The Fortnite App Store Battle: A Real Antitrust Conundrum, Or Just A Carefully Planned Out Contract Negotiation?

from the a-little-from-column-a... dept

Last week there was quite a lot of news paid to Apple kicking Fortnite out of the iOS app store for violating the rules by avoiding Apple’s in-app payment setup (out of which Apple takes 30%). Epic, who had been hinting at this for a while, introduced a direct payment offering that effectively avoided the 30% charge that Apple (and Google) require from developers.

There have been arguments over the last decade or so since Apple implemented its policy requiring subscription revenue to go through Apple’s system — but this is probably the biggest fight yet. Epic was clearly expecting Apple to do this because almost immediately after Fortnite was removed from the app store, Epic first released a Nineteen Eighty-Fortnite parody ad, mocking Apple’s infamous 1984 Superbowl ad.

Almost immediately, Epic also sued Apple over the removal in a legal complaint that was clearly prepared well in advance. Represented by some of the top antitrust lawyers in the country, and weighing in at 65 pages, Epic had spent some time preparing for this fight. To drive this point home, the lawsuit itself references 1984 in the opening paragraph, tying into Epic’s marketing campaign:

In 1984, the fledgling Apple computer company released the Macintosh?the first mass-market, consumer-friendly home computer. The product launch was announced with a breathtaking advertisement evoking George Orwell?s 1984 that cast Apple as a beneficial, revolutionary force breaking IBM?s monopoly over the computing technology market. Apple?s founder Steve Jobs introduced the first showing of the 1984 advertisement by explaining, ?it appears IBM wants it all. Apple is perceived to be the only hope to offer IBM a run for its money . . . . Will Big Blue dominate the entire computer industry? The entire information age? Was George Orwell right about 1984??

Fast forward to 2020, and Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation. Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear. At a market cap of nearly $2 trillion, Apple?s size and reach far exceeds that of any technology monopolist in history.

The coordination between product, marketing, and legal shows that Epic was well aware of what it was doing.

And, almost immediately after all of that, Google also kicked Fortnite out of its app store, and Epic sued Google too. Rather than opening with the 1984 line (which wouldn’t apply to Google), in this case, Epic’s lawyers leaned on the “Don’t Be Evil” line:

In 1998, Google was founded as an exciting young company with a unique motto: ?Don?t Be Evil?. Google?s Code of Conduct explained that this admonishment was about ?how we serve our users? and ?much more than that . . . it?s also about doing the right thing more generally?. Twenty-two years later, Google has relegated its motto to nearly an afterthought, and is using its size to do evil upon competitors, innovators, customers, and users in a slew of markets it has grown to monopolize. This case is about doing the right thing in one important area, the Android mobile ecosystem, where Google unlawfully maintains monopolies in multiple related markets, denying consumers the freedom to enjoy their mobile devices?freedom that Google always promised Android users would have.

Google acquired the Android mobile operating system more than a decade ago, promising repeatedly over time that Android would be the basis for an ?open? ecosystem in which industry participants could freely innovate and compete without unnecessary restrictions.2 Google?s CEO, Sundar Pichai, represented in 2014 that Android ?is one of the most open systems that I?ve ever seen?.3 And Andy Rubin, an Android founder who is described by some as the ?Father of Android?, said when he departed Google in 2013 that ?at its core, Android has always been about openness?.4 Since then, Google has deliberately and systematically closed the Android ecosystem to competition, breaking the promises it made. Google?s anti-competitive conduct has now been condemned by regulators the world over.

Both lawsuits argue that this is an antitrust violation. Also, in both cases, Epic makes it clear (again, strategic marketing at work) that it’s not seeking monetary damages, but is demanding that both companies change their practices regarding what cut they take from in-app payments via the app stores. Of course, if it gets rid of having to hand over 30% to Apple and Google, Epic stands to make a lot more money (even if it then discounts in-app purchases that are done directly, as it did with this update).

