“According to Representative Hank Johnson at a recent Congressional hearing: ‘developers have no choice but to go along with [Apple’s policies] or they must leave the App Store. That’s an enormous amount of power.’”
On August 23, Microsoft filed a declaration in support of Epic Games, Inc.’s August 13th Complaint for Injunctive Relief against Apple, Inc., in which Epic alleged that Apple has been using “a series of anti-competitive restraints and monopolistic practices” through its distribution of software applications (apps) and its processing of consumers’ payments for digital content used within iOS mobile apps (in-app content).
The General Manager of Gaming Developer Experiences for Microsoft, Kevin Gammill, filed the declaration in support of Epic Games’ motion for a temporary restraining order. The declaration emphasized that Epic Games’ Unreal Engine is “a critical technology” for game creators, including Microsoft. It explained that game engines provide game creators with a “developmental environment that delivers the necessary graphics, rendering, physics, sound, networking, and other technologies that enable them to build games that run on multiple platforms.” Noting that some creators develop their own proprietary game engines, Gammill explained that many rely on third-party game engines, including Unreal Engine. Microsoft has a multi-year Unreal Engine license agreement for its own games on PC, Xbox consoles, and mobile devices including iOS.
The declaration further stated that “[d]enying Epic access to Apple’s SDK and other development tools will prevent Epic from supporting Unreal Engine on iOS and macOS, and will place Unreal Engine and those game creators that have built, are building, and may build games on it at a substantial disadvantage.” Noting that Microsoft would be forced to choose between abandoning its customers on the iOS and macOS platforms and choosing a different game engine to develop new games, Gammill explained that Apple’s discontinuation or uncertainty about whether Unreal Engine will continue to be supported by iOS or macOS would be a “material disadvantage” for Unreal Engine because it would make Microsoft less likely to choose it for future projects.
In addition, Gammill explained that game creators and gamers would be harmed by Apple’s discontinuation of support for Unreal Engine on iOS and macOS. For example, the declaration pointed out that game creators in the latter stages of developing a game using Unreal Engine would be faced with “significant sunk costs and lost time using Unreal Engine for game creation, and [creators] would have to choose between (a) starting development all over with a new game engine, (b) abandoning the iOS and macOS platforms, or (c) ceasing development entirely.” Gammill also noted that Apple’s removal of Unreal Engine’s ability to develop updates and improvements for iOS and macOS could also harm games previously built with Unreal Engine by preventing the development of “updates that take advantage of new iOS or macOS features, fix software bugs, or patch security flaws.” In a final point, the declaration stated that “this situation could bifurcate a game’s player base, such that gamers on iOS or macOS cannot play or communicate with friends or family who are playing on other platforms.”
Epic Games Complaint
Epic Games is a developer of entertainment software including the game Fortnite, which has “topped 350 million players and has become a global cultural phenomenon.” On August 13, Epic added a direct payment option to its iOS Fortnite app, giving players the option to use either Apple’s payment processor or Epic’s direct payment system. Epic’s direct payment option provided users with a cost savings of 20%. Apple responded to Epic’s addition of a direct payment option by removing Fortnite from the Apple App Store, thereby preventing new users from downloading the app and existing users from updating it. Epic explained that it, along with Fortnight users, are directly harmed by Apple’s anti-competitive conduct. Thus, on the same day Apple removed Fortnite from the App Store, Epic filed a Complaint for Injunctive Relief seeking to “end Apple’s dominance over key technology markets, open up the space for progress and ingenuity, and ensure that Apple mobile devices are open to the same competition as Apple’s personal computers.”
Apple’s iOS App Distribution
Epic noted that apple imposes “unreasonable restraints and unlawfully maintains a total monopoly in the iOS App Distribution Market” which results in sweeping harms to app distributers, app developers, and consumers. Epic alleged that Apple prevented developers from selling or distributing iOS using any payment method other than Apple’s App Store, thereby “foreclose[ing] any alternative way to reach the over one billion users of iOS devices.” Epic further explained that, through the exclusive use of its App Store, Apple retains a 30% tax on every purchase. According to Representative Hank Johnson at a recent Congressional hearing: “developers have no choice but to go along with [Apple’s policies] or they must leave the App Store. That’s an enormous amount of power.”
The complaint stated that Apple’s anti-competitive conduct with respect to iOS app distribution harms app distributors by preventing them from competing with Apple by offering new methods of distributing iOS apps to users separate from the App Store. Further, the complaint noted that app developers are harmed by Apple’s conduct because they are denied any choice on how to distribute their apps and “are forced to fork over more of their revenue on paid apps than they would if Apple faced competition, and on occasion have to abandon their apps altogether if they cannot earn a profit given Apple’s 30% tax.” The complaint also explained that customers are harmed by Apple’s anti-competitive conduct because they are denied a choice in app distribution channels and are forced to pay higher prices.
In-App Payment Processing
Epic also alleges that Apple “imposes unreasonable restraints and unlawfully maintains a total monopoly in the iOS In-App Payment Processing Market” by requiring third-party app developers to only offer Apple’s payment method for In-App purchases and by taking a 30% fee on all in-app purchases. Epic asserts that Apple’s conduct with respect to iOS in-app payment processing harms other payment processors by preventing them from competing with Apple on price and stopping them from creating new in-app payment processing methods such as rewards points. Epic also noted that Apple’s conduct harms app developers by denying them choice on how to process payments, denying them the benefit of innovating their own payment processing methods and by forcing them to pay Apple’s tax. In addition, Epic asserted that consumers are harmed by Apple’s anti-competitive tactics because they are denied a choice in payment processing and “suffer higher prices and inferior service.”
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