Epic Games v. Apple
Epic Games, Inc. v. Apple Inc. was a lawsuit brought by Epic Games against Apple in August 2020 in the United States District Court for the Northern District of California, related to Apple's practices in the iOS App Store. Epic Games specifically had challenged Apple's restrictions on apps from having other in-app purchasing methods outside of the one offered by the App Store. Epic Games' founder Tim Sweeney had previously challenged the 30% revenue cut that Apple takes on each purchase made in the App Store, and with their game Fortnite, wanted to either bypass Apple or have Apple take less of a cut. Epic implemented changes in Fortnite intentionally on August 13, 2020, to bypass the App Store payment system, prompting Apple to block the game from the App Store and leading to Epic filing its lawsuit. Apple filed a countersuit, asserting Epic purposely breached its terms of contract with Apple to goad it into action, and defended itself from Epic's suit.
Epic Games v. Apple
Epic Games, Inc. v. Apple Inc.
May 3–24, 2021
September 10, 2021
The trial ran from May 3 to May 24, 2021. In a September 2021 ruling in the first part of the case, Judge Yvonne Gonzalez Rogers decided in favor of Apple on nine of ten counts, but found against Apple on its anti-steering policies under the California Unfair Competition Law. Rogers prohibited Apple from stopping developers from informing users of other payment systems within apps. Epic appealed the ruling to the Supreme Court in July of 2023. Apple also filed an appeal of the ruling. Justice Kagan declined to grant Epic's emergency request for a stay of the ruling in August of 2023. In January of 2024, the Supreme Court denied the full appeals of both Apple and Epic in the case, leaving the case primarily a victory for Apple but still requiring them to allow developers to include notices of alternate payment systems in apps.
Epic also filed another lawsuit, Epic Games v. Google, the same day, which challenges Google's similar practices on the Google Play app store for Android, after Google pulled Fortnite following the update for similar reasons as Apple. However, that case centered more on the practices and deals that Google, as a dominant tech giant, wielded over partners to assure use of the Play Store. In December 2023, a jury ruled against Google in that it had unlawfully maintained its monopoly on the Android environment.
District court[edit]
Preliminary hearing[edit]
At the first court hearing on the matter on September 28, 2020, Judge Rogers appeared likely to deny Epic's demand to require Apple to rehost Fortnite on the App Store unless Epic conforms to the App Store policy, consistent with Apple's argument that Epic itself had created the situation leading to its removal, but otherwise ready to maintain the restraining order related to the Unreal Engine and Epic's developer accounts. Judge Rogers indicated that she was in favor of a jury trial when the case would be heard, then expected to be in July 2021, stating during the hearing "I think it's important enough to understand what real people think. Do these security issues concern people or not? Are the concerns of the developers incredibly important? I think many people would feel it is. I do think that this is something for which jury insights would be important."[40]
In post-hearing filings, both Epic and Apple argued that the case should be decided by a judge rather than a jury.[41] Judge Rogers agreed, scheduling a bench trial to commence in May 2021.[42] In October 2020, Judge Rogers denied Epic Games' request for a temporary injunction that would require Apple to allow Fortnite in its current state (with Epic's storefront), but made permanent the injunction preventing Apple from terminating Epic's developer accounts such that it could continue to maintain the Unreal Engine for iOS and macOS systems.[43] In her decision, Rogers stated that a key aspect of her review of the case would be Epic's contention that the App Store is unique and its arguments as to why Apple's antitrust behavior is limited to the App Store and not to the other closed systems such as Xbox Live, PlayStation Store or the Nintendo eShop. Rogers said that "a final decision should be better informed regarding the impact of the walled garden model given the potential for significant and serious ramifications for Sony, Nintendo and Microsoft and their video game platforms."[44]
Pre-trial[edit]
Facebook stated in December 2020 that it will fully support Epic Games in the lawsuit during its discovery phase. Facebook itself had been in prior conflict with Apple over its App Store policies and had amassed its own collection of information they plan to share with Epic.[45]
As part of its case, Apple had attempted to subpoena records from Valve related to several hundred games and their sales on Steam, given that Steam is a direct competitor to Epic Games' storefront in the personal computer space. Valve declined to comply with these requests, arguing that Apple's requests are overly broad and unrelated to their complaint with Epic.[46] The judge ruled in Apple's favor, stating that Valve was not the only target of Apple's subpoenas seeking similar storefront data, and thus the request was not unreasonable.[47]
Trial[edit]
The trial commenced on May 3, 2021. Due to the nature of the case, Judge Gonzalez Rogers required that all parties be physically present at the court, with additional steps made to account for safety due to the ongoing COVID-19 pandemic.[48][49] The trial ran for three weeks, with testimony ending on May 21, 2021 and closing arguments given on May 24, 2021.[50] The law firm Cravath, Swaine & Moore represented Epic Games while Gibson, Dunn & Crutcher represented Apple.[51]