Of course, when various mutli-billion dollar giants battle in court, you know there’s a lot happening behind the scenes. From a pure narrative perspective, you can see Epic’s point. Fortnite’s success on mobile is not about the benefits provided by the app stores on either of the major mobile operating systems. And, to be clear, Epic had explored this area in the past. Two years ago it tried to avoid the Google Play Store to protest the 30% cut (which is possible, though clunky, on Android), but eventually gave in and went back into the Play Store.

From Apple’s standpoint, Epic’s move put it in a no-win position. If it let Epic do this with Fortnite, tons of other developers would claim that Epic was getting preferential treatment, and thus letting Epic’s move slide would create massive problems in its own way. But pulling Fortnite down from app store created a new set of problems as well (including this antitrust suit). Then Google was similarly put in an impossible situation. Right after seeing what happened with Apple, Google basically had to make a similar call, knowing that it had to decide if it was going to stand firm like Apple (and face a certain lawsuit) or cave and create a whole host of other problems.

From Epic’s vantage point, this was a shot that the company had to take. The company’s CEO, Tim Sweeney, has a history of not liking rent-seeking by middlemen. And while the antitrust fight can be costly, a win (either by settlement or by the results of litigation) would be a huge win, and a loss would effectively leave Epic in the same position it’s in now (though with some quite hefty legal bills that the company can easily afford).

As for the legal arguments… I think it’s an uphill climb. The public narrative may sound good, but the actual antitrust laws are going to make this quite difficult to win.

To some extent, this comes down to one of the key differences between the mobile universe — which is much more closed, limited, and controlled by gatekeepers — and the wider, more open internet ecosystem. And, to their credit, both Apple and Google have done a lot to build the entire smartphone/tablet ecosystem with iOS and Android, though it is disappointing that over time Google has progressively moved away from its more “open” promises regarding Android. That said, being more closed and proprietary has allowed both companies (and especially Apple) to argue that their devices are a lot more secure than computers and an internet where anything goes.

Also, much of this fight ignores that in the console world, 30% is also the standard fee. It certainly looks like, pretty much across the board, devices used for gaming have decided that the entrance fee to get on a device is about 30% of any in-app purchases. As John Gruber notes, Sweeney seems to handwave around the dedicated gaming consoles argument — suggesting that somehow the 30% makes sense there, because of the nature of those consoles. But that does seem to undermine his overall argument (and may also doom his legal argument).

I don’t know what the right answer is here, and I don’t find myself particularly rooting for any one of these giant companies in this fight. I wish mobile platforms were more open, but I understand why they’re not. I also don’t think that the activity Google and Apple engage in will trip the wire under current antitrust law. And thus, if Apple and Google do stand firm, I think Epic loses in the long run. But it can be a very long run, and it might just be worth it for Epic to try to force its view of the mobile app market onto that world.

But, of course, to some extent, everything is a negotiation. And there’s a part of me that wonders if Epic isn’t just hoping to use this as an “initial offer” to get Apple and Google to agree to a favorable deal to allow Fortnite back into the app stores. That, of course, would raise a bunch of other questions — including other developers demanding similar treatment. But I could see some sort of tiered system worked out, whereby Apple and Google agree that at certain levels of revenue, the cuts they take drop. Just to get this lawsuit out of the way.

No matter how you feel though, this is going to be a big fight to watch over the coming months and years. It’s almost as fascinating as Fortnite itself.

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Companies: apple, epic, google

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Comments on “The Fortnite App Store Battle: A Real Antitrust Conundrum, Or Just A Carefully Planned Out Contract Negotiation?”

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44 Comments
Koby (profile) says:

Corporation vs Corporation

I remember an article from a couple years back:

https://www.techdirt.com/articles/20120906/11274320303/judge-quickly-approves-ebook-pricing-settlement-says-its-public-interest-to-stop-price-fixing.shtml

Now, the show is on the other foot. Instead of Amazon being the big monopolist, it is Apple. And instead of the little guys conspiring to raise prices so that they can get more money, Epic is not raising consumer prices, and instead trying to make more money by asking the middleman to lower prices.

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Michael Long (profile) says:

Re: Corporation vs Corporation

Dear Government.

