Epic Games and Apple Inc. have finally begun with their three weeks antitrust trial, the biggest in over two decades. The courtroom battle began on Monday and the consequential outcome of this trial could be a game-changer for the gaming and technology industry on the whole. Apple has had a solid business model for more than a decade now and if by any chance, Epic Games wins this trial over the iPhone maker, the latter could face far-reaching implications with respect to its super-profitable business model and the United States antitrust law.
As mentioned in a report by The Washington Post, Epic Games accuses Apple Inc. of building a closed wall with its iOS ecosystem and in response, Apple deliberately painted the “Fortnite” maker as an opportunist who is looking to cut costs and make profits through this court trial.
Apple says that Epic Games is trying to force Apple to include malicious, harmful and potentially untested applications on its App Store. On the other hand, Epic calls Apple to be a monopolist that has successfully lured in customers and developers to its App Store market and then locked them into its Ecosystem with restrictive rules and policies.
Basically, both the parties are standing strong on their allegations and the case will reportedly be decided by U.S. District Judge Yvonne Gonzalez Rogers. This man will be deciding the fate of Apple’s iOS market by analysing the legal definition of a Monopoly and understanding the depth of Apple’s monopoly in the industry. Judge Rogers will also decide if Apple is actually abusing its monopoly to lock in customer and developers and whether it is fair on Apple’s part to charge a 30% fee cut from its developers without allowing them to use their own in-app payment system, the main fuss behind this court trial.
The First Day of Court Trial: May 3rd, 2021
In the opening statement made by Epic Games, Chief Executive Officer, Tim Sweeney mentions that it is suing Apple for “Change”- not just for itself but for all developers out there who think that Apple in itself is a monopolistic market.
Opening remarks on behalf of Epic were delivered by Katherine Forrest, a partner with Cravath, Swaine & Moore and a former District judge with the Southern District of New York, according to a report by The Washington Post. The report further mentions that Forrest is also a deputy attorney general, antitrust division for the United States Department of Justice. This means that she a solid contender that serves on behalf of Epic Games in this controversial antitrust court trial.
As a part of the opening statements made by Forrest, she showed a presentation to the court wherein she alleges that Apple’s iOS ecosystem is a “walled garden” created by the company. In the presentation, she has reportedly highlighted some solid documents that allegedly support Epic’s “walled garden” accusation. The Fortnite maker has allegedly accused Apple Inc. of planning to create this walled garden for customers and developers where it lures them in and locks them with their highly restrictive policies and rules with regard to iOS, Apple’s popular mobile operating system. Epic says that Apple makes it difficult for developers to switch from iOS to the competitor’s Operating System i.e., Google.
As mentioned in an exclusive report by The Washington Post, the presentation shared by Forrest on the first day of the court trial against Apple included some hard evidence where Apple’s own employees have been found saying that Apple is hard to quit and the number one application that makes it hard to quit the Apple ecosystem is iMessage.
The communication that Epic’s attorney is referring to here is the email chat between Ian Rogers, former Apple executive and Eddy Cue, Vice President at Apple’s Internet Software and Services. Rogers emailed Cue telling him that it is most difficult to quit Apple’s ecosystem because of iMessage. He further added that he had switched from Apple to Android Operating System and that he used WhatsApp, Slack and WeChat for work but ultimately missed a ton of messages from friends and family that used iMessage. It has been reported in the presentation that Rogers explicitly mentioned to Cue that iMessage amounts to serious lock-in. This is pretty serious proof against Apple because both of these gentlemen shared senior positions in the company.
As the court trial proceeds, Epic Games entered newer documents as evidence against Apple’s master App Store. The Fortnite maker has evidently dug Apple’s ground to find documents and evidence against the company’s policies and regulations. Apple has been very confidently saying in the public that it is in complete control over its App Store but according to the documents produced by Epic, the internal scenario at the company seems completely opposite and that is exactly what caught the judge’s attention.
During the court trial, Epic’s attorney produced an email from Apple’s long-time executive who is responsible for overseeing the company’s App Store, Phil Schiller. In the email, he sounds angry at his team or someone from the company where he points out the inclusion of a super famous game, Temple Run’s rip off with “garbage marketing text”, no screenshots and an almost 1-star rating. The email mentioned Phill highlighting rather getting angry at the fact that this Temple Run rip off was positioned as the #1 free app of the store. He questions if anyone is looking after the App Store and does nobody sees how this app is cheating the system. He remarks the scene as “insane” as well.
This is definitely bad news for Apple but the company was definitely well prepared with their defence and responses.
The United States District Court says that they have successfully compiled more than a hundred files and documents from Apple and Epic as evidence and one that caught the court’s eye was Epic Games’ Fortnite World Cup back in 2018-19, a world championship event for Fortnite players.
Questions have been rising as to how could Epic afford to pay for hosting such a huge event with evidently fewer sponsorships. There were questions on whether the event was profitable to which Epic gave some answer.
Anyhow, there were emails found between Epic employees, as mentioned in a report by The Washington post where they were discussing to make Apple Inc. the presenting sponsor of the event which could somehow give them leverage with the iPhone maker but ultimately the event was held without any significant branding.
Further following the court battle between Epic and Apple, the iPhone maker dropped a bomb on Epic as it cites Federal Trade Commission V/s Qualcomm Inc. which was a fairly similar case regarding antitrust laws and anticompetitive behaviour. The court in part of its decision states that anticompetitive behaviour is illegal, hypercompetitive behaviour is not and this phrase itself can turn things around in this present case.
Mark Lemley, director at Stanford Program in Law, Science and Technology told The Washington Post back in 2020,
“If Apple can persuade the court that this is just about … Apple’s control of its own store and the prices it wants to charge, then Qualcomm says not quite ‘Do whatever you want, we don’t care,’ but something pretty close to that.”