Among aspects covered by the trial included:
Appeals[edit]
On the day of Rogers' decision, a representative for Apple stated that "Today the Court has affirmed what we've known all along: the App Store is not in violation of antitrust law."[64] However, in October 2021, Apple filed an appeal of the decision, seeking to overturn the preliminary injunction related to anti-steering practices which was due to go into effect in December 2021. Apple claimed the injunction was no longer necessary as they were planning on deleting the anti-steering provisions from their AUP as a result of the settlement from a separate lawsuit, Cameron v. Apple, completed in August 2021.[71] Judge Rogers denied a stay of the injunction related to the anti-steering provisions in November 2021, requiring Apple to comply by December 9, 2021, 90 days from the initial order.[72] The Ninth Circuit issued a stay on the portion of Judge Rogers' order related to provide in-app links to alternate payment systems on December 8, 2021, ruling that Apple had shown likelihood to succeed on their appeal, though the order requiring Apple to allow apps to communicate to users about such payment systems outside of the app was upheld.[73]
Epic Games' Sweeney stated that the decision "isn't a win for developers or for consumers", that Epic would not be bringing Fortnite back to iOS until "Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to consumers", and that they would continue to litigate on this matter.[74] Epic filed notice of its appeal to the Ninth Circuit on September 12, 2021, challenging Judge Rogers' conclusion that Apple was not a monopoly.[75] Following their appeal on September 22, Sweeney stated that Apple had told Epic they would not let Fortnite back onto the App Store until the completion of all litigation related to the suit, which Sweeney later believed that this particular process would take "a minimum of five years, if not more", thereby prolonging the lawsuit until 2026.[76]
A coalition of 35 states, Microsoft, the Electronic Frontier Foundation, and several other groups filed amicus briefs in support of Epic's position, arguing that Apple held a monopoly and thus that Epic should prevail in its lawsuit.[77]
Court hearings for the appeals began on November 14, 2022, in the Ninth Circuit.[78]
The Ninth Circuit issued its opinion on April 24, 2023. The three judge panel all agreed that the lower court ruling should be upheld. However, the Ninth Circuit agreed to stay the injunction requiring Apple to offer third-party payment options in July 2023, allowing time for Apple to submit its appeal to the Supreme Court.[79] Both Apple and Epic Games have appealed this decision to the Supreme Court in July 2023.[80][81] Justice Elena Kagan declined Epic's emergency request to lift the Ninth Circuit's stay in August 2023.[82]
On January 16, 2024, the Supreme Court declined to hear the appeals from Apple and Epic in the case. [83]
Aftermath[edit]
With the Supreme Court's refusal to hear either appeal, the case ended with all charges dismissed exception for the anti-steering charge. To implement this, Apple allowed developers to include "metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms", but required that developers give Apple 27% of all sales made within seven days of being directed to these sites, which Apple described as a "reasonable means to account for the substantial value Apple provides developers, including in facilitating linked transactions".[84] In addition, the App Store posts a warning screen stating that Apple is not responsible for any security or privacy issues related to third-party payment systems when clicking through to one of these systems.[84] Sweeney stated that these changes are in bad faith compliance with the court orders, maintaining a 27% anti-competitive tax and a "scare screen" that are intended to dissuade developers from using third-party payment systems. Epic filed its request to Rogers in March 2024 to enforce the anti-steering provision that she had outlined for Apple.[84][85]
Apple had requested the lower court to order Epic Games to pay 90% of Apple's legal fees estimated at $73 million, based on the fact that nine of the ten claims Epic filed were dismissed by the court.[86]
Apple announced on January 2024 that to comply with the European Union's Digital Markets Act (DMA) that it will allow third party storefronts to be loaded onto iOS devices in March 2024. In response, Epic stated they plan to bring the Epic Games Store as well as Fortnite to iOS in Europe. [87] Sweeney still argued that the new terms for use in the EU were "a new instance of Malicious Compliance" and would continue to challenge those through legal routes.[88] While Epic had originally been approved for an Apple developer account through its Sweden office in preparation to release Fortnite on iOS in early 2024, Apple nullified the account on March 6, 2024, stating that Epic Games was untrustworthy and threatened the iOS environment. Epic published letters it had obtained from Apple that Epic claimed demonstrated the account termination was retaliatory for Sweeney's comments on Apple's compliance with the DMA and vowed to fight Apple as needed.[89] The EU stated the next day they were seeking more details from Apple and whether the action was compliant under the DMA.[90] Following that, on March 8, Apple reversed the ban on Epic's Sweden account, which Sweeney stated was "a big win for European rule of law, for the European Commision, and for the freedom of developers worldwide to speak up."[91]
Reactions[edit]
