Both Apple and Google pulled Fortnite off their app stores yesterday and that resulted in Epic Games suing both the tech giants. Epic Games called the companies monopolistic, particularly Apple. Apple promptly yanked Fortnite from the App Store and, for good measure, revoked access to Unreal Engine — a piece of Epic software used by game developers and, increasingly, Hollywood, to create. Aug 14, 2020 Why did Apple ban Fortnite? So on Fortnite, there are these things called V-Bucks. Think of them as virtual tokens you can use to purchase new 'skins' and collectables on the game. Amid the ongoing legal battle between Apple and Epic Games, Fortnite players on iOS and macOS will be locked out of the new Marvel-themed season, which starts on August 27th.Epic says Apple is.
© Image: Epic GamesFortnite is one of the most popular video games on the planet, playable across computers, gaming consoles, and mobile devices. But as of Thursday, Aug. 13, it's no longer available to download on mobile platforms — not on iOS via the Apple App Store, and not on Android except outside the Google Play Store.
That's because Apple and Google removed the app from their respective marketplaces on Thursday for violating their rules. Immediately afterward, Fortnite maker Epic Games filed separate antitrust lawsuits against the two companies. Epic also staked out its position with a cheeky parody of '1984,' Apple's famous Super Bowl commercial from that year.
It's the latest, and most explosive, development in a long-simmering dispute between Epic and the two tech giants that, together, control the entire global market for smartphones. What's the nature of the conflict? Why is it happening, and why now? What could it mean for the Android and iOS software marketplaces? And will you still be able to play Fortnite on your phone?
Why can't I download Fortnite from the App Store or Play Store?
Epic Games decided to pick a fight with Apple and Google on Thursday, Aug. 13. The Fortnite maker pulled a bold stunt that quickly snowballed into the game getting removed from both the Apple App Store and Google Play Store — all of which, it turned out, was part of Epic's plan.
On Thursday morning, Epic introduced a new way to pay for V-Bucks, the in-game currency in Fortnite. Players on Android and iOS now had the option to buy V-Bucks via 'Epic direct payment,' a route that offered them a 20% discount. If they instead decided to buy the currency through the Play Store or App Store, they'd have to continue paying the (higher) regular price. Why the discount? Google and Apple each take a 30% cut of purchases made within apps in the Play Store and App Store, respectively. With direct payments, Epic can pass on some savings to the customer.
The thing is, Epic Games' stunt was a flagrant violation of the guidelines for the App Store and Play Store. Both Apple and Google require that payments for in-app digital content — e.g., Fortnite V-Bucks — be processed via their stores' respective internal billing systems. Apple's rules are even more stringent, forbidding developers from so much as mentioning external payment options.
Epic knew exactly what it was doing: The direct-payment feature was a deliberate attempt to circumvent Google's and Apple's long-standing developer guidelines. The two tech giants couldn't let that stand, so both companies removed Fortnite from their marketplaces.
Can I still play Fortnite on Android and iOS?
Yes. Apple and Google only delisted the Fortnite app itself, preventing users from finding it in their app stores via search. If you currently have the game downloaded to your device, you can continue playing it and buying V-Bucks. If you've ever previously downloaded Fortnite from the App Store or Play Store, you can get it again from your purchase history. And on Android, where Google doesn't force all developers to distribute apps via the Play Store, you can continue to download Fortnite from third-party sources like the Epic Games app in Samsung's Galaxy Store or Epic's own website.
However, you'll only be able to play the current content in the game. Mobile players are locked out of downloading any future Fortnite patches, which is a major problem for a game that is all about content updates. When the fourth season of Fortnite chapter 2 goes live on Aug. 27, mobile players won't be able to access it.
What is Epic Games' dispute with Apple and Google about?
This fight is largely about — what else? — money.
Tim Sweeney, the founder and CEO of Epic Games, has expressed frustration for years with what he views as Apple's and Google's monopolies on the software marketplaces for their respective mobile operating systems.
