Law Street Media

Epic Games Sues Apple Over App Store Policies

Apple's logo on a store window.

Bangkok, Thailand 21/12/2018 The logo of Apple brand in front ot First Apple store in Bangkok, Thailand.

Epic Games, Inc. filed a lawsuit against Apple, Inc. Thursday in the Northern District of California, charging Apple with violations of the Sherman Act and state antitrust law citing the tech giant’s anticompetitive restraints and monopolistic practices. The 65-page, ten-count complaint targets Apple’s much-maligned App Store policies that have been the subject of foreign regulatory scrutiny and recently, Congressional inquiry.

The filing concerns both Apple’s “distribution of software applications to users of mobile computing devices like smartphones and tablets, and [] the processing of consumers’ payments for digital content used within iOS mobile apps.” Epic accuses Apple of imposing a “tax” that “prevent[s] software developers from reaching the over one billion users of its mobile devices (e.g., iPhone and iPad) unless they go through a single store controlled by Apple, the App Store.” There, Apple demands an “oppressive 30% tax” on the sale of every app and every digital in-app content purchase.

Epic is a Maryland-based company that developed and owns the popular game “Fortnite,” which is free for users to download and play. Epic monetizing the game by offering users various in-app purchases. This model, it contends, “makes Fortnite widely accessible at no cost to consumers, while earning a return on its artistic and engineering investments through the sale of cosmetic enhancements.”

Epic argued that Apple’s extortionate tax has not only caused it injury but also harms “the consumers who rely on these mobile devices to stay connected in the digital age.” Epic wrote that “[b]ut for Apple’s illegal restraints, Epic would provide a competing app store on iOS devices, which would allow iOS users to download apps in an innovative, curated store and would provide users the choice to use Epic’s or another third-party’s in-app payment processing tool.”

Apple’s anticompetitive behavior has also forced Epic to distribute its app exclusively through the App Store and exclusively using Apple’s payment processing services, the plaintiff claimed. This, it contended, forced Epic, “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.”

Epic avers that it has tried to negotiate with Apple, and has publicly advocated for changes to its “tax” policy, but to no avail. In conjunction with its filing, Epic added a direct payment option to Fortnite, allowing players the option to continue making purchases using Apple’s payment processor or to utilize Epic’s direct payment system for a 20% discount, according to the complaint.

“Rather than tolerate this healthy competition,” the complaint said, Apple responded by removing Fortnite from its App Store. This means that new users cannot access the game, and existing users cannot receive game updates through the store, the complaint explained. The reaction, Epic contended, “is yet another example of Apple flexing its enormous power in order to impose unreasonable restraints and unlawfully maintain its 100% monopoly over the iOS In-App Payment Processing Market.”

Interestingly, Epic is not pursuing monetary damages. Instead, Epic explained that it wants to end Apple’s unfair and anti-competitive actions that enable it to maintain monopolies in the iOS app distribution and the iOS in-app payment processing markets. The complaint highlighted the fact that Epic does not seek “favorable treatment for itself,” rather, it seeks “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.”

Epic is represented by Faegre Drinker Biddle & Reath LLP and Cravath, Swaine & Moore LLP.

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