Fortnite' Battle Royale: Epic Games Vs Apple and Google

www.dailyjournal.com

THURSDAY, AUGUST 27, 2020

PERSPECTIVE ‘Fortnite’ battle royale: Epic Games vs. Apple and Google

By Mark Riera nition, the larger Apple’s and Google’s market shares will appear. Although every manu- pic Games v. Apple facturer is a monopolist in its and Google: Does suc- own goods, the relevant prod- E cess require an alleged uct market will be defined by monopolist to do business with the cross-elasticity of demand, a competitor that wants to sell or consumers’ willingness to mobile apps to IOS and An- shift to substitutes as the mo- droid users outside the iTunes nopolized good rises in price. and Google Play Stores? The Gamers are likely indiffer- Northern District of California ent to the identity of the party provisionally said no, denying charging for in-app purchases Shutterstock a temporary restraining or- A boy plays “Fortnite.” because gamers still choose der to require Apple to restore their payment source, and in- “Fortnite” to the iTunes store. 350 million players “and has The Federal app purchases are relatively On Aug. 18, Epic Games become a global cultural phe- Antitrust Claims small even if large in the ag- sued Apple and Google in the nomenon.” Tencent Holdings, Epic Games claims Apple and gregate. From the developer’s Northern District alleging fed- the world’s largest video game Google each has a monopoly point of view, it likely wants to eral antitrust claims and relat- company, reports that it owns in markets for app distribution distribute its games in as many ed California state law claims more than 10% of Epic Games. and in-app payment process- outlets as possible, including because Apple and Google will Epic Games distributes “Fort- ing systems within their mo- computers, gaming consoles, not let Epic distribute games nite” directly to PC and Apple bile OS ecosystem. Based on televisions, cell phones, and and charge users directly for computer gamers, and through this foundation, Epic Games perhaps smart watches. in-app purchases. Epic Games, Google to Android mobile us- alleges claims under Sherman If the relevant market is Inc. v. Apple, Inc., 4:20-cv- ers. Until recently, Epic dis- Act Section 2 for unlawful games, the market may include 05640- YGR, and Epic Games, tributed “Fortnite” through maintenance of a monopoly in a broad range of entertainment Inc. v. Google LLC, et al., Apple to IOS mobile users. the distribution and payment alternatives, and if the mar- 5:20-cv-05671-NC. Epic al- Apple’s Developer Agreement processing markets and denial ket is app hosting or payment leges that Apple and Google prohibits developers from dis- of access to an “essential facil- processing, the market may be charge developers 30% of in- tributing apps to IOS users or ity” necessary to compete, and very different and Apple and app sales and Epic proposes to selling in-app enhancements under Sherman Act Section Google may have market pow- reduce that amount by 20%. outside Apple’s app store. On 1 for unreasonable restraints er… or not. The story goes that the vast Aug. 13, Epic Games did just imposed in Apple’s Developer majority of mobile devices use that, offering in-app purchas- Agreement and Google’s OEM Monopolization and the Android operating system es to “Fortnite” IOS app us- Agreement, and tying the apps Essential Facilities that Google owns and licenses ers directly. Apple responded stores to IOS in-app payment Big does not necessarily mean to OEM device manufacturers. by removing “Fortnite” from and Google Play billing. bad. A monopