The Apple V. Epic Games Lawsuit is Settled - $100M in Refunds are Given

Epic Games v. Apple is a current case filed by Epic Games in the United States District Court for the Northern District of California in August 2020, concerning Apple's activities in the iOS App Store.

Epic Games has explicitly challenged Apple's prohibition on applications using in-app payment mechanisms other than those provided by the App Store. Epic Games' creator Tim Sweeney has previously questioned Apple's 30% income share on each App Store transaction, and with their game Fortnite, he intended to either skip Apple or have Apple take a smaller portion.

Epic made modifications to Fortnite on August 13, 2020, to circumvent the App Store payment mechanism, causing Apple to remove the game from the App Store and resulting in Epic's lawsuit.

Apple responded with a countersuit, claiming Epic intentionally broke its contract with Apple to provoke it into action and defended itself against Epic's lawsuit. The trial lasted from May 3 through May 24, 2021, with a decision expected later that year.

A Little Bit of Background

Since 2015, Epic Games co-founder and CEO Tim Sweeney have questioned the requirement for digital storefronts like Valve's Steam, Apple's App Store for iOS devices, and Google Play to require a 30 percent revenue share cut, arguing that an 8 percent revenue share should be sufficient to work any digital storefront.

While a 30 percent revenue cut was the industry standard across computers, consoles, and mobile platforms in 2019, Sweeney stated that higher revenue shares made sense on consoles because of massive investment in hardware, which is usually sold below cost, and marketing campaigns together with publishers, but not on open platforms like mobile devices and private computers.

The Epic Games Store was created partly to point out that Epic could function with a smaller revenue cut of 12 percent.

Before a very important congressional hearing on antitrust allegations against Google, Sweeney reaffirmed his position on the 30 percent income reduction that Apple and Google made in mid-2020, yet as during comparable examinations of Apple within the world organization.

That 30 percent share, in line with Apple, represents the App Store's value beyond the apparent services it provides developers. That 30 percent cut also includes Apple's technology, tools, software for app creation and testing, and marketing efforts additionally to platinum-level customer care.

Apps must utilize Apple's storefront, Apple argues so that Apple's high standards for privacy, security, content, and quality are met. This also protects iOS users from dangers related to other storefronts.

A review of the cases shows that Apple's iOS App Store exclusivity is that the main problem. Because Apple controls the marketplace for iOS-enabled devices, Epic Games believes that Apple's actions in limiting alternative payment methods and storefronts are anticompetitive in nature.

Apple argues that Epic is an element of a marketplace that spans many platforms, not just iOS, and thus it doesn't have a monopoly therein regard.

The Fortnite Case

Epic Games updated Fortnite on August 13, 2020, across all platforms, including iOS and Android, to decrease the price of "V-Bucks" (the in-game money) by 20% if bought straight from Epic.

Epic said it couldn't extend the discount to iOS and Android customers who bought via Apple or Google's storefronts because of Apple and Google's 30% revenue share. Both Apple and Google pulled Fortnite from their stores within hours, claiming that the ability to circumvent their payment systems violated their terms of service.

Epic promptly filed antitrust and anticompetitive conduct cases against Apple and Google in the United States District Court for the Northern District of California. After a court hearing on August 24, 2020, Judge Yvonne Gonzalez Rogers approved Epic's plea to keep its developer licenses for iOS and macOS from being revoked, but she denied Epic's request for a preliminary injunction to reverse Apple's decision to remove Fortnite from the iOS store.

The revocation of the developer's licenses, according to Rogers, may do substantial harm to both the Unreal Engine platform and the gaming industry as a whole, and Apple "has decided to behave harshly" in threatening that move. Rogers agreed with Apple that Epic Games has not yet shown irreparable damage in the case of Fortnite.

The present situation seems to be self-created. Epic's iOS developer account was then canceled by Apple on August 28, 2020, prohibiting the business from submitting new content to the App Store but allowing it to continue developing on the platform.

Epic submitted papers ahead of the first hearing on September 28, 2020, in which they plan to seek a preliminary injunction for Apple to rehost Fortnite.

On September 8, 2020, Apple filed a countersuit against Epic. In their lawsuit, Apple claimed that Epic had broken their contract and was seeking to ban the use of Epic's payment system in any game, including Fortnite, on the iOS marketplace, as well as monetary penalties to recoup money earned while Epic's version of Fortnite remained live on August 13, 2020.

Epic's lawsuit was described by Apple as an effort to be a part of a marketing push to rekindle interest in Fortnite.

In November 2020, Judge Rogers rejected Apple's monetary claims of theft, saying that the claims could not be evaluated separately from the breach of contract allegations, but left the breach claims in place.

The Final Trial

In December 2020, Facebook announced that it would completely assist Epic Games throughout the lawsuit's discovery phase. Facebook has already clashed with Apple over its App Store rules and had collected its own set of data that it plans to share with Epic.

Given that Steam is a direct rival to Epic Titles' storefront in the personal computer sector, Apple sought to subpoena data from Valve relating to several hundred games and their sales on Steam as part of their lawsuit.

Valve refused to comply with the requirements, claiming that Apple's demands were too broad and irrelevant to their Epic complaint. The court sided with Apple, saying that Valve was not the only company targeted by Apple's subpoenas for comparable retail data and that the request was fair. On May 3, 2021, the trial began.

Due to the sensitivity of the matter, Judge Gonzalez Rogers insisted that all parties be physically present in court, with extra precautions taken to ensure everyone's safety in light of the current COVID-19 epidemic.

The three-week trial concluded on May 21, 2021, with final arguments delivered on May 24, 2021. Several papers that were part of Epic and Apple's testimony were made public throughout the trial, some of which included private information about third parties.

Some of these papers were supposed to be sealed but ended up in the public court records, revealing some of the historical inner workings of the video game business as well as financial information on Epic's Epic Game Store.

Wrapping Up

In July 2021, forty states sued Google in the United States, alleging that its app store policies, including its 30% revenue cut, were anti-competitive, similar to the elements Epic sought in its lawsuit.

Senators Richard Blumenthal, Marsha Blackburn, and Amy Klobuchar proposed the "Open App Markets Act" bill in August 2021, which would prohibit app retailers from pushing developers to use their payment method exclusively.

Apple announced in August 2021 that, as part of a settlement to a similar class-action lawsuit filed by app developers, it would allow developers to collect information such as email addresses from users within apps so that they can later inform customers about payment options outside of the App Store.

Apple resolved a federal lawsuit accusing it of having monopolistic control over its App Store last week.

According to The Wall Street Journal, the firm agreed to refund $100 million to US developers who paid excessive fees on their applications between June 2015 and April 2021.

Originally Published on Medium