iv]
In the instant case, the lawsuit was filed under the Sherman Act of 1890.
§1 of the Sherman Act outlaws contracts combinations, or conspiracies that unreasonably restrict trade[v], however, in Tampa Elec. Co. Vs Nashville Coal Co. It was stated that a violation would be considered if the effect of the business is to foreclose competition in a substantive share of the line of commerce. Thus, indicating that Epic would have to prove that bypassing the restraints set by Apple and Google is virtually impossible[vi].
§2 of the Sherman Act outlaws monopolization, attempted monopolization, and conspiracy or combination to monopolies[vii]. There are 2 exceptions to this law which was stated in United States v. Grinnel Corp,
- That the defendant’s business has monopoly powers in the relevant market,
- That the defendant has its monopoly powers through means other than superior product, business acumen, or historic accident. [viii]
For Epic to successfully ascertain the claim, it would have to give definitive proof that Apple and Google are monopolies in their respective markets. In the instant that is it proved that both the corporations are monopolies in their respective markets, Epic would also have to prove that the monopolistic powers rely on the exclusivity they have secured for apps and in-app purchases.[ix]
Apple’s Reply to Epic’s Lawsuit
Apple responded to Epic’s complaint by taking Fortnite out of the App Store, saying that not only is Epic’s claim that the product is a monopoly not real, but that CEO Tim Sweeney called for a “special deal”. According to the emails of Apple’s response to the Epic suit, it was alleged that Epic Games had demanded a contractual deal with Apple, which was actually sought by Epic’s CEO[x]. Epic has also filed a plea to permanently or temporarily inject the action which Apple has taken against Epic, i.e. Apple banning them from their App Store. This was a claim for a temporary restraining order to inject Apple’s ban on Epic.[xi]
Apple has replied to Epic with a 34-page long complaint where they claim that the Temporary Restraining Order (TRO) has little to no grounds[xii]. For a temporary restraining order to stand in court, “The TRO requirement is the same as with a temporary injunction.” As stated in Rovio Entertainment Ltd. v. Royal Plush Toys, Inc.[xiii] The temporary injunction is “an exceptional relief rarely given as a right”. Benisek v. Lamon.[xiv] In general, the “plaintiff seeking a preliminary injunction must state”:
- that he is likely to succeed on the merits;
- that he is likely to suffer irreparable harm on the ground;
- that an injunction is in the public interest;
As stated in Winter v. Natural Res. Def. Def. Board, Inc[xv].
Epic bears the burden of meeting all the winter prongs:
That they would be irreparably harmed
Apple claims that the glomming emergency over Epic for which they are claiming to be irreparably harmed is a self-created one. The ‘revolutionary’ anti-trust lawsuit could have been filed without breaking the terms of a legally binding contract, Epic was well aware that adding a separate payment option which would essentially bypass apple is a violation of the contract they agreed upon.[xvi] On top of this, Epic created a planned lawsuit that has its own viral video and an advertisement campaign with a hashtag #FreeFortnight, therefore Epic seemed to be well aware of the consequences of their actions and hence their claim for a temporary injunction. Apple has also stated that this self-inflicted emergency can stop the moment Epic would start complying by the rules set in their respective contract, however, Epic’s intention is to get a free ride on Apple’s innovation, Intellectual Property, and years of user trust[xvii].
That they have a very probable chance of winning the anti-trust claims
Apple claims that Epic has an uphill battle with respect to its anti-trust claims. The App Store has exponentially increased output, reduced prices, and dramatically improved consumer choice. As has been declared by the ninth circuit recently, in United States v. Microsoft Corp., that the novel business practices especially pertaining to technology should not be declared illegal without an elaborate inquiry on the precise nature of the harm the said business has caused.[xviii] In the instant case, Epic has failed to process a proper inquiry, it has no economic experts backing its broad claim. Epic has also ignored the fact that Fortnite can be played on other platforms and by Epic’s logic many companies like Microsoft, Nintendo, etc. would also fall under their definition of monopoly.
