In a lawsuit filed August 14, Fortnite maker Epic Games accused Apple of anticompetitive behavior after Apple pulled the popular battle royale-style game from its App Store. Current players can still access Fortnite on their iPhones but will not be able to receive updates for the game. New users cannot download the game at all.
Apple’s action came after Epic announced the “Fortnite Mega Drop,” a promotion that grants players a 20% discount on V-bucks, Fortnite’s in-game currency, if they purchase them via Epic’s direct-payment system on PCs and consoles. In other words, Epic incentivized Fortnite players to eschew making in-app purchases in order to avoid paying Apple’s required 30 percent cut of all in-app purchases.
Apple quickly responded to Epic’s end-run around its middleman commission by pulling Fortnite from sale on the App Store. Apple stated:
Today, Epic Games took the unfortunate step of violating the App Store guidelines that are applied equally to every developer and designed to keep the store safe for our users. As a result their Fortnite app has been removed from the store. Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services.
Apple’s 30 percent commission policy has long been a bone of contention between the digital distribution platform and game developers and publishers. Google Play Store, which also takes a 30 percent commission from purchases on its store, followed Apple’s lead by banning Fortnite from the Google Play Store. Epic subsequently sued Google as well. This lawsuit alleges similar anticompetitive actions by Google and the Google Play Store, related to the cut it takes from in-app purchases.
Fortnite is a free-to-play game that generates the majority of its revenue from in-game purchases. Prior to releasing Fortnite on the Google Play Store in late 2019, Epic reportedly asked Google for an exemption from the commission, stating, “We believe this form of tying of a mandatory payment service with a 30% fee is illegal in the case of a distribution platform with over 50% market share.”
Google rejected the request.
Other apps have sidestepped the commissions by not implementing functionality for users to purchase content or subscriptions through the app. Instead, users can buy them through other means, then access the purchased content within the app and other platforms. For example, Netflix does not offer subscription sign-ups in its app, nor can Kindle app users purchase ebooks or video content in the Amazon Prime Video apps on Apple and Google Play.
In the Mega Drop FAQ posted on its website, Epic accuses Apple of “intentionally sabotag[ing] consumer iOS devices to prevent users from installing software directly from developers.” The argument – posited by Epic and other app developers including Spotify – is that Apple operates as a monopoly by forcing consumers to download software only via the App Store. Further, Epic argues that Apple’s requirement that apps downloaded from the app store use Apple’s payment processing service is anticompetitive and that it forces developers to charge higher prices for in-app goods such as skins and in-game currencies.
In contrast to Apple’s 30 percent cut, other payment methods such as Mastercard, Visa, and Paypal charge fees ranging from 2.5 percent to 3.5 percent. Epic’s argument is that Apple prevents Epic and other developers from passing these potential cost savings on to consumers because Apple blocks apps from processing direct payments.
Epic further points out in its FAQ that thousands of other apps available on the App Store are permitted to accept direct payments: Amazon, DoorDash, and McDonald’s to name just a few. Apple has claimed that its rules ensure the safety of App Store users. However, this belies Apple’s position in pulling Fortnite: “Clearly Apple acknowledges that third-party payment services are safe and acceptable for goods and services. Epic direct payment simply offers players the same kinds of payment options as these other apps.”
Epic’s FAQ tells users that it has chosen “to fight Apple’s policies on behalf of all consumers and their right to have access to more efficient payment methods and to receive the best prices available.”
It would appear that Epic is indeed ready for a fight. One game research director, Piers Harding-Rolls of Ampere Analysis, believes that Fortnite’s new (rule-breaking) payment method-of-choice feature was implemented specifically to force the issue and “make Apple remove the app.”
Harding-Rolls may have a point; scant hours after Apple removed Fortnite from the App Store, Epic filed a 65-page lawsuit against Apple and a 60-page lawsuit against Google, which would imply that the paperwork was prepared in advance. Epic also released a short film titled “Nineteen Eighty-Fortnite,” a play on George Orwell’s dystopian novel 1984 and a parody of Apple’s own 1984 commercial. At the end of the video, Epic implores viewers to “Join the fight to stop 2020 from becoming ‘1984’”. Epic shared the video on Twitter along with a link to Epic’s #FreeFortnite website. As of this writing, the #FreeFortnite hashtag is trending on Twitter and Fortnite is streaming the video on a loop on its YouTube and Twitch channels.
Consistent with its messaging, Epic claims in its lawsuit that “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation.” Any decisions stemming from the Apple and Google lawsuits – no matter which side the decisions favor – will certainly have seismic repercussions on the future of apps and in-app purchases.
The lawsuit asks the Northern District of California to issue an injunction prohibiting Apple’s alleged anticompetitive conduct and to declare that Apple’s contractual and policy restraints are unlawful and unenforceable.
Gamma Law is a San Francisco-based firm supporting select clients in cutting-edge business sectors. We provide our clients with the support required to succeed in complex and dynamic business environments, to push the boundaries of innovation, and to achieve their business objectives, both in the U.S. and internationally. Contact us today to discuss your business needs.