'Fortnite' and Apple: The Battle Takes a Turn

On Friday, Judge Yvonne Gonzalez Rogers, a California judge, concluded and ruled on the ongoing Apple VS Epic Lawsuit, and it seems as if no one really won. The judge ruled that Apple was not exercising an unfair monopoly on the mobile app space with iOS and its in-app purchases. She further ordered Epic games to pay damages for violating its developer's agreement with 'Fortnite'. She simultaneously ordered Apple to remove all of its anti-steering rules that bans developers from making users aware of Apple's in-app purchase system. Let's take a look at the lawsuit and know more about the 'Fortnite' and Apple conflict.

What is the Lawsuit about?

The trial saw both sides arguing about the market belonging to the 'Fortnite' iOS app. Epic claimed Apple had abused a monopoly on the iOS app ecosystem; Apple claimed Fortnite was playing in the more competitive overall digital game market.

The judge said that both of these definitions are wrong. However, on the contrary, she also stated that Apple seems to be less wrong. The highlighting question is that whether Apple has an unlawful monopoly in "digital mobile gaming transactions". Rogers also acknowledges the fact that mobile games have a different user base than PC or console games. This user base relies heavily on the "freemium" model of in-game item sales and purchases. These are less important to both mobile and PC/console gamers.

Epic had made 10 claims against Apple. Most of these claims rely on Apple having an unfair monopoly under several laws of the state. These laws are the federal Sherman Antitrust Act or California’s antitrust-focused Cartwright Act. Even though the ruling is sympathetic towards Epic, almost all of its claims were dismissed.

Does Apple Have a Monopoly on Mobile Gaming?

Mobile games comprise almost 70-per cent of Apple's App Store revenue. Apple has outsized power in mobile gaming. Rogers recognizes and addressed the rise in popularity of Nintendo and cloud gaming, but she stated that currently, iOS and Android hold a duopoly when it comes to mobile gaming. The ruling estimates that Apple has a share of around 55-per cent in the mobile game transactions market, alongside “extraordinarily high-profit margins,” which can be a sign of monopoly power.

However, the power and profit of Apple do not show antitrust conduct. Success is not illegal. Roger concluded. Even though Epic tried to throw some light on the possibility of iMessage holding users down to iOS, but the judge was not convinced.

“The evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share,” Rogers writes. “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 did not focus on this topic.” This ruling leaves the possibility open for multiple antitrust lawsuits in the future.

For the moment, this judgement undermines Epic's allegation that Apple has been maintaining a monopoly under the Sherman Act, helping take down four of its claims against Apple. It means, by extension, Apple didn’t violate California’s Cartwright Act, taking down two more of the claims.

Apple Lacks Competition

The judgement and trial are not all happy and gay for Apple. Judge Rogers said, “nothing other than legal action seems to motivate Apple to reconsider pricing and reduce rates.” She continued by adding that Apple “does a poor job of mediating disputes between a developer and its customer,” adding to it, it’s been “slow either to adopt automated tools that could improve speed and accuracy or to hire more reviewers” for its app review process. “Apple’s slow innovation stems in part from its low investment in the App Store,” the ruling states.

Apple's Fears of Opening Up iOS

Apple has claimed that the iOS platform is an abnormally secure and safe ecosystem because of its walled-garden model. Apple states that there is no other option that can protect the sensitive data of the users in a better manner. Epic called that claim a pretext for shutting down the competition. Judge Rogers is particularly dubious of Apple software engineering VP Craig Federighi, who delivered a dramatic but suspiciously new denunciation of macOS malware.

“Even though unrestricted app distribution likely decreases security, alternative models are readily achievable to attain the same ends even if not currently employed,” she concludes. The ruling dashes Epic’s hope that Apple would legally have to allow sideloaded apps and third-party app stores on iOS — which was Apple’s worst-case scenario going into the trial.

Did Epic Knowingly Break the Contact with Apple

The Epic v. Apple ruling declares that part of Apple’s developer agreement (called the DPLA) is unlawful. However, Epic still has to pay for breaking it with the Fortnite payment system change. Apple doesn’t have to restore Fortnite or keep Epic’s other apps on iOS if it doesn’t agree to follow Apple’s rules.

Epic claimed the contract was “illegal and unenforceable” as it violated the Sherman Act, the Cartwright Act, and the UCL. Judge Rogers comes to the conclusion that the single UCL offence wasn’t sufficiently related or severe to justify Epic’s rule-breaking.

Epic broke another rule. It hid the alternate payment system inside a remote “hotfix” when Apple’s policies said it couldn’t “provide, unlock, or enable additional features or functionality through distribution mechanisms other than the App Store.” The ruling concludes Epic “never showed why it had to breach its agreements” to challenge Apple’s alleged anticompetitive actions.