HCR Law Events

28 August 2020

Epic Games joins Spotify in struggle against Apple’s App Store Commission

In the latest protest against the allegedly excessive levels of commission charged by Apple to developers on in-app purchases, video game and software developer Epic Games has filed an anti-trust lawsuit against Apple in the state of California.

Apple’s policies

It’s been reported that there has been growing discontent amongst developers concerning Apple’s policies for some time. Apple currently takes a 30% commission on all in-app purchases made by consumers. Payment of this commission is unavoidable, as it is mandatory for developers to use Apple’s in-app purchase system to process payments and forbidden for developers to inform users of cheaper alternative purchasing methods.

Challenge by Epic Games

On 13 August 2020, Epic Games added its own cheaper in-app payment system into its most popular game, ‘Fortnite’, in contravention of Apple’s polices. Apple responded by immediately removing the game from the App Store altogether, meaning that users can no longer install or update the game. Epic Games subsequently filed a comprehensive and apparently pre-prepared anti-trust complaint in California where it is based.

Epic Games’ complaint states that Apple’s policies are harmful to:

  1. distributors, who are foreclosed from competing with Apple an innovating new methods of distributing apps to users outside of the App Store;
  2. app developers, who are denied choice on how to distribute their apps, are forced to pay more in commission than they would if Apple faced competition and, in some cases, developers have had no choice but to abandon their apps where a profit cannot be made in addition to Apple’s 30% commission; and
  3. consumers, who are  denied choice  and innovation in app distribution channels and are  forced to pay higher prices while suffering inferior customer service from Apple.

Rather than seeking compensation for payments received by Apple to date, Epic Games is seeking injunctive relief against Apple, requiring that it cease the allegedly anti-competitive practices and amend its policies.

Fortnite is one of the most popular apps on the App Store, with a worldwide player base of 350 million players and generating revenue in excess of $1bn through the App Store. It is therefore expected that there will be mounting social and economic pressure on Apple to revise its policies to bring the game back to the App Store.

Spotify’s challenge through the European Commission

This is not the first such challenge to be issued against Apple’s 30% commission on in-app purchases. Back in March 2019, Spotify filed a complaint with the European Commission over the same issue.

While progress on this complaint has been slow, the Commission announced in a press release on 16 June 2020 that they would be opening an investigation into Apple’s allegedly anti-competitive practices.

In particular the Commission’s investigation will focus on:

  1. the mandatory use of Apple’s own proprietary in-app purchase system for the distribution of paid digital content; and
  2. restrictions on the ability of developers to inform iPhone and iPad users of alternative purchasing possibilities outside of apps.

These parallel investigations into Apple’s pricing practices and policies will be watched with anticipation by anti-trust and competition lawyers across the world. Whatever the decision arising out of these complaints, the results will set a new precedent regarding the ability of tech giants such as Apple to regulate their own distribution platforms.

 

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About the Author
Steve Thomas, Partner

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