Companies like Facebook, Spotify, and the Match Group supported Epic Games in its lawsuit and spoke of their own past issues with Apple's App Store policies related to their services.[92] Digital Content Next, a non-profit trade group representing media outlets like The New York Times and The Wall Street Journal, also backed Epic's suit, asserting among other issues that Apple has given out uniquely favorable deals to some providers like Amazon but not to others.[93]
After the initial ban, some people attempted to sell mobile iOS devices with Fortnite still installed for thousands of dollars.[94] When the game was removed from the App Store, it did not surprise many users as most people were anticipating it from the beginning and it seemed that many players purely jumped "on board for the memes", according to Polygon.[95] In September 2020, Epic Games, together with thirteen other companies, launched the Coalition for App Fairness, which aims for better conditions for the inclusion of apps in the app stores.[96]
On October 8, 2020, Microsoft announced a commitment to ten fairness principles in the operation of its Microsoft Store on Windows 10, which included promises of transparency over its guidelines, not blocking competing app stores from being used on Windows, and not removing apps from the store based on their business model, how they handle payments, or how their services are delivered.[97]
In December 2020, Apple announced that it would be lowering the revenue cut Apple takes for app developers making $1M or less from 30% to 15% if app developers fill out an application for the lowered revenue cut.[98]
Related actions[edit]
By Epic Games[edit]
In December 2020, Epic Games filed separate complaints against Apple and Google in the United Kingdom's Competition Appeal Tribunal related to the companies' anticompetitive behavior in both the UK and European Union, with similar charges as Epic asserted in their U.S. cases.[103] They have also launched legal action in Australia,[104][105] and the European Union.[106] On February 22, 2021, the Competition Appeal Tribunal rejected Epic's lawsuit against Apple in the UK however allowed their lawsuit against Google to proceed. Epic Games later released a statement stating that they would reconsider pursuing their lawsuit against Apple in the UK following the resolution of the U.S. lawsuit while also stated that they were "pleased" with the tribunal's decision regarding their case against Google.[107]
Epic also filed similar charges against Apple in Australia. On April 9, 2021, Judge Nye Perram ordered a three-month stay on Epic's lawsuit against Apple in Australia while stating that the stay would become permanent in the event Epic does not file in the U.S. but under the Australian Consumer Law within that time frame.[108] Epic appealed Judge Perram's ruling, which was granted in a ruling in July 2021, allowing its case in Australia to go forward.[109]
Epic had acquired Bandcamp in March 2022. Bandcamp allowed music creators to sell music with a 10-15% revenue split, which was kept following Epic's acquisition. Google announced a planned change in its Google Play Store policy that required all apps to use its Play Store payment systems or face removal by June 2022. Bandcamp, supported by Epic, sued Google in April 2022 and sought a preliminary injunction to block this action by Google, arguing that the 30% revenue cut demanded by the Play Store payment system would destroy their financial model. Google responded that they have offered a Media Experience Program that for media apps that provide appropriate integration with Google's services, that they can use a 10% revenue cut through the Play Store instead.[110] By May 2022, an agreement had been arranged that while Epic's suit continues, Bandcamp could continue to use its in-app purchasing system, though they will retain the 10% fee on each sale in escrow until the conclusion of the case.[111]
Additional filings by Epic assert that Google had paid competitors significant sums of money to dissuade them from making a competition app store to Google Play, with the highest being $360 million paid to Activision Blizzard. Epic Games said these payments helped Google to maintain its monopoly on storefronts via Google Play on the Android operating system.[112]
Others[edit]
In the United States, forty states filed suit against Google in July 2021 arguing its app store practices, including its 30% revenue cut, were anti-competitive, similar to the factors that Epic sought in its case.[113] Later, in August 2021, Senators Richard Blumenthal, Marsha Blackburn, and Amy Klobuchar introduced the Open App Markets Act bill, which would prevent app stores from forcing developers from exclusively using the app store's payment system.[114] The bill passed out of the Senate committee by February 2022.[115] It died at the end of the 117th Congress.
In August 2021, as part of a settlement to Cameron v. Apple, a similar class-action lawsuit filed by app developers, Apple announced that it would allow developers to collect information within apps such as email addresses from users so that the developers can subsequently tell customers about ways to pay outside of the App Store.[116]
South Korea passed a law in August 2021 amending their Telecommunications Business Act that required app stores like Apple's and Google's to allow app developers to use alternative payment systems other than the storefront, in addition to giving the government more involvement in mediations over app store issues in conflicts between the operators and developers and users. This was the first such law passed at a national level.[117] Epic asked Apple to allow Fortnite onto the Korean version of the store due to this policy in September 2021, but Apple rejected this as the law had yet to come into effect.[118]