JOIN USApple, Epic Games spar over Fortnite's return to app store
Apple and Epic Games, the maker of Fortnite, sparred in federal court Monday over whether to reinstate the popular game in Apple’s App Store, raising antitrust arguments that may reshape a key part of the internet economy and the way people use smartphones.
In a three-hour videoconference hearing in the Northern District of California, Epic laid out its allegations that Apple had abused its power. Their fight began last month when Epic tried collecting its own payments for Fortnite without going through the app store, breaking Apple’s rules. Apple then booted Fortnite from the app store; Epic responded by suing Apple, accusing it of violating antitrust laws.
On Monday, Epic said Apple’s unwillingness to let it use its own payment system was anti-competitive and monopolistic. Apple countered that Epic had created a “self-inflicted wound” by not complying with its payment policy. Apple also said Epic had plenty of alternative ways to distribute its games.
Judge Yvonne Gonzalez Rogers concluded the hearing by recommending a jury trial in the case in July. In the coming days, she is expected to rule on whether Apple must allow Fortnite back into its app store and support Unreal Engine, Epic’s software development tools, in the interim.
The battle is playing out as scrutiny of the power of the tech giants ramps up. Lawmakers, regulators, academics and activists are increasingly taking issue with the reach of Apple, Amazon, Facebook and Google in people’s lives. For months, the Department of Justice, the Federal Trade Commission, state attorneys general and House lawmakers have investigated the clout of the companies and whether they stifle competition and harm consumers.
Those inquiries are set to come to a head soon. The Justice Department is poised to sue Google on claims of anti-competitive search practices, while Congress is expected to release a report of a yearlong antitrust investigation into the big technology platforms.
Much of the scrutiny of Apple has centered on the power it holds over developers in its app store. Apple and Google control access to apps on virtually all of the world’s smartphones through their iOS and Android operating systems. The companies charge a 30% fee for purchases made inside apps in their app stores. And they make their own apps that compete with those of independent developers.
Apple has long said that all app developers are subject to the same rules, and that its commission is fair. But Epic has said Apple’s power creates an unlevel playing field and is unfair. Apple’s 30% cut of fees, for instance, is too high a tax on commerce, the games maker has said. It is seeking the option to use its own payment method and publish its own app store within Apple’s and Google’s systems.
Last week, Epic joined with Spotify, Match Group and other independent developers to form a nonprofit coalition to push for changes in the app stores and to “protect the app economy.”
But by taking on Apple so directly and publicly, Epic — a 29-year-old privately held company worth $17.3 billion and based in Cary, North Carolina — may be in for the fight of its life. Apple has a market capitalization of nearly $2 trillion and almost unlimited resources. Last month, it cut off its support for Epic’s Unreal Engine, a software development tool that thousands of developers use. That took the smaller company by surprise.
“We recognized the theoretical possibility in advance, but thought it would be so foolish of” Apple to cut off Unreal Engine, Tim Sweeney, Epic’s founder and chief executive, said in an interview last week.
In court Monday, Gonzalez Rogers sharply criticized Epic’s decision last month to break with Apple’s payment rules. “There are plenty of people in the public who consider you guys heroes for what you did, but it’s still not honest,” she said.
Epic argued that Fortnite’s removal from the app store had caused it irreparable harm. But Gonzales Rogers noted that Epic’s publicity campaign around the fight, including a parody video of Apple’s famous “1984” ad and a hashtag, #FreeFortnite, had probably increased goodwill toward the company.
Epic’s attorney, Katherine B. Forrest, a partner at Cravath, Swaine & Moore, defended the publicity campaign.
“When you are taking on the biggest company in the world and you know it’s going to retaliate, you don’t lie down in the street and die,” she said. “You plan very carefully.”
Apple said it would reinstate Fortnite to its App Store only if Epic complied with its rules.
“They don’t need this court’s emergency help — they have the keys to free Fortnite right there in their pocket,” said Apple’s attorney, Theodore J. Boutrous Jr., a partner at Gibson Dunn.
Apple also repeated a long-standing argument that it maintains tight control over its app store to keep customers’ data secure and private.
Gonzalez Rogers encouraged both companies to consider a jury trial. “It is important enough to understand what real people think,” she said. “Do these security issues concern people or not?”
The battle over the power of app stores has sharpened recently. Even Facebook, which is also under antitrust scrutiny, has piled on. On Friday, the social media giant said Apple had temporarily waived its 30% fee on apps that provide virtual events for three months. Facebook lamented that starting next year, it would have to “yet again pay Apple the full 30% app store tax.”
On Monday, Google also said it would no longer allow companies to circumvent its app store fees, as companies like Spotify and Netflix have done in recent years.
In the interview last week, Sweeney said Epic was “all in” on the fight against Apple. “We’re staking our business on a battle in which we feel is right,” he said.