An Epic bite of Apple

In a battle of titans, the little guy may have just won.

Just over a year ago Epic Games, creator of "Fortnite," launched an aggressive legal campaign against Apple over the latter's policy regarding in-app purchases.

"Fortnite," like most free-to-play games out there, generate revenue through in-game microtransactions. But unlike the PC version of their game where in-game payments are made directly to Epic Games, players that access the game through their Apple iOS devices must go through Apple's App Store to make their purchases. This means Apple takes 30% of the top for any "Fortnite" purchases made on Apple devices.

For a game as popular as "Fortnite," that amounts to millions upon millions of dollars.

So Epic Games decided to pick a fight. Last August they updated "Fortnite" on iOS with the option to bypass the App Store and make payments directly to Epic. Apple quickly responded by pulling the game from the App Store and Epic immediately fired back with a lawsuit that challenged Apple's stranglehold over the iOS ecosystem.

Thus, here we are, a year later and the court has ruled. In this battle of corporate titans, Epic Games lost on nine of the ten counts of the case. The judge ruled that Apple's control over the iOS ecosystem does not constitute a monopoly, or, at the very least, that Epic's lawyers failed to prove that it does.

Specifically, the judged rejected the notion that Apple's "walled garden" platform is a relevant market of its own rather than part of a larger market of mobile platforms. While Apple's 55% market share of the total mobile market is problematic in its own right, it's not a monopoly.

The judgment also stated that that Apple's termination of Epic's presence on the platform was a valid response to Epic's violation, thus Epic Games remains banned from the App Store until Apple decides to let them back on.

The ruling even went so far as to order Epic Games to pay Apple their 30% cut for the iOS purchases that bypassed the App Store. Considering Epic made more than $12 million in revenue on the iOS between August and October of 2020, that puts them on the hook for millions of dollars in back pay.

But while Epic lost on just about every count, it could be argued that Apple lost on the count that really mattered.

The court ruled that Apple is no longer allowed to forbid developers from directing their customers to purchasing platforms that bypass the App Store and Apple's 30% cut of in-app purchases.

The violation of this rule is part of what got "Fortnite" booted from the iOS platform and while the court ruling doesn't get Epic's game reinstated, it does open the door for other developers to benefit from Epic's martyrdom. It doesn't seem that direct in-app payments are on the table yet, but it does appear that a link to a web browser where users could make purchases could be allowed. At the very least, developers will be allowed to communicate with users that other payment options exist.

So while Epic may be on the hook for millions after the court ruling, Apple has billions on the line if developers are able to take advantage of this crack in the walled garden.

This is, of course, assuming that Apple doesn't figure out a way around the injunction. The court order doesn't say Apple is forbidden from getting their cut one way or another, just that they can't have that specific prohibition against steering customers to other payment options.

It will be interesting to see how Apple reacts. While the court order came down largely in Apple's favor, it did not go unnoticed that Apple was "near the precipice of substantial market power, or monopoly power," which is not a good look for a company that has more than one antitrust suit going against it.

So, at the end of the day, it's hard to say either side really won. Epic Games certainly didn't get what they wanted, but Apple's victory may end up pyrrhic.

Travis Fischer is a news writer for Mid-America Publishing and doesn't play "Fortnite" or own an Apple device, yet is still somehow compelled by this lawsuit.