Apple started to fire back at Epic with their allegations as the court proceeded after multiple technical glitches as it has been reported. Apple mentions that Epic has suddenly decided not to pay Apple for its innovations anymore and that it is forcing the iPhone maker through this lawsuit to include untrusted and untested applications in its App Store. Apple’s attorney says that this is something that the law does not allow.
The main point from where the whole lawsuit stems is Epic Games’ inclusion of its own in-app payment system for Fortnite which is against Apple’s policies and as Apple accuses Epic, the step was taken intentionally to bypass the company’s 30% commission fees. Apple mentions in court that Chief Executive Officer, Tim Sweeney had discussed this lawsuit way ahead of time with Microsoft, deceiving Apple and giving the competitor a heads-up. Isn’t this against the law?
Apple mentions that its consumers have multiple choices if they want to use an iPhone for games especially for Fortnite or not. One of Apple’s opening arguments mentioned that most of Fortnite’s revenues come from other sources and platforms than iOS.
If at all Epic Games wins this lawsuit, it will mean that Apple will have to offer a less secure Operating System that will become more dangerous for consumers. As mentioned in the story by The Washington Post, Apple’s attorney took a hit at Google saying that it is much less secure than iOS and Apple would be in the same position if it didn’t have control over its App Store Ecosystem with all its restrictive policies.
Epic CEO Tim Sweeney takes the stand:
Tim Sweeney, Chief Executive Officer, Epic Games took the stand on Monday afternoon during the antitrust court trial. He was initially asked about his background in games and the products that the company has developed in the recent past.
Sweeney describes Fortnite as not just a game but an entertainment system which is frankly debatable. Sweeney repeated what his attorney Katherine Forrest has been fighting for against Apple’s policies. He says that his company’s complaints against Apple are not about the company’s App review policies and they are not seeking any additional compensation. Sweeney stressed the fact that his company’s business has been negatively affected by Apple’s requirements to go through App Store for in-app payments processing system.
Tim Sweeney also stated before the court that Apple can evidently make more money from its 30% commission cut than the app developers themselves can make, according to The Washington Post.
For some time during the court trial, it seemed as if Epic was not fighting Apple but was only there to prove that Fortnite is not just a video game. Whatever suits Sweeney, Apple fired some pretty strong allegations all through the trial.
During Sweeney’s cross-examination, Apple’s attorney- Richard Doren grilled Epic’s CEO on the fact that it hadn’t raised any issues with Apple’s policies when the company originally joined Apple’s developer program. Doren mentions that the 30% commission cut policy has been there since Epic Games joined the party, so why is it now that Epic is accusing Apple of doing what it has said in its allegations.
Doren claims that Fortnite is growing less popular by the day and less lucrative over time and that is the reason why Fortnite maker is challenging Apple in this lawsuit to combat the financial crisis. The counsel for Apple did not spare Sweeney for even one moment as reported by various sources. Sweeney was deliberately asked to repeat his platform’s policies regarding commissions. Doren also highlighted the fact the other competitors in the market such as Sony and Microsoft leverage the same 30% commission cut from developers on their PlayStation, Nintendo and Xbox devices. Very cleverly, Doren made Sweeney acknowledge this fact and Epic lost the battle there for a moment.
As the opening statement and their responses were noted on this first day of trial, the court ended the proceedings for the day and the next trial had to be resumed on 4th May 2021 i.e., Tuesday.
Second Day of Trial: May 4th, 2021
“The most dangerous thing Epic is going to try to sell this court is the idea that consumers would be better off if Epic has its way. Nothing could be further from the truth,” says Karen Dunn, Apple’s attorney, a partner with New York-based law firm- Paul, Weiss, Rifkind, Wharton & Garrison.
She added that the results of Epic winning this trial will be less security, lower quality, less privacy and less choice for consumers and developers. She says that these are all of the things that antitrust laws seek to protect.
The New York Times reporter, Erin Griffith is live reporting on Epic Games V/s Apple:
I'm reporting on Epic and Apple again today but not from the courtroom.
(Bc of the pandemic, access is limited. Media is taking turns w/ @StephenNellis and @MActon93 in the room today.)
Tim Sweeney is currently being cross-examined again by Apple's lawyer.
— erin griffith (@eringriffith) May 4, 2021
More internal emails: Sweeney is the leader of Project Liberty. Epic renewed its developer license just before asking Apple to loosen its rules. Epic asked Apple to make the changes for all developers. Apple notes such a change would require a "side letter."
— erin griffith (@eringriffith) May 4, 2021
More internal emails: Sweeney is the leader of Project Liberty. Epic renewed its developer license just before asking Apple to loosen its rules. Epic asked Apple to make the changes for all developers. Apple notes such a change would require a "side letter."
— erin griffith (@eringriffith) May 4, 2021
Sweeney says Epic's revenue was down in 2019 compared to 2018. Then 2020 had a historically large "pop" because of the pandemic.
— erin griffith (@eringriffith) May 4, 2021
Now going through Sweeney's emails to MSFT teasing the hotfix, the infamous “You’ll enjoy the upcoming fireworks show.”
— erin griffith (@eringriffith) May 4, 2021
We end by talking about Sweeney's personal use of an iPhone and why he likes its security and privacy features. "If Apple were to compromise those values would it lose its competitive advantage to Google?"
Sweeney: "I'd need to know the specific changes it would make."— erin griffith (@eringriffith) May 4, 2021
Epic lawyer now pointing out that we don't know the terms or commission rates that MSFT Sony or Nintendo charges other companies because they are negotiated. Apple does not negotiate terms with anyone.
— erin griffith (@eringriffith) May 4, 2021