Apple maintains a fully walled garden on its platform: If you want to release an app that reaches the more than 1.4 billion active iOS devices worldwide, you have no choice but to do it through the App Store. That requires agreeing to Apple's terms, including giving the company final approval over your app and the content within it.
Android is a fundamentally more open ecosystem; Google allows third parties like Amazon and Samsung to operate their own app stores. In fact, when Epic launched Fortnite on Android in August 2018, it released it outside the Play Store. The company relented more than 18 months later, bringing Fortnite to the Play Store in April 2020 — but it did so reluctantly, saying that it felt it had no other choice because 'Google puts software downloadable outside of Google Play at a disadvantage.' (File that away for later.)
Money is the key reason that Epic — and many other companies that publish mobile apps — have a problem with the iron grip that Apple and Google maintain over their marketplaces. As we explained above, App Store and Play Store developers are forced to process in-app purchases via Apple's and Google's own billing systems. And Google and Apple take a 30% cut of every single transaction for digital goods and services (aside from subscriptions, for which the commission drops to 15% after a user has been subscribed for one year).
For developers, that's just the cost of doing business — the toll they have to pay in order to access the massive global audiences that use the App Store and Play Store. And, of course, that revenue is generated by the apps yet goes to the distributor instead of the developer.
How much money are we talking about? The App Store generated an estimated $61 billion in sales of digital goods and services in 2019, according to a recent study by an economics firm (a study that Apple itself touted, so presumably the numbers are reliable). Some of that total consists of subscriptions, so the math is fuzzy because of the differing commissions. But let's say half of the $61 billion came from subscriptions and the other half didn't — if that were the case, Apple's cut of the total in 2019 would've been north of $13.72 billion. And that would be about 28.5% of the company's total services revenue for the calendar year, which amounted to $48.13 billion. (Note that in August 2008, one month after the App Store launched with its 70/30 revenue split, Apple's then-CEO Steve Jobs told the Wall Street Journal, 'We don't expect this to be a big profit generator.')
Google hasn't revealed the same kind of sales data, but analytics firm Sensor Tower estimated that Play Store users spent $24.3 billion in 2019. If we do the same calculation, splitting that figure evenly between subscriptions and everything else, we get an estimated commission revenue for Google of more than $5.46 billion.
For their part, Apple and Google say their commissions are a fair fee for the service they're providing — not just the logistics of distributing apps (like bandwidth costs) and processing transactions, but the safety and security of these approved ecosystems. The idea is that no one getting an app from the App Store, for example, has to worry that they might be downloading malware onto their iPhone.
But app makers would prefer that Google and Apple take a far smaller cut of sales, especially since — in the developers' opinion — the reality of the mobile software market is that they have no viable alternative to paying that toll. And in recent years, they've begun to publicly air this grievance.
In March 2019, Spotify filed an antitrust complaint against Apple with the European Commission, the governing body of the European Union. The streaming music company alleged that the App Store guidelines 'purposely limit choice and stifle innovation at the expense of the user experience,' and characterized the 30% commission as a 'tax.' Spotify also pointed out that Apple operates its own streaming music service, Apple Music, and said that the App Store's 30% commission — since it would apply for Spotify but not Apple Music — functions as an anti-competitive policy.
In June 2020, the European Commission opened two antitrust investigations into Apple, one regarding the App Store and another for Apple Pay. Companies such as Epic Games and Match Group, the owner of Tinder, have spoken out in support of the investigations. Sweeney, Epic's CEO, told the Washington Post that 'the iOS App Store's monopoly protects only Apple profit, not device security.' Microsoft word software cost.
All of that was a preface to Epic firing its own salvo in this battle: filing lawsuits against Apple and Google after they removed Fortnite from their app stores.
Why did Epic Games file lawsuits against Apple and Google?
On Thursday, Epic filed separate civil suits against Apple and then Google in U.S. federal court, accusing the companies of antitrust violations.
