Can Fortnite maker Epic Games take on Apple & Google? Experts weigh in – Polygon
Fortnite developer Epic Games seems to have a way with breaking the rules. In the face of Fortnite’s success, companies have ended up changing long-standing policies — like Sony, which abandoned its fight against cross-platform play in 2018 after Epic Games forced the issue, eventually leading to cross-play in other games, too.
Fortnite’s size and popularity gave Epic Games the power to bend Sony and Nintendo’s rules, but will the tactic work with the monoliths of Apple and Google? Well, the North Carolina-based company is trying. On Thursday morning, Epic Games updated Fortnite with a new option for payment processing, providing a discounted price for players who choose to process payments through Epic, not Apple or Google. Epic thus circumvented the Apple storefront’s 30% cut on purchases by giving players a 20% discount on V-Bucks, Fortnite’s in-game currency. In response, both Apple and Google removed Fortnite from the App Store and the Google Play Store, respectively, citing policy violations.
As it turns out, this is what Epic Games was expecting. And it had a plan. Moments after the game was removed from Apple’s storefront, Epic Games began its #FreeFortnite campaign, complete with a hashtag, in-game propaganda video, and a pair of lawsuits. In those lawsuits, Epic Games argues that Google’s and Apple’s policies are anti-competitive and a violation of antitrust laws. Epic Games CEO Tim Sweeney said on Twitter that his company is not looking for special treatment; it wants Apple and Google to change its rules and create truly “open platforms” to benefit “all developers,” not just Epic. “It’ll be a hell of a fight!” Sweeney said.
Today, Apple said Epic is seeking a special deal, but that’s not true. We’re fighting for open platforms and policy changes equally benefiting all developers. And it’ll be a hell of a fight! https://t.co/R5A48InGTg
— Tim Sweeney (@TimSweeneyEpic) August 14, 2020
Epic Games has gone up against large tech companies in the past, but its antitrust litigation will be different. It’s looking to change the policies of companies that solidified themselves as market leaders in the industry, and neither Apple nor Google will want to let go of that. This litigation has a much larger scope than any of the other challenges that Epic Games has faced, like the Sony faceoff. Likewise, Epic Games is the “underdog,” if you can call it that. Although it’s valued at more than $17 billion, that’s significantly overshadowed by the trillion-dollar market capitalization of Alphabet (Google’s parent company) and Apple.
“Epic is going at the heart of the App Store monopoly, as well as Google’s comparable monopoly over the sale of Android apps,” Sandeep Vaheesan, legal director at anti-monopoly research and advocacy group Open Markets Institute, told Polygon. “It’s challenging the practices by which [Apple and Google] acquired this dominant position and tried to leverage this dominant position into new markets. This is a major lawsuit.”
Vaheesan said Epic Games’ lawyers presented “detailed factual allegations” that rely on “strong legal theories,” which bodes well for the company. Epic isn’t asking the court to rewrite antitrust law as it stands — instead, it’s asking a judge to just enforce the law as it exists. It’s different, in that way, from the antitrust hearing in Congress last month, where government officials discussed potential changes to market power rules. (Epic’s lawsuit, however, is still important in that if Epic wins, it’ll make it clear that Apple’s and Google’s practices are illegal, and then those companies will be forced to change their practices.)
The U.S. House of Representatives’ Subcommittee on Antitrust, Commercial and Administrative Law held a major hearing on July 29, in which lawmakers grilled tech executives including Alphabet CEO Sundar Pichai, Amazon CEO Jeff Bezos, Apple CEO Tim Cook, and Facebook CEO Mark Zuckerberg. The high-profile hearing put the four CEOs before Congress, asking them to answer questions about the power their companies wield.
The hearing, like Epic’s lawsuits against Apple and Google, brought antitrust and monopoly issues to the public forefront. And that’s important, regardless of whether things turn in Epic’s favor in the court of law.
“It’ll be a test of whether the law that’s nominally on the books is actually effective in constraining the power and practices of these big tech companies,” Vaheesan said.