Please make the big bad Apple take less of our money and we, like AT&T, Sprint,Verizon, and many other proud US corporations will definitely consider passing on at least some of those savings on to our customers.

Seriously. We promise to think really hard about it!

Epic

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Anonymous Coward says:

Re: Corporation vs Corporation

Epic is railing against the very thing they recently started doing: Forcing their customers to use their own store (and launcher) to run their products. It’s not exactly the same since the games they sell are their own products but it’s not all that dissimilar. There were outcries of antitrust when they did that, too.

I do hope Epic is able to at least force Apple and Google to allow alternative app stores to be installed on devices where users can go to purchase apps from outside Apple/Google’s walled gardens. They’re unlikely to be much better than sideloading random apps but they’ll at least be convenient and the alternative stores will have a vested interest in keeping their offerings clean.

Fuck Apple and Google but also fuck Epic. They’re all a bunch of greedy assholes.

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PaulT (profile) says:

"It certainly looks like, pretty much across the board, devices used for gaming have decided that the entrance fee to get on a device is about 30% of any in-app purchases."

Hmmm… although it’s increasingly less an option at least you still have the option to buy physical media with consoles. That means very cheap deals and times, and the ability to trade and borrow games. That’s a pretty big current difference to having to use Apple’s store no matter what, even if consoles are generally trying to edge away from physical media in the long term.

So, with that being the case would the argument of "consoles do it too" when the consumer had a choice in one case and zero choice in another? I’m not sure I agree with Sweeney’s argument, but there is certainly a different argument to be made between the platform types.

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Samuel Abram (profile) says:

Re: Re: Re:

However, as much as people write tirades against Valve and Steam for being a monopoly, GOG, itch.io, and yes, Epic’s own Game Store (on which they have one-year exclusives which they swiped from Steam) also exist, and while I refuse to shop on the Epic Game Store, I do shop as much as I can on GOG, itch, and the Nintendo Switch eShop so I don’t have to be dependent on Steam.

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IAmNotYourLawyer (profile) says:

Re: Re: Antitrust? How many platforms is Fortnight available on?

How the relevant market is defined will be very important to the case. Apple will push to define a broad market (e.g., all gaming across all platforms) while Epic will advance a more narrow definition (e.g., shooters on mobile).

If this goes to trial, how the judge decides what the market is will significantly impact the analysis of competition.

That One Guy (profile) says:

'How dare you punish us for violating your rules!'

Yeah, Epic’s ‘outrage’ here is entirely staged, they knew damn well that if they broke the rules in such a blatant fashion the app stores would have to respond, and they’re hoping to rope in people gullible enough not to see that their ‘woe is me, I’m so persecuted’ problems are completely self-inflicted to argue in their favor and pressure Apple and Google to fold.

If they didn’t like the fact that the app stores were taking a 30% cut they could have made an argument that it brings in enough that a smaller cut might be justified, they could have lied to their players that if Google/Apple took smaller cuts they would drop in-game purchase prices, they could have just pulled the game and hosted it on their own platform, by going with the tactic that they chose they made crystal clear that much like previous actions this is entirely a PR stunt to bolster their position and try to increase the cash-flow to a company that’s already swimming in cash.

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Anonymous Coward says:

Re: 'How dare you punish us for violating your rules!'

They didn’t have to lie – they DID drop their in-app purchase prices, if you chose to buy DLC from them direct.

Personally, I think there is a lot of uninformed bollocks said about Epic, they actually do a hell of a lot for the developer and gaming community, far more than a lot of other companies.

Yes, I have a slight bias, I’m an indie developer who uses Unreal Engine, but this doesn’t distract from my points.

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Anonymous Coward says:

Re: Re:

Fortnite is free. What is not free are the skins, dances and other purchasable things in the game. You also can’t download Fortnite and play it on an Apple device now, even though it is free. Maybe you should learn more about things before commenting.

On Android, they can and have been sideloading the game to let you play it even when it was not available on the Play store. The problem here is that Android has multiple scare messages that pop up and try to persuade you to not trust this file because it might contain a virus or other program that you do not know about.

