Nineteen Eighty-Fortnite: A face-off between Epic and Apple

Politicians and authorities around the world are currently taking action against companies like Google, Facebook and Apple on many levels. This ranges from new behavioural constraints in antitrust law, the introduction of a digital tax to strict regulatory measures against online platforms. But it is not only governments and parliaments that are standing up to the immense power of big tech. Private companies are now also mounting their own independent fights. The conflict of games producer Epic Games ("Epic") with Apple is now even going to round two. Not with swords and cannons - as many Fortnite fans may have hoped - but with sleek hashtags like #freefortnite and prominent antitrust lawyers. Code name of the operation: "Project Liberty".

Project Liberty’s Origins

The accusation is well and truly known: Apple wants its cut of revenues of in-app purchases, Epic is fighting it out tooth and nail. Under current terms of use, Apple typically receives a 30% fee on the purchase of digital content for hosting its marketplace. All payments must be processed through Apple's own payment system. Epic opted not to adhere to these terms of use and established its own payment system in the game Fortnite. Players on Android and iOS have since been able to purchase digital content, V-Bucks (the in-game currency in Fortnite), directly through Epic at a 20% discount. Via the App Store, users would have still had to pay the normal higher price. Epic justified this discount by saying that Apple charges app developers a 30% commission on all subscription fees for App Store purchases. Direct payments, so Epic argued, allowed it to pass on savings to customers. However, such practice is against Apple's developer guidelines, and as a result the game Fortnite was banned from the App Store.

This dispute first came to the public's attention in August 2020, when Epic filed a lawsuit in a US court accusing Apple of using anti-competitive practices against app developers in the App Store and is seeking reinstatement in the App Store by means of an injunction. This was then followed by antitrust complaints in numerous other countries - including Australia, Great Britain and now a few days ago in the EU.

A ban from the App Store would not have been necessary for Epic to launch its legal dispute over Apple’s terms of use - but makes way for the massive media marketing campaign that accompanied Epic's meticulously planned scandal from the very beginning. Under the hashtag #freefortnite, players are discussing the dispute - elevated by the game manufacturer to a David versus Goliath battle - and the majority of players are clearly taking a position in support of Epic. Not surprisingly, as the ban also directly affects them. For Epic to succeed with its claims against Apple, however, it will have to convince courts of law, not courts of public opinion. Whether the courts will grant Epic a "Victory Royal" is still largely open to debate.

Where do the courts stand on "Project Liberty"?

Epic's fight for the favour of the judges is proving to be much more difficult than the fight for the favour of its players. The US Court largely denied granting a temporary restraining order. While it recognised in principle that violations worthy of examination were pointed to, the judge found no reason for emergency proceedings. Epic would have brought the urgency of the proceedings upon itself by deliberately violating Apple's terms of use. The battle will continue in round two.

Epic also experienced a further setback in proceedings before the competition authority of the United Kingdom. Geographically, they do not deem themselves competent to adjudicate the legal dispute that is spilling over from the other side of the Atlantic.

Before the European Commission, however, things are looking brighter.

Epic's complaint filed with the EU Commission

In its antitrust complaint to the European Commission ("EC"), Epic relies on Article 102 TFEU, according to which an undertaking enjoying a dominant position on its market may not abuse such position. Epic claims that Apple's restrictions completely eliminate competition in app distribution and payment processes. The antitrust complaint does not seek damages, but "timely and effective remedies" to enjoin Apple's alleged anti-competitive practices.  Those, Epic argues, lead to higher prices for consumers and give Apple too much control over development on its platform.

Apple's market power repeatedly leading to feuds between tech companies is nothing new to the EC. It is already investigating a competition complaint against Apple by music streaming market leader Spotify and is currently assessing the competitive position Apple's pay service has.  EU Competition Commissioner Margrethe Vestager sees a direct link between Epic's complaint and the current investigations: “It’s the same family of concerns.”

Accordingly, the EC could also open proceedings against Apple in relation to this complaint if it deems this necessary to protect European competition. If, after an in-depth investigation, the EC considers that competition concerns indeed exist, Apple may be requested to provide remedies to address the EC's concerns. If these remedies are not sufficient and the EC concludes that EU antitrust law has been violated, it will formally declare an infringement has occurred and order that it be ended.

The EC might impose specific remedies, such as allowing Epic to sell its in-game currency directly through its own game in the future. The chances of this happening in the EU are probably better than ever given the other investigations against Apple.

An All-Out Victory for Epic is Still to be Achieved 

In the court of public opinion, Epic clearly emerges victorious. The legal battle in the court of laws proves much more difficult. In Apple's view, the matter can easily be resolved - Epic would simply have to remove the external payment option from the Fortnite app and ensure that purchases are only made via the Apple payment method. But Epic definitely doesn't feel inclined to do that – and certainly isn’t ready to back down. The one thing that can already be said with confidence, however, is that an antitrust dispute has probably never been fought out so successfully in the media as this "battle royal" between Epic and Apple.

Please note: This blog merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the blog.