The problem isn’t simply that Apple and Google are monolithic companies, but that they have large monopolies over certain markets. Valarie Williams, an antitrust lawyer and partner at Alston & Bird, told Polygon that Epic Games’ basic allegation comes down to whether or not Apple (and, subsequently, Google) has a monopoly through its App Store. For Epic to succeed in its lawsuits, it has to prove the market exists — and that the companies have monopolies over them.
She pointed to another restriction, the “tying” arrangement, that Epic Games said is violating antitrust laws. “[Apple] is saying that if you’re going to use the App Store, then you have to use our payment processing service; you can’t use your own,” Williams said. If you don’t want to do that, then you can’t use the App Store — and that’s why Fortnite was removed.
“It’s not a problem to be a monopoly,” Williams said. “It’s not a problem under the law to have market power. It’s when you use that to restrain competition.” And Epic Games has alleged that that’s exactly what the restrictions do, at least in the case of Apple — you can’t just move to a different app store on iOS, because Apple doesn’t permit them to exist.
Epic Games, in its cases, will be building on the “public and political momentum generated by last month’s hearing,” Vaheesan added. He said that antitrust issues aren’t typically “front-page news,” but that’s changing, of course — with the congressional hearings and now, Epic Games’ #FreeFortnite campaign, which seems specifically designed to harness gamer anger.
Fortnite’s removal from the app stores doesn’t necessarily impact gamers too much — at least, not gamers on Android. Google’s platform is more open than Apple’s, and the game wasn’t even available on the Play Store until April. Instead, people had to download it directly from Epic Games, and they can still do that, including its updates. On iOS, it’s not that simple. You can’t just go straight to Epic Games to download Fortnite and its updates. New users won’t be able to download the game at all, and current users won’t be able to play the next update should Apple not return it to the store. Presumably, keeping Fortnite off the app stores means Google and Apple are losing something — the 30% commission they take from in-app purchases, which is what Epic Games wants to stop, anyway.
At this point, it doesn’t necessarily even make sense to talk about whether Epic Games and Fortnite could or will win against Apple and Google in court. The legal process for antitrust cases is devastatingly slow.
“We’re not likely to get resolution soon,” Vaheesan said. He pointed to a class-action lawsuit against Apple’s App Store practices that has been in the courts for a decade. (The Supreme Court’s 2019 ruling in the case, Apple v. Pepper, allowed for lawsuits to continue in lower courts.)
John Bergmayer, legal director for consumer rights organization Public Knowledge, told Polygon that Epic Games’ approach with regard to public opinion puts the gaming company in a good position — regardless of the potential outcome of the court cases.
If Epic Games eventually wins over Apple and Google, that’s great. It’ll benefit Epic Games, but more importantly, the industry will be forced to change its practices, at least with regard to tying app purchase exclusivity. If the case ends in a settlement, that still means something is going in Epic Games’ favor, though it may not have as broad an application to the industry as a whole. (Epic, however, said that it’s not looking to get a special exemption from either Google or Apple.)
But even if Epic loses, it won’t be the end of this particular fight. “It sucks, it’s bad to lose, but it at least highlights the need for some sort of action from Congress to change the law,” Bergmayer said.
Congress, at least, seems interested in investigating the nature of these companies’ antitrust violations, per the House judiciary antitrust subcommittee hearing. Apple is also reportedly under a Department of Justice investigation for its App Store policies, similar in nature to the Epic Games lawsuit. However, it’s hard to say what will come of any of this, or how long it would take to make adjustments to existing antitrust laws. That’s on top of the ongoing Apple v. Pepper case and the European Union’s investigations into the company.
Rep. David Cicilline (D-RI), chairman of the antitrust subcommittee, has spoken publicly (and strongly) against these practices — particularly Apple’s.
“Apple’s tax is highway robbery,” Cicilline said in a statement emailed to Polygon. “These high fees would not exist in a competitive marketplace. It’s also outrageous that a company worth nearly $2 trillion with record-breaking profits is holding smaller companies hostage during an economic crisis. All just because it can. This is a real problem. It doesn’t just undermine innovation — it threatens the jobs and economic livelihood of the people who work at these companies.”