Next month a federal trial is scheduled to begin between Apple Inc and Epic Games. Epic has filed an anti-trust lawsuit against the tech company for kicking Fortnite off their App Store. This is more than a challenge over a single videogame, this is a major challenge to the entire walled garden ecosystem that Apple has built.
Yesterday, both parties filed a document called a “proposed findings of fact”. This essentially lays out every factual claim that they will use in their arguments at the trial. They are some seriously hefty documents, totaling at about 650 pages and they draw on the history of both companies.
The heart of the issue is the 30 percent surcharge Apple collects on purchases made through the App Store. Fortnite was kicked off the App Store by offering in-app purchases that circumvented the App Store and avoided the 30 percent surcharge, the so-called Apple Tax.
Epic Games argues that while the control Apple has over what app can be allowed on their App Store is perfectly legal, the issue arises when they use that control to influence and profit from the secondary in-app purchase market.
While consoles from the likes of Sony and Microsoft operate on a similar model, they believe that the issue comes down to the profits. In their filing, they state that “video game consoles operate under a radically different business model than smartphones.” This means that most console manufacturers offer their hardware at cost or often lose money by selling them, it is in their interest to attract developers so the charges on the game and in-app purchases are necessary to maintain their profits. On the other hand, Epic claims that Apple still makes the most of their profits from the sale of iPhones, so the charge should be different.
The new claim
“Epic just wants to free-ride on Apple’s innovation,” Apple said in its filing on Thursday, arguing that Epic is using the lawsuit to “revive flagging interest in Fortnite.” Unfortunately, neither party has yet agreed to comment on the recent filing, but it is an interesting claim for Apple to make. The issue with this claim is pretty obvious, Fortnite is still a hugely popular title, even Fortnite betting sites and its esports ecosystem remain popular attractions this long into their lifecycles.
They also went on to say:
“Apple is among the most innovative, competitive, dynamic, and creative companies in the United States, and millions of people benefit from its products and services. Those products and services are the result of billions of dollars of investment, in addition to substantial time and thought, and represent Apple’s intellectual property.”
In my opinion, it all just boils down to cold hard cash. No matter how these companies care to spruce up their arguments regarding the freedom of the industry or the need for competition, the simple fact of the matter is that Epic Games believed they could make a lot more money if Apple wasn’t taking a 30 percent cut of the in-app purchases. Now, with a serious lawsuit on the horizon, who knows what will happen to Epic Game’s stocks.
There will be some interesting things to come out of this lawsuit. If it is determined that Apple is now too big to be run out of their Cupertino offices, we could see one of the biggest anti-trust cases in years. They could be regulated in a similar manner to wireless carriers or banks, regulatory limits could be placed on the smartphone companies which may impact the control they have over their own ecosystem.