Apple’s lawsuit against Epic Games is now being played out in U.S. District Court for the Northern District of California. And whatever the final decision, the implications of the lawsuit may be felt at land-based and Vegas casino online sites for many years to come.
The fight started in August 2020 when Epic introduced a new direct-payment system for their Fortnight game. This action served to circumvent the Apple Store’s 30% fee. Apple responded by removing Fortnight from the Apple App Store. That, in turn, prompted Epic to launch a civil lawsuit regarding Apple’s threat to terminate Epic’s developer account (which would prevent Epic from developing any future games that could be played on a Mac or any iOS system.)
On August 24th the judge issued a temporary restraining order that prevented Apple from terminating Epic’s developer account. Judge Yvonne Gonzalez Rogers said, however, that Apple would not be required to restore Fortnight to the App Store.
Apple then countersued Epic for a breach of contract and asked for damages. Although Judge Rogers criticized Epic’s decision to breach its contract with Apple and expressed skepticism about Epic’s arguments (including the claim that, because it was a well-established company and partner of Apple it did not pose a security threat to Apple) she did recommend that the case proceed to a jury trial which, if the two sides agree, will begin in July.
Frustration with Apple
Some industry observers have criticized Epic, saying that the company simply wants to attract publicity and revive its flagging Fortnight franchise. Others however including companies such as Spotify, Tile and the Match Group applauded Epic’s willingness to take on the Apple giant in court.
The newly-formed Coalition for App Fairness, comprised of the aforementioned companies and others, said that it was important to “defend the fundamental rights of creators to build apps and to do business directly with their customers.”
Apple has a lot at stake in this fight. It is trying to control how apps are distributed and monetized across Apple devices. The eventual decision will affect other device manufacturers as well. Apple demands that it approve every app that's offered for sale for its iOS devices.
The Apple App Store serves as the only distribution platform for iOS app developers. That type of control is a selling point for Apple in its marketing because it promises iPhone users that any app that they download from the App Store has been vetted for security.
Apple's App Store frustrates many in the tech industry with many developers saying that Apple has taken too much control.
Apple charges up to 30% for any in-app purchase made through its store and requires app developers to keep “objectionable content” (pornography, realistic portrayals of death and violence, encouraging drug use) off of their products. Apple only allows apps in their store which have been scanned for security issues and spam and won’t allow apps that can be used to take data from people's phones without their consent.
The company said in one of its filings that "Apple's requirement that every iOS app undergo rigorous, human-assisted review -- with reviewers representing 81 languages vetting on average 100,000 submissions per week -- is critical to its ability to maintain the App Store as a secure and trusted platform for consumers to discover and download software". That is such an important principle for Apple that they have fought Microsoft and Amazon over the user of the term “App Store,” though in the end, Apple backed down.
Apple Vs Epic Games
Apple is no stranger to court battles. In the past, it fought Samsung over the iPhone design, Nokia over patent royalties and Cisco over the iPhone name.
Now it meets Epic Games in court over Epic’s allegations that the iPhone maker's rules regarding how app developers make money in the App Store and how big a cut of app sales developers need to pay Apple. Apple will be called to defend the way it operates its App Store which is the only way that iOS users can get access to the developers’ apps.
Epic claims that it’s inappropriate for Apple to charge such a high rate, and add so many restrictions, for gamers to purchase in-game purchases. In-game purchases are the add-ons that players need to buy to get designs, token, clothes, etc for their Fortnite characters and are, for many developers, a key source of income.
To combat Apple’s control over the in-app purchases for their game Epic turned on a hidden code that allows users to purchase the in-game apps through Epic. These direct payments circumvented the 30% commission that Epic had obligated itself to pay to Apple through their contract with the Apple App Store.
The entire gaming industry, along with millions of app developers and hundreds of millions of gamers are watching the proceedings with interest. Apple’s App Store now features more than 1.85 million apps and serves more than 27 million app developers.
More than 1 billion people have downloaded apps from the Apple Store. David Olson, a professor at Boston College Law School, says, "There are good arguments on both sides." Olson tracks antitrust, intellectual property and patent law and says that what makes this case stand out is that it raises the question of how much Apple should be allowed to control its platform without crossing anti-trust issues. "This could be huge" says Olson.
Critics of Apple say that the iPhone maker exercises too much control over other companies. The Coalition for App Fairness has organized to support Epic. Horacio Gutierrez, head of global affairs at Spotify -- a Coalition member -- says "As enforcers, regulators, and legislators around the world investigate Apple for its anti-competitive behavior, The Coalition for App Fairness will be the voice of app and game developers in the effort to protect consumer choice and create a level playing field for all."
In the end, most consumers don’t have a lot of sympathy for either side. Joost van Dreunen, a professor at NYU Stern School of Business and author of the upcoming book One Up: Creativity, Competition and the Global Business of Video Games says, "Epic's being self-serving by saying it's protecting the little guy, and Apple's being self-serving by saying its protecting consumers.
If Apple loses the case, many analysts say that it will have far-reaching implications for the whole industry. It would set a precedent that affects how all app stores work as the courts consider how to apply the decades-old antitrust to modern-day technology. "Antitrust needs to catch up with the world some," said Boston College Law School’s David Olson.