By: Alex Arnts
Industry changing antitrust suits have become increasingly rare in recent decades, as this area of law has seen increasingly lax enforcement by the federal government. However, when major antitrust suits do occur, they often target the tech sector. Epic Games, the maker of popular video games such as “Fortnite” and “Gears of War,” has recently commenced antitrust suits against both Apple and Google which have the potential to reshape the distribution of mobile apps and videogames as a whole.
Epic Games’ lawsuits target the practices of Apple and Google’s mobile app stores, as they each disallow direct in-app purchases to consumers. Instead, all in-app purchases must also go through the respective app stores where Apple and Google skim 30% from every in-app purchase. Epic Games opposes Google and Apple’s marketplace policies as they relate to Epic’s game Fortnite Mobile, which is free to play and derives all of its revenue from in-app transactions. Epic contends that Google and Apple are only able to take 30% of Fortnite’s in-app purchases because they exclude other marketplaces from distributing apps on their platforms, and that doing so is anticompetitive and illegal under the Sherman Antitrust Act, California’s Cartwright Act, and California’s Unfair Competition law.
Despite the apparent similarity of Epic’s two suits, they may not necessarily share the same outcome. Epic faces a tremendous uphill legal battle in its suit against Google because Google allows its Android devices to purchase apps from third-party markets in addition to its own marketplace. Therefore, because there are other app marketplaces available on phones which use Google’s Android platform, it is thus unlikely that Google’s policies regarding app distribution will be ruled illegally anti-competitive.
Epic will also struggle to prevail in its suit against Apple, but it has a greater chance of success against Apple than Google. Unlike Google, Apple disallows apps from being loaded onto its devices from third party app stores. Thus, the only source of iPhone apps is Apple’s own application marketplace, which means Apple is forcing app developers to choose between having their apps excluded from iPhones altogether, or surrendering 30% of all in-app purchases. If Apple’s practice of disallowing software from third-party marketplaces was applied to other devices, such as computers, that alone would be considered illegally anticompetitive. However, whether courts will apply this rule to app-based devices such as cell phones and tablets remains to be seen.
A court ruling against Apple’s practice of limiting devices to software distributed on its own marketplace could have potentially far-reaching implications for antitrust in the digital sphere, most notably in the realm of videogame consoles. Similar to Apple, the companies behind major gaming consoles such as the Nintendo Switch, Sony PlayStation 5, and Microsoft Xbox Series X all limit their users to downloading apps and digital games from marketplaces run by the console’s developers, which each take a 30% cut from every transaction. If Epic prevails in its suit against Apple, future courts could potentially apply Epic’s logic to content distribution on video game consoles and rule that restricting users to software marketplaces run by hardware manufacturers is illegally anticompetitive in that sphere as well.
Epic’s cases have been proceeding slowly, but there have been a number notable developments that indicate Epic is gaining momentum, especially in its case against Apple. Since filing its cases Epic has founded the Coalition for App Fairness alongside Spotify and other leading developers of mobile applications to lobby against Apple and Google’s unfair app marketplace practices. Furthermore, Facebook has also pledged to support Epic in its suit against Apple. Perhaps feeling the heat from Epic’s efforts, Apple recently reduced the percentage of in-app purchases it will take from small developers. These developments reinforce the notion that Epic’s suits have the potential to reshape antitrust in the mobile app industry and beyond.