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Anonymous Coward says:

There’s something more subtle about this. The timing wasn’t accidental.

(1) Apple etc. testify to Congress, under oath, that (among other things) companies are NOT punished for speaking out about the "monopoly".

(2) Epic breaks the rule with Fortnite. As expected, Apple removes Fortnite from the store. So far, it is possible to see all this as just "how dare you punish us by violating your rules?" But that completely misses the point. Because, as has been noted, Apple has the high ground, and an Epic lawsuit seems a stretch.

(3) Epic SPEAKS OUT ABOUT THE MONOPOLY: the lawsuit the videoclip.

(4) Apple does something else–removes Epic from the Super-Sekrit Developers Club. Which can ONLY be seen as PUNISHING Epic for SPEAKING OUT ABOUT THE MONOPOLY.

Mistake. So Apple is exposed by their own actions, publicly revealed as a perjurer. Now that "monopoly" mud is going to stick. Tight.

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Matteste says:

The Hypocrisy is strong with this one.

Kinda rich coming from Epic complaining about monopolies when in all past cases they have done so, there never were any monopolies, just untapped markets. And then of course they start to engage in their own actual monopolies instead. After all, both in the cases of this and Steam, there is nothing actually stopping them from putting up their own stuff such as this.

What’s clear here is the Epic are the ones really guilty of breaking Anti trust laws as they are now trying to use the government to slam down on their competitors. People should really take a look at Upper Echelon Gaming’s video on the subject as he makes some good points regarding what Epic might be truly up to.

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ShushinKun says:

If I were a Fornite player, which I am not, it would really piss me off to be used in this way.

Epic pretty much threw the Fornite players under the bus by using them as chips for this ploy about money renegotiation, and yet I see so many people all over the internet cheering for Epic on this issue…

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Ed (profile) says:

No sympathies for Epic

I loathe everything Apple. But, in this instance, I’m in full agreement with Apple (and Google). Epic has known the rules and is simply getting greedy. The Apple and Google environments are there for a reason. Just look at the Android market in China, where Google Play Store isn’t allowed: it’s a malware shithole! Evidently, Epic wants this same type of shithole everywhere, on both Apple and Android. Sorry, Epic, I hope you lose on this one and get slapped down hard for your stupidity.

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Darkness Of Course (profile) says:

Sweeney, yeah that guy

The funny bit about Sweeney and money is he hand-waves re his own sources of income.

He is a middle-ware, as well as, a game engine provider. He gets a cut of every game that uses his tools. He finally backed off the fees for indie devs, and for games that don’t make a bundle of money. But, he didn’t do it out of the goodness of his heart. He was pushing others, and got called out – then he was all Mr. Nice Guy.

I fail to understand how the R&D to develop a cheap PC product to mostly do video games is somehow protected and sacred compared to, in apple’s case, designing their own CPUs, creating their own SoCs, developing new business markets. I would guess that apple coughs up more to develop a new phone than either Sony or MSFT did for their cute little system based on a tablet SoC, aka a low power Applications Processor with integrated graphics originally intended for the tablet market.

Remember this: every game that makes a dent in any store puts money in Epic’s pocket. Two ways currently, first is their game software, and now the Epic Store. Sweeney is driven to put more money in his pocket. I seriously doubt there is any other reason behind his actions.

Great_Scott says:

Epic Can't Win

This can’t work out for Epic.

Apple can’t afford to back down, even if they were inclined to.

Google, on the other hand, are unable to lose this case because the ability to sideload apps exist – it’s not even hidden away – there is not and cannot be a "monopoly" on Android.

Even the fake "your own device’s store is a monopoly somehow" argument (which is not only stupid, but would allow for easier virus and malware attacks) fails on that platform.

