By Natalie DeCoste
On Friday, Sept. 10, a California judge handed down a ruling in the case of Epic v. Apple, but that ruling is far from the end of the line for the gaming company and the tech giant.
The battle between the two companies began in August 2020 when Apple removed Epic Games’ Fortnite from its App Store following the launch of a new direct payment option that allowed Fortnite to circumvent the 30% cut Apple takes from digital transactions within apps.
The removal led Epic to sue Apple, and Google, in the U.S. District Court in San Francisco. Epic accused the big tech company of engaging in monopolistic behaviors in distributing apps to devices and processing payments for digital content.
The trial happened in May, and Judge Yvonne Gonzalez Rogers released her ruling last Friday. In the decision, the judge concluded that Apple was not unfairly monopolizing the mobile app space with iOS or its in-app purchasing system and ordered Epic to pay damages for violating its developer agreement with Fortnite.
“Given the trial record, the Court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws. While the Court finds that Apple enjoys a considerable market share of over 55% and extraordinarily high-profit margins, these factors alone do not show antitrust conduct. Success is not illegal,” read the decision.
The judge noted that the evidence presented at trial lacked critical factors such as barriers to entry and conduct decreasing output or decreasing innovation in the relevant market that are needed to prove that Apple is an illegal monopolist.
“In sum, given the totality of the record, and its underdeveloped state, while the Court can conclude that Apple exercises market power in the mobile gaming market, the Court cannot conclude that Apple’s market power reaches the status of monopoly power in the mobile gaming market…Apple is only saved by the fact that its share is not higher, that competitors from related submarkets are making inroads into the mobile gaming submarket, and, perhaps, because plaintiff did not focus on this topic,” wrote the judge.
A large portion of the trial centered around defining the marketplace which Apple occupies. Lawyers for Epic argued that the market in question should be defined narrowly as app distribution. Meanwhile, Apple claimed there is no separate market for app distribution because it has never separately licensed iOS or its App Store.
Judge Rogers disagreed with both parties’ definitions of the marketplace and instead found that the relevant market is the digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store.
“The evidence demonstrates that most App Store revenue is generated by mobile gaming apps, not all apps. Thus, defining the market to focus on gaming apps is appropriate. Generally speaking, on a revenue basis, gaming apps account for approximately 70% of all App Store revenues,” read the decision.
While the judge disagreed with Epic that Apple is an illegal monopolist, she did find that Apple was engaging in anticompetitive conduct in violation of California law.
“The Court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice. When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted,” wrote Judge Rogers.
The anti-steering rules prevent app developers from telling consumers about alternatives to Apple’s in-app payment system, preventing consumers from knowing the full extent of the costs associated with Apple’s services. The judge found that these provisions artificially increased Apple’s market power by preventing developers from communicating about lower prices on other platforms, and the appropriate remedy is to eliminate these provisions.
The court also found that Apple was entitled to damages from Epic Gamest equal to 30% of the $12,167,719 in revenue Epic Games collected from its users through the Fortnite app on iOS using Epic Direct Payment between August and October 2020, plus 30% of any revenue the company collected from Nov. 1, 2020, through the date of judgment.
The judgement, which has repercussions for both sides, is arguably a victory for Apple, which has led Epic Games to file an appeal of the ruling.
“Notice is hereby given that Epic Games, Inc…. appeals to the United States Court of Appeals for the Ninth Circuit from the Final judgment entered on Sept. 10, 2021,” the document reads.
The appeals document gives no details about the legal basis for the appeal, but Epic will likely continue to press the federal antitrust issue.
