A federal judge denied Epic Games’ request to force Apple to reinstate Fortnite on the App Store pending the results of an antitrust lawsuit. U.S. District Court Judge Yvonne Gonzalez Rogers also ruled in favor of Epic, permanently granting a prior temporary order that stops Apple from retaliating against Epic by removing support for Epic’s Unreal Engine.
The antitrust battle kicked off August 13, when Epic announced a discount policy and direct payment mechanism for Fortnite that Apple and Google claimed violated their respective terms of service. Epic CEO Tim Sweeney has long argued against big companies taking a 30% commission of every game transaction and said Epic should be able to sell its in-app goods directly to players for less. Epic only charges a 12% developer fee in its store.
After Epic modified the iOS version of Fortnite so players could pay for virtual goods directly — without giving Apple its 30% — Apple kicked Fortnite out of the App Store and said it would no longer provide support for Epic’s Unreal Engine. Epic then asked the courts in Oakland, California to reinstate Fortnite and prevent Apple from taking action against Unreal Engine.
The mixed ruling means Epic will likely lose revenue over the course of the antitrust trial, but Epic’s Unreal Engine customers won’t have to worry that their games will no longer work on Apple’s iOS and Mac platforms because Apple pulled technical support.
Epic can still reinstate Fortnite by taking out the direct payment modification that caused the ban, although it’s unclear whether Apple would allow this immediately or impose a penalty waiting period.
Epic Games released a statement in response to the ruling: “Epic Games is grateful that Apple will continue to be barred from retaliating against Unreal Engine and our game development customers as the litigation continues. We will continue to develop for iOS and Mac under the court’s protection, and we will pursue all avenues to end Apple’s anti-competitive behavior.”
The case could go on for years, but the ruling on the temporary restraining order request may offer an early indication of the federal judge’s thoughts about the merits of the case.
In a statement, Apple defended its position: “Our customers depend on the App Store being a safe and trusted place where all developers follow the same set of rules. We’re grateful the court recognized that Epic’s actions were not in the best interests of its own customers and that any problems they may have encountered were of their own making when they breached their agreement. For 12 years, the App Store has been an economic miracle, creating transformative business opportunities for developers large and small. We look forward to sharing this legacy of innovation and dynamism with the court next year.”
Apple contends that it is not a monopoly, as it faces competition in every market, including gaming. The company has filed a counterclaim alleging that Epic could easily put Fortnite back in the store without the unauthorized payment system and that any harm is a “self-inflicted wound.”
Epic argues app distribution is an “aftermarket” derived from the primary market of the smartphone platform. Epic says the courts should view the relevant antitrust market as the aftermarket, which has a unique brand and a unique market and is not part of a larger single product. Epic isn’t challenging Apple’s rights on the smartphone platform, only in the aftermarket, where Epic alleges Apple is behaving in a monopolistic manner. Epic argues that Apple restricts choices (such as downloading apps from websites) available to consumers in other markets.
Epic said in court it has seen a 60% drop in daily active users on iOS since Apple cut off its access to the App Store. But in a hearing, the judge grilled Epic’s lawyers on why they thought Apple’s market was so unique when Fortnite appears in plenty of other places where it has to pay a 30% fee.
“If we look at the video game industry, of which your client is a part, the 30% seems to be the industry rate,” Gonzalez Rogers said. “Steam charges 30%, GOG. Microsoft charges 30%. In the consoles, PlayStation, Xbox, Nintendo, GameStop, Amazon, Best Buy charge 30%. Your client doesn’t. Where is the lack of competition?”
Gary Bornstein, an external lawyer for Epic Games at Cravath, Swaine, & Moore, said in the hearing that 63% of Fortnite players on iOS play only on iOS. He argued Apple has prohibited Epic from having its own store on Apple’s platform based solely on anti-competitive reasons.
Apple said Sweeney has testified that about 90% of average daily players access Fortnite via a competing platform. Apple also maintained that Epic benefits from Apple’s services, which is one reason it charges a fee. Apple pointed out that Fortnite has used more than 400 of Apple’s unique Application Programming Interface (API) frameworks and classes (such as Metal). And Apple noted that it has promoted Fortnite in the past.
A jury trial might begin in July 2021, but appeals are likely to stretch out longer. Regarding the Unreal Engine aspect, the judge said, “Epic Games and Apple are at liberty to litigate this action for the future of the digital frontier, but their dispute should not create havoc to bystanders. Thus, the public interest weighs overwhelmingly in favor of Unreal Engine and the Epic Affiliates.”
To lobby against Apple, Epic has created the Coalition for App Fairness with other notable critics, including Spotify, Tile, Basecamp, Blix, Deezer, Blockchain.com, SkyDemon, ProtonMail, Schibsted, the European Publishers Council, and the Match Group.
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