That with the ban on Fortnite from the App Store would be the harm in the public interest
Apple makes the argument that public interest cannot and does not weigh in favor of Epic. Using injunctions as a mode of obtaining the desired contractual deal would inevitably set off a wildfire where each and every developer would break the contract and subsequently claim the same in the garb of an orchestrated emergency. This would put the existence of the App Store in great peril where the safety of the users would be jeopardized and all payments made would bypass Apple. Therefore, Apple claims that this would make its users ‘ultimate victims’ where their privacy and security would be compromised.[xix]
For Epic to enforce a temporary restraining order on Apple’s actions, it would have to meet all of the conditions for which Apple has presented the honorable court with many strong arguments. After banning Fortnite from the App Store, Epic’s developer platform (Unreal Engine) linked to its gaming engine was threatened to be removed by Apple. This posed a serious threat to the company’s licensing business. Epic managed a temporary restraining order which kept the problem at bay, however, the future of Unreal Engine still lingers on which could potentially threaten the entire ecosystem of third-party games that depends on the engine.[xx]
The main legal battle of this case would be to establish the boundary of the relevant market which would essentially act as its foundation. Epic would want the relevant market to be small and concise, i.e. restrict the boundary of the market to their respective App stores, whereas, Apple and Google would fight for the relevant market to be taken in a broad category. Another major battle would be to see how the competitors get around their exclusive setups. Apple and Google would be inclined to prove that the competitors could bypass the exclusive set-ups easily, whereas, Epic would be inclined to prove the virtual impossibility to bypass the exclusive set-ups in place.
If Epic Games succeeds in winning this case, it would be a historic decision that not only impacts Epic Games but also a whole host of game developers on Apple and Google Platforms who have been forced to give both Apple and Google a substantial reduction in their sales so far. Apple’s CEO Tim Cook has already been cornered by the US Antitrust Committee at the recently concluded hearing for its anti-competitive practices and this lawsuit would definitely speed things up. This victory could potentially start a wildfire where other developers try and hunt down other anti-competitive policies by big corporations.
This article can be cited as:
Bluebook, 20th edn.: “Kshitij Pal, Fortnite goes Rogue: Analysing Epic’s Lawsuit against Google and Apple, Metacept – InfoTech and IPR, accessible at https://metacept.com/fortnite-goes-rogue-analysing-epics-lawsuit-against-google-and-apple/ .
[i] Dean Takahashi, Epics’s antitrust case against apple’s app store monopoly, Venture Beat (Aug.13, 2020), https://venturebeat.com/2020/08/13/epics-antitrust-case-against-apples-app-store-monopoly/
[ii] Ians, Tech group files complaint against Google’s In-app payment system, Economic Times (Aug.24,2020), https://telecom.economictimes.indiatimes.com/news/tech-group-files-complaint-against-googles-in-app-payment-system/77720118
[iii] Nick Statt, Apple just kicked Fortnite from the App Store, The Verge (Aug.13, 2020), https://www.theverge.com/2020/8/13/21366438/apple-fortnite-ios-app-store-violations-epic-payments
[iv] James Chen, Understanding Anti-Trust Laws, Investopedia (Jul.31, 2020), https://www.investopedia.com/ask/answers/09/antitrust-law.asp
[v] 15 U.S.C §1.
[vi] Tampa Elec. Co. Vs Nashville Coal Co. 365 U.S. 320, 327 (1961).
[vii] 15 U.S.C § 2.
[viii] United States v. Grinnel Corp, 384 U.S. 563, 570-571 (1966).
[ix] Cecilia D’Anastacio, Epic game’s lawsuit fire a shot at Apple and Google’s App Stores ‘Monopolies’, Wired (Aug.13, 2020), https://www.wired.com/story/epic-games-sues-apple-fortnite-app-store/
[x] Alex Castro, Apple has finally met it’s Fortnite match, The Verge (Aug.14, 2020), https://www.theverge.com/2020/8/14/21368651/apple-fortnite-ios-app-store-ban-lawsuit-epic-games-payments
[xii] Case 4:20-cv-05640-YGR Document 36.
[xiii] Rovio Entm’t Ltd. v. Royal Plush Toys, Inc., No. C 12-05543 LB (N.D. Cal. May. 13, 2013).
[xvi] Adi Robertson, Apple says Epic is ‘putting the entire App Store model at risk’ , The Verge (Aug.21, 2020), https://www.theverge.com/2020/8/21/21377660/apple-fortnite-epic-antitrust-lawsuit-in-app-purchases-special-deal
[xvii] __, ‘FreeFortnite’ tournament taunts Apple amid legal battle, New India Express (Aug.22, 2020), https://www.newindianexpress.com/business/2020/aug/22/freefortnite-tournament-taunts-apple-amid-legal-battle-2186962.html
[xviii]United States v. Microsoft Corp, 253 F.3d 34.
[xix] Case 4:20-cv-05640-YGR Document 36.
[xx] Nick Statt, WHY EPIC CAN’T AFFORD TO LOSE THE UNREAL ENGINE IN ITS LEGAL FIGHT WITH APPLE, The Verge (Aug.26, 2020), https://www.theverge.com/2020/8/26/21402443/epic-fortnite-apple-unreal-engine-ios-game-developers-lawsuit