There are some differences between the two complaints, since Android isn't a closed ecosystem like iOS. And the one against Apple begins with an evocative reference to '1984,' Apple's memorable 1984 Super Bowl commercial, which introduced the Macintosh personal computer with an allusion to George Orwell's 1949 novel Nineteen Eighty-Four. (This is relevant because Epic parodied the ad in a Fortnite event on Thursday called 'Nineteen Eighty-Fortnite,' which launched the company's #FreeFortnite campaign.)
But the thrust of both suits is the same: Epic alleges that Apple's and Google's respective strangleholds on app distribution and payment processing amount to anti-competitive practices that maintain monopolies in those two markets. The complaints cite violations of the Sherman Antitrust Act, the 1890 federal law governing business competition; California's Cartwright Act, which is essentially a state-level version of the Sherman Act; and California's Unfair Competition Law.
If Epic were to succeed in these lawsuits — an outcome that would presumably involve court rulings or legal settlements forcing Apple and Google to change their policies — the company would keep a higher share of revenue from, say, purchases of Fortnite V-Bucks. So Epic has a clear financial incentive here. Indeed, in Apple's statement about removing Fortnite from the App Store, the company said that '[Epic's] business interests now lead them to push for a special arrangement.'
Macbook system lock pin. However, Epic says in its lawsuits that special treatment is precisely what it doesn't want. Instead, it's looking for fundamental changes to the way that Google and Apple do business with everyone on their software marketplaces.
'At the most basic level, we're fighting 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 said Friday in a Twitter thread.
Here's what Epic asks for in its complaint against Apple:
Epic is not seeking monetary compensation from this Court for the injuries it has suffered. Nor is Epic seeking favorable treatment for itself, a single company. Instead, Epic is seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers.
And here's the very similar language from Epic's complaint against Google:
Epic does not seek monetary compensation from this Court for the injuries it has suffered. Epic likewise does not seek a side deal or favorable treatment from Google for itself. Instead, Epic seeks injunctive relief that would deliver Google's broken promise: an open, competitive Android ecosystem for all users and industry participants. Such injunctive relief is sorely needed.
('Injunctive relief' is a legal term for a court order that stops someone from doing something.)
The lawsuits contrast iOS and Android with the fully open ecosystems of related platforms on computers — Apple's own Mac OS, and Microsoft's Windows. In fact, Epic's complaint against Google pointedly references previous antitrust litigation involving Microsoft, noting, 'Two decades ago, through the actions of courts and regulators, Microsoft was forced to open up the Windows for PC ecosystem.' It goes on to say, 'As a result, PC users have multiple options for downloading software unto their computers, either directly from developers' websites or from several competing stores. [..] Android users and developers likewise deserve free and fair competition.'
Epic says that if it weren't for Apple's prohibitions against non-Apple app stores on iOS, Epic would run its own marketplace and 'would provide users the choice to use Epic's or another third-party's in-app payment processing tool.' In its complaint against Google, Epic alleges that 'Google has eliminated competition in the distribution of Android apps using myriad contractual and technical barriers,' such as 'intimidating messages and warnings' shown to users who try to install apps from sources outside the Play Store. Even though Google allows third parties to run their own app marketplaces, the reality of the Android ecosystem, according to Epic, is that 'there is no viable substitute to distributing Android apps through the Google Play Store.'
For instance, Epic accuses Google of forcing OnePlus, a smartphone manufacturer, to renege on a deal it had made with Epic to put an Epic Games app (for the company's video games, such as Fortnite) on its phones. The complaint quotes Google as expressing concerns about Epic being able to install and update apps while 'bypassing the Google Play Store.'
As for the payment processing side of the lawsuits, Epic describes the 30% commission that Apple and Google charge as 'exorbitant,' and says that the fee 'forces developers to suffer lower profits, reduce the quantity or quality of their apps, raise prices to consumers, or some combination of the three.' Epic demonstrated this neatly in its original V-Bucks price drop on Thursday, discounting the currency by 20% for customers who cut out the middleman — Google or Apple — and buy V-Bucks directly from Epic. After the price cut, the company was able to say in its lawsuit against Apple that 'Epic is forced, like so many other developers, to charge higher prices on its users' in-app purchases on Fortnite in order to pay Apple's 30% tax,' describing that situation as an 'anti-competitive harm.'
