Why are Apple, Google being sued by Fortnite maker Epic Games?

Epic also filed lawsuits in Australia in November 2020. The company says it picked Australia because of its favourable antitrust laws. All sides agree that the Australian case is extremely similar to what has played out in the US, and the trial here is dealing with the same issues.

In the US, Epic has already lost its battle, with Apple winning on nine of 10 counts. The US Supreme Court recently declined to hear an appeal. Epic won a separate trial against Google however, with a jury finding that Google has a monopoly in the Android device space and engaged in unlawful practices to maintain that monopoly.

While all this is happening, Europe’s Digital Markets Act recently came into effect, forcing Apple to allow other app stores onto its iPhones. Epic has said it will shortly bring back Fortnite to iPhones in Europe, along with its own app store.

Who will appear at the trial?

Some of the companies’ top executives have already flown into Melbourne to appear in court in person, underscoring the seriousness of the event. Epic Games chief executive Tim Sweeney has touched down in Melbourne and is set to be joined by vice presidents from Apple and Google, including Apple fellow Phil Schiller and its senior vice president of software engineering, Craig Federighi.

What’s Epic saying?

Epic declined to comment on the trial on the record but says overall, it wants to see more competition in app distribution and in-app payments on mobile devices so people have more choices.

“The industry is being strangled by a few gatekeepers imposing insane amounts of control and extracting huge taxes, which not only raise prices for consumers but also make a lot of kinds of products just unviable,” Epic boss Tim Sweeney said in a recent interview.

What’s Google saying?

Google says that it doesn’t have a monopoly over Android smartphones. It says Australian developers have many ways to distribute their apps, that Google Play’s fees are the lowest of any major app store, and that Australian consumers have choices in how to pay for digital purchases. It likes to point out its differences to Apple.

“It’s clear that Android and Google Play provide more choice and openness than any other major mobile platform, and it’s a model that’s good for Australian developers and consumers,” Google vice president Wilson White said.

“We will continue to vigorously defend our right to a sustainable business model that enables us to keep users safe, partner with developers to grow their businesses, and keep the Android ecosystem thriving and healthy for all Australians.”

What’s Apple saying?

Apple says, too, that it faces intense competition in Australia’s device and game transaction markets and that Epic wants to change the rules to improve its bottom line.

“Epic is seeking a redo of the case it overwhelmingly lost in the US when a federal trial court found – and an appellate court affirmed – that Apple’s App Store business model does not violate antitrust laws,” Apple said in an on-the-record statement.

“Under the guise of competition law, Epic is now asking an Australian court to grant it a free and unfettered license to use Apple’s intellectual property to enhance its own bottom line at the expense of the user experience and other developers.

“The evidence we present in court will once again substantiate that the App Store business model provides a safe and trusted place for users and a pro-competitive business opportunity for all developers.”

What’s the Australian government doing?

This is very much a live issue for the competition watchdog and the federal government. A recent Senate committee recommended the government introduce laws to “prevent anticompetitive practices through the bundling of payment services and products by large digital platforms.”

Meanwhile, Australia’s competition watchdog says Apple and Google could soon face new rules that would allow app developers to charge for in-app purchases without paying a cut to the tech giants.

“Enforcement of the Competition and Consumer Act and Australian Consumer Law, particularly through the courts, can be years-long processes that don’t suit rapidly evolving digital markets. It is also necessarily retrospective, occurring only after harmful conduct has occurred,” an ACCC spokeswoman said.

“Epic’s proceedings have taken over three years to come to trial, and if there are appeals, it will take longer until final judgment. This is an example of a regulatory framework that relies solely on enforcement to address competition and consumer harms of the rapidly transforming digital economy.

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“Epic has taken proceedings in the United States and Australia, with evidence it was in the best position to assemble. The ACCC did intervene to support keeping the proceedings in Australia when a stay was sought. The Treasury is working on the design of a legislative framework and is likely to publicly consult on this work before any reforms are implemented.”

What about the class actions?

Lawyers from Phi Finney McDonald and Maurice Blackburn are bringing together class actions against Apple and Google, alleging that the two tech giants have breached Australian consumer law. The class actions will be heard as part of the trial.

“For big platforms like Apple and Google, it’s in their interest to try and frame this case as a case between big US tech giants. What that completely ignores is the small Australian app developers, who develop apps on where the best camping spots are, or where to put solar panels on your property,” Phi Finney McDonald principal lawyer Joel Phibbs said.

“The ACCC has already recommended a crackdown on these digital platforms as part of a proposed industry code of conduct. The Senate committee report further supports our position that Apple and Google’s anticompetitive conduct needs to be addressed and the jury in California has now made findings that Google’s Play store and billing service is an illegal monopoly.

“While the Senate and the regulatory response are pleasing for the future of reform, they won’t provide any form of redress.”

What’s at stake, and how might I – and my smartphone – be impacted?

Your iPhone will be opened up big time if Epic gets its way. Just look at iPhones in Europe – users there can now install apps from developers directly, rather than having to go through Apple’s highly profitable “walled garden”, its App Store. App services and digital payments revenue have become an important revenue driver for Apple, which is now a $3 trillion business. For Apple and Google, there are billions of dollars in fees at stake.

Apple says circumventing its App Store means less security for its customers and that it won’t be able to invest as much back into its systems. However, companies such as Epic say that more choice is a win for consumers, and that app prices will be lower without Apple and Google’s fees. Either way, the impact may become visible on your home screen in the months to come.

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