An Epic judgment? The battle of Apple v Fortnite continues

On 10 September, a US federal judge issued a ruling in the case of Epic Games v Apple. The case has been a high-profile challenge by Epic Games (makers of the popular video game, Fortnite) of Apple and the up-to 30% cut that Apple takes for purchases on the App Store, with Epic arguing that the Apple App Store was monopolistic.

The catalyst for Epic’s lawsuit was in August 2020 when Apple removed Epic from the App Store after Epic updated Fortnite on the App Store to reduce the price of in-game currency if players bought directly from Epic, bypassing Apple’s commission and violating Apple’s anti-steering provisions (provisions preventing app users about alternative ways they can pay for subscriptions and in-app purchasers). The case was heard in federal court in California in May 2021.

The judgment ruled in favour of Apple, finding that the App Store was not a monopoly and that Apple’s “success is not illegal”.

However, Epic Games did win some concessions in the judgment. The judgment also addressed Apple’s anti-steering provisions. The judge issued a permanent injunction stating that Apple will no longer be allowed to block developers from adding links to alternative payment mechanisms.

Nonetheless, the concessions were limited — Epic (and other developers) are not allowed to insert their own payment method into apps, nor can developers place their own app stores on Apple devices.

Interestingly, Epic did not challenge the amount of Apple’s commission (it was only challenging the fact that Apple took commission). The judge stated that the 30% commission taken on most subscriptions was “potentially anticompetitive” but the court could not rule on that point as it had not been argued.

Overall, the decision found that Apple’s decision to terminate its agreement with Epic was “valid, lawful and enforceable” given Epic’s conduct to put a direct payment system into Fortnite, which was a violation of the App Store rules. Epic was ordered to pay Apple damages of 30% of the $12 million revenue Epic collected through the direct payment system from August 2020 to the present day.

On 12 September, Epic filed to appeal the ruling.

One of the aspects of the decision that is likely to be key in the appeal is the broad market definition adopted by the judge. The judge defined the market as the market for “digital mobile gaming transactions”, contrary to the arguments of Apple (who argued it was all gaming platforms) and Epic (who argued that the market was just Apple’s App Store). A definitive conclusion on market definition would have significant implications for US antitrust cases in this area going forward.