Epic also asserts that the only reason the fee is that high is because of the monopoly power that the companies wield over the app distribution and payment processing markets on iOS and Android. (Epic points out that third-party payment services such as PayPal and Square charge a processing fee in the realm of 3%, one-tenth of the app store commission.) Whether it's Apple or Google, each company 'coerces developers into using its own in-app payment processing,' according to Epic.
Because app developers can't avoid paying the 30% fee to Apple and Google, it sometimes makes more financial sense for them to provide a worse customer experience — another 'anti-competitive effect' of the commission that harms consumers, according to Epic. One long-standing example Epic doesn't cite is that the App Store commission is the reason you can't buy Kindle e-books in the Amazon or Kindle apps on iOS. Amazon doesn't want to give Apple a 30% cut of book sales, so it forces iOS users to go outside the apps and make purchases in a web browser (or in an app on a different platform).
Another problem with Apple and Google handling all the payments themselves, Epic says in both legal complaints, is that 'Epic is unable to provide users comprehensive customer service relating to in-app payments.' The company adds, '[Apple/Google] has little incentive to compete through improved customer service because [Apple/Google] faces no competition and consumers often blame Epic for payment-related problems.'
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The point of all these charges from Epic is not just to argue that Apple and Google maintain distribution and payment monopolies on their app stores. Antitrust laws are written in such a way as to protect competition for the benefit of consumers, so it behooves Epic to illustrate the ways in which Google's and Apple's practices are harming consumers, not just the companies' potential competitors.
As for the outcome of these lawsuits, well, it's far too early to have any indication right now. For instance, Apple has been fighting a class-action antitrust lawsuit against its App Store practices for almost a decade now. The Supreme Court ruled in 2019 that the case, Apple v. Pepper, could continue as a class-action suit, but didn't decide on the antitrust concerns at issue. (For more, check out our report on Epic's antitrust lawsuits with comments from legal experts.)
In fact, with the court battles that lie ahead amid the backdrop of an increased appetite for regulation of Big Tech — in both the U.S. and EU — we may not know for years how Epic's lawsuits against Google and Apple will turn out.
What's the latest with Epic's lawsuits against Apple and Google?
While Epic's case against Google seems to be in a holding pattern of sorts, the Fortnite maker's lawsuit with Apple has only continued to escalate.
Days after Epic filed suit against Apple and Google, Apple told Epic that it would take further action — action that extended beyond Fortnite alone. The game is made using a game development toolset called the Unreal Engine, which Epic also produces. The Unreal Engine supports games on a wide variety of platforms, including Apple's iOS and macOS, and countless third-party developers rely on the Unreal Engine for their own games.
Apple threatened to revoke Epic's access to Apple's development tools — which would prevent Epic from maintaining active development of the Unreal Engine on Apple platforms — unless Epic removed the direct-payment option from Fortnite and stopped violating Apple's App Store policies by Aug. 28. In an Aug. 17 legal filing requesting a court order to prevent Apple from doing this, Epic said that Apple's potential move would 'cripple the engine's desirability and future commercial viability across all platforms,' and that it would 'harm developers who already use Unreal Engine.' Epic also asked the court to force Apple to allow Fortnite to return to iOS.
After hearing oral arguments from Epic Games and Apple on Aug. 24, a federal judge issued a split decision that night. U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple cannot terminate Epic's access to Unreal Engine development tools on Apple platforms, but permitted Apple to keep Fortnite off the App Store. The temporary restraining order is effective immediately, and the legal case will continue with a hearing in September.
Update (Aug. 25): We've updated this article with a section on the latest updates in the Epic Games v. Apple court case.