RE: Groundswell of support for Epic – Maybe when Epic’s own store gets advanced Shopping Cart technology that it shouldn’t have launched without and stops scraping friends list from Steam installs, I’ll think about supporting them. (I’m not even going to get into them being owned by TenCent here)

steve says:

The appstore argument always seems like a stretch, until you translate it back to something you know a bit better:

So you bought a Ford, you should have known that you can only use Ford Fuel, Ford Tyres, Ford Wiper blades, and Ford oil. Oh and if you dont service it at a ford dealer, warranty over buddy.

These are arguments that have already been dealt with, and would be ruled anti competitive in an instant, this is just the law catching up with modern day.

That One Guy (profile) says:

Re: 'You can sell on my property but I get a cut in exchange.'

Well, no, the Ford is the product whereas the app store is the platform to sell the product on.

Keeping with the car comparison it would be more along the lines of a person/company with a large empty lot allowing anyone to sell cars on the lot but requiring that any transactions go through them both so they can take a cut to pay for the lot and make some money leaving it open and so they can reduce the odds of someone scamming potential buyers, which would harm the lots reputation and result in less buyers/sellers.

Taur10 (profile) says:

I think the case against Apple is fairly strong, especially in the face of Apple’s latest moves which could break anything using the Unreal engine on Macs as well as IOS devices. Basically your software doesn’t get on Apple devices without Apple’s permission, and them getting a cut.

On the Google side, their argument is really rather weak, after all you can load software onto your device from non-Google sites. That said, the first article I read on this had Epic saying that users were constantly getting asked to update permissions for the app, something I’ve never seen on non-Play apps on my devices, which makes me wonder if Google was targeting them to force Epic into the Play store where they could get a cut of their sales.

Taur10 (profile) says:

Re: Re: Re:

https://edition.cnn.com/2020/08/18/tech/epic-apple-developer-tools/index.html

Can’t find the exact article I read, I think it was from CNN and went into more detail, but short version, they’re not just threatening to remove them from both stores, but also cut off their access to development tools which is essential for any of their software or anything based on it to work.

Samuel Abram (profile) says:

Re: Re: Re: Re:

Thank you for your receipt! If Apple removed Fortnite from the Mac App store, that’s not really a big deal since there are other stores and distribution methods to get apps to work on a Mac. It’s a general-purpose computer, after all. However, Apple forbidding Epic from using Apple’s own developer tools and software development kits strikes me as something more akin to what a video game console manufacturer would do rather than a general-purpose computer manufacturer would do. I can easily see why Ron Gilbert decided to leave Apple-Macintosh-land for being a Linux user.

Taur10 (profile) says:

Actually Apple hasn’t been a general purpose computer in a while really for example you can’t easily change a hard drive because of sensors in or on the factory drive. Bit by bit they’ve been locking down the software and hardware, with the former supposedly only installable if the maker has a developer ID. This becomes a problem because if they pull Epic’s ID, not only will it stop their software from being installed, it may also cause problems with anything built on it.

Samuel Abram (profile) says:

Re: Re:

Bit by bit they’ve been locking down the software and hardware, with the former supposedly only installable if the maker has a developer ID.

Key word is "supposedly". I have a Mac Mini installed with the latest version of MacOS and I can
A. use the unix terminal,
B. use and install Apps that are not from the App store, and
C. use and install Apps that aren’t signed from developers.

While you’re right that Apple has made B and C harder and harder (both of which have made Ron Gilbert quit in disgust), we’re definitely not there yet where the Macintosh line of computers are as closed off as the iOS smartphones and tablets.

PaulT (profile) says:

Re: Re: Re:

Also:

D. Install Linux or even Windows if you find MacOS too restrictive, the latter with full support from Apple if you do it through Bootcamp

Whatever you think of Apple’s policies with its security and build decisions, it sure as hell still produces general purpose computers until the day when they both block non-app store programs and block Homebrew and other alternative installers, and even then there are still options.

Anonymous Coward says:

Re: They're all scumbags

There is one key point here. Say you are Apple or Google and you create a locked in "market place" and demand a 30% cut of "in game" transactions. Okay, so you can then use your influence to promote the highest transactor to increase your margins from something you had no hand in creating.

WTF is a curated market?

New normal.

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