The Epic-Apple affair is over and the maker of Fortnite has won at least a partial victory which could have significant ramifications for iOS developers in the future.
Judge Yvonne Gonzalez Rogers issued her decision on the case today, siding with Epic on one of the ten counts she charged Apple with, but also siding with Apple on the one of his counterclaims against Epic.
Gonzalez Rogers agreed with Epic that Apple’s restriction rules against apps directing people to external payment offers violate California unfair competition law and issued a permanent injunction against Apple.
Starting December 9, Apple will no longer be allowed to prevent developers from including external links, metadata buttons, or other calls to action that direct users to places where they can pay for services without that Apple does not perceive a reduction in revenues. Additionally, developers will be allowed to contact customers directly through any contact information provided to them when users register a new account through an app.
On Apple’s side, Judge Gonzalez Rogers agreed with the iPhone maker that Epic breached its contract by circumventing the App Store’s payment processing — and the 30% fee it was carrying — to allow iOS users to purchase Fortnite V-Bucks directly through the app. To that end, Epic was ordered to pay 30% of the more than $12 million raised through the iOS app from August to October last year, and 30% of any money raised in this way since then.
One of the key points where Epic lost was its attempt to define a market in which it could be said that Apple had a monopoly. While the judge rejected Apple’s own definition of the market – all digital video games – as being too broad, she said Epic was arguing that Apple had no competitors of any kind, “a monopoly of one”, as she said. She rejected both arguments, finding instead that the market in question was digital mobile game transactions.
“Epic Games has failed to demonstrate that Apple is an illegal monopolist”
Judge Yvonne Gonzalez Rogers
“Given the trial record, the Court cannot ultimately conclude that Apple is a monopoly under federal or state antitrust laws,” Judge Gonzalez Rogers wrote. “Although the Court finds that Apple enjoys a sizable market share of over 55% and extraordinarily high profit margins, these factors alone do not demonstrate antitrust conduct. Success is not illegal.
“The final trial record did not include evidence of other critical factors, such as barriers to entry and conduct diminishing production or diminishing innovation in the relevant market. The Court does not find that it’s impossible; only that Epic Games failed in its obligation to demonstrate that Apple is an illegal monopolist.
“Nevertheless, the lawsuit showed that Apple was engaging in anti-competitive behavior under California competition laws. Court finds that Apple’s anti-steering provisions conceal critical information from consumers and unlawfully stifle consumer choice When coupled with Apple’s incipient antitrust violations, these anti-piloting provisions are anti-competitive and a nationwide action to eliminate these provisions is warranted.”
The judge denied Epic’s arguments that Apple’s efforts to keep customers in the iOS ecosystem amounted to anti-competitive behavior, saying emails with Apple executives talking about getting people “addicted or aiming for a “serious lockdown” weren’t harmful, pointing out that Epic executives had used “lock-in” to refer to Fortnite players and say that every company is trying to keep users from dropping out.
“Whether the conduct is pro-competitive depends on other factors, including timing and whether stickiness is at least partly related to product attractiveness, which can then decline if products become less attractive (e.g. , due to higher stake prices),” Judge Gonzalez Rogers said. , noting that Epic’s attorneys have not explored the matter with Apple executives at the helm.
However, she found that Apple’s policies have at least resulted in price increases for developers, noting that Epic Game Store competition in the PC space has prompted Steam and Microsoft to cut their own commission rates little by little. soon after. And while Apple argued that other mobile app stores and consoles had a 30% commission as standard, the judge said these were frequently traded down. (She cited evidence sealed in the case as confirming that console makers were reducing breaks for big developers.)
“Given Apple’s high profit margins on the App Store, a third-party store could likely provide game distribution at a lower commission and thus either lower prices or increase profits for developers,” the judge said. . “The Court must reserve on whether Apple’s restrictions increased prices for consumers because the evidence is mixed.”
She also agreed with Epic that Apple’s restrictions have stifled innovation in the field.
“Apple conducted developer surveys in 2010 and 2017,” Judge Gonzalez Rogers said. “Comparing the two indicates that Apple isn’t acting quickly to address developer concerns or devoting enough resources to their problems. Innovators aren’t resting on their laurels.”
She added, “The fact is that a third-party app store could pressure Apple to innovate by providing features that Apple has neglected. Since this competition is currently excluded, Apple’s restrictions reduce innovation in “basic” game distribution services.”
“While some consumers may want the benefits offered by Apple…Apple is actively denying them the choice”
Judge Yvonne Gonzalez Rogers
Additionally, she dismissed Apple’s defense that its restrictions on app distribution were necessary to have a secure platform, saying Epic has shown that alternative app review models can achieve the same goals.
“Because Apple has created an ecosystem with interlocking rules and regulations, it’s difficult to assess any specific restriction in isolation or in a vacuum,” she said. “Thus, in examining the combination of the impugned restrictions and Apple’s justifications, and their absence, the Court finds that common threads run through Apple’s practices that unreasonably restrict competition and harm consumers, namely the lack of information and transparency about policies that affect consumers the ability to find cheaper prices, improved customer service and options regarding their purchases Apple uses these policies so that it can extract supra-competitive commissions from this highly lucrative gaming industry.
She added, “While some consumers may want the benefits offered by Apple (e.g. one-stop shopping, centralization and easy access to all purchases, increased security through centralized billing), Apple is actively denying them the choice. These restrictions are also clearly different from real-life situations. Apple created an innovative platform but it did not reveal its rules to the average consumer. Apple used this lack of knowledge to exploit its position. Thus, the relaxation restrictions will increase competition because it will force Apple to compete on the benefits of its centralized model or it will have to change its monetization model in a way that is actually tied to the value of its intellectual property.”
Despite picking up a partial victory, Epic didn’t seem happy with the outcome.
“Today’s decision is not a victory for developers or for consumers,” said Epic Games CEO and Founder Tim Sweeney. on Twitter. “Epic strives for fair competition between in-app payment methods and app stores for one billion consumers.
“Fortnite will return to the iOS App Store when and where Epic can offer in-app payment to compete fairly with Apple’s in-app payment, passing the savings on to consumers.”
A call may be in the works, as Sweeney also promised that “we will keep fighting”.
As of this writing, Apple has not responded to a request for comment.
For more, check out our full rundown of all Epic vs. Apple titles.