CUPERTINO (CBS SF /CNN) — A federal judge presiding over a high-stakes antitrust lawsuit between Apple and Epic Games — maker of the popular video game Fortnite — repeatedly slammed Epic on Monday on its legal theories and tactics in the company's case against the iOS App Store, a court battle that could reshape the digital economy.
Epic is seeking a temporary court order that would force Apple to unblock Fortnite from its iOS App Store. Apple removed the game in August after Epic pushed a software update to the app that allowed players to circumvent Apple's proprietary in-app payment system — a move that is contractually prohibited.
The case is considered a potentially landmark suit, one that tests the frontiers of antitrust law, said Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California. She did not give a timeframe for a decision on the injunction. She also said that given her schedule, the case is not likely to go to trial until July 2021. And, she added, she would prefer the case be tried before a jury.
Monday's arguments will not determine the final outcome of the lawsuit — only whether Gonzalez Rogers grants Epic's request for a preliminary injunction. But the court clash, which was livestreamed on Zoom, offered a preview of what a jury could hear next summer, as well as a peek into the judge's early views in the case.
Epic Games declined to comment. Apple did not immediately respond to a request for comment.
Judge Gonzalez Rogers looked skeptically at many of Epic's claims, explicitly telling the company several times in the hearing she was not persuaded by its arguments or its strategy.
Epic knew that it was breaching its contract with Apple when it published the update, but did it anyway, she said, accusing the company of dishonesty.
Apple has justified its app store policies partly as a way to protect consumers from security risks and malicious software. Epic has countered that it is a credible business that has been on the iOS App Store for years and poses no security threat. But Gonzalez Rogers said that is not the issue.
'You did something, you lied about it by omission, by not being forthcoming. That's the security issue. That's the security issue!' Gonzalez Rogers told Epic. 'There are a lot of people in the public who consider you guys heroes for what you guys did, but it's still not honest.'
Epic's attorneys acknowledged that the company breached its agreement with Apple but claimed Epic was simply refusing to comply with an anti-competitive contract, and that forcing a legal battle was part of Epic's plan.
'When you are taking on the biggest company in the world, and you're taking it on where you know it's going to retaliate, you don't lie down in the street and die,' said Epic's attorney, Katherine Forrest. 'You plan very carefully on how you're going to respond.'
Gonzalez Rogers' pique with Epic extended to many of the company's legal theories. Epic has alleged that Apple, through its developer rules, is abusing its tight grip on the iOS App Store to harm innovation, competition and consumers in the market for iOS app sales.
Tens of millions of iOS users have been harmed, Epic alleged, by what it described as a retaliatory decision by Apple to remove Fortnite from the iOS App Store. The decision reflects Apple's ironclad control and unlawful monopoly maintenance, Epic argued.
It also cited Apple's in-app payment system as an example of illegal tying — when a company bundles two products together for anti-competitive gain.
But there is no tying going on with Apple's in-app payment system, Gonzalez Rogers observed.
'I'm not particularly persuaded,' she said of the in-app payment mechanism. 'I just don't see this as a separate and distinct product.'
Nor did the judge buy Epic's argument that Apple has harmed the distribution of Fortnite because of Apple's exclusive control of the iOS App Store. Fortnite players on iOS have a variety of choices to access the game even if it is no longer available on iOS, she said.
'Walled gardens have existed for decades,' she said. 'Nintendo has had a walled garden. Sony has had a walled garden. Microsoft has had a walled garden. What Apple's doing is not much different… It's hard to ignore the economics of the industry, which is what you're asking me to do.'
For its part, Apple alleged that Epic CEO Tim Sweeney is attempting to lead a developer revolt that cuts at the heart of Apple's business model.
'Mr. Sweeney is trying to be the Pied Piper of other developers,' said Apple lawyer Ted Boutrous. He said Epic wants others to 'cheat, breach [their] agreement [and] sneak in software to bypass app review.'
A finding in Epic's favor would be a 'green light to other companies and that would be very dangerous,' he argued.
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© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.
