Judge Hands Down Split Decision in Epic Games v. Apple Lawsuit

Epic Games is already appealing. Will Apple appeal too?

Last Friday, a federal court judge handed down a split decision in the Epic Games versus Apple case. Epic Games sued Apple last year when Apple removed Epic Games’ Fortnight from the App Store, citing the company had violated their terms and conditions by offering a payment option that circumvented Apple’s revenue share. Epic Games said Apple had a monopoly that forced developers to pay a 30% commission to Apple to get their games included in the App Store. In Epic Games’s 65-page complaint filed in the U.S. District Court of Northern California, Epic Games alleges that Apple imposes “anti-competitive restraints and monopolistic practices” which violate the Sherman Antitrust Act.

“Epic brings this suit to end Apple’s unfair and anti-competitive actions that Apple undertakes to unlawfully maintain its monopoly in two distinct, multibillion dollar markets: (i) the iOS App Distribution Market, and (ii) the iOS In-App Payment Process Market…Epic is not seeking monetary compensation from this Court for the injuries it has suffered. Nor is Epic seeking favorable treatment for itself, a single company. Instead, Epic is seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers,” the complaint says.

Image courtesy of Epic Games and Fortnite.

Split ruling

The three-week Epic Games vs. Apple trial concluded in May, and the judgment was revealed last week. Judge Yvonne Gonzalez Rogers ruled in Epic Games’ favor, stating Apple must remove rules that banned developers from offering payment alternatives that go outside the App Store/iOS payment ecosystem.

However, Judge Gonzalez Rogers ruled in Apple’s favor on another matter, saying the company wasn’t monopolizing the mobile app market with the App Store and their in-app purchasing policies. She ordered Epic Games to pay damages for violating their developer agreement; they are appealing the verdict via the U.S. Court of Appeals for the Ninth Circuit, reports The Verge.

In the judge’s ruling, Judge Gonzalez Rogers said that Apple “is near the precipice of substantial market power, or monopoly power,” but Epic Games failed to make a strong enough case. In addition, The Verge reports that Apple can choose whether or not to put Fortnite back in the App Store and they can choose to terminate any related developer accounts. In a separate article, The Verge reports that Apple has not yet decided if they will appeal the verdict.

Updates to App Store policies

In a separate but related action, in late August, Apple announced that it had agreed to make major updates to its App Store policies to settle a class-action lawsuit brought against the company by developers in the U.S. One of the biggest changes to be made is allowing developers the opportunity to offer payments options outside the iOS app. In the past, allowing outside payments went against Apple’s terms and conditions and could get a developer (like Epic Games) and their apps (Fortnite) booted from the App Store.

When the changes go into effect, Apple will allow developers to communicate with their customers about payment options, including those available outside of iOS. For example, a game developer can email a customer and let them know they can subscribe directly on the developer’s website rather than subscribe through Apple. Users must opt-in to such communications, and customers can choose to opt out of those communications.

Insider Take

Based on Apple’s settlement with developers in the class action lawsuit, which Judge Gonzalez Rogers will also rule on, the outcome of the Epic Games v. Apple lawsuit is not surprising. We expected that Apple’s concession about the revenue share would apply to all developers, including Epic Games, so Epic Games’ win there makes sense. It also is not a surprise that the judge upheld Apple’s terms and conditions, but perhaps unfortunate that Epic Games may not have the opportunity to return Fortnite to the App Store. It will be interesting to see if Apple appeals, since they seem to have won the biggest battle, and how Epic Games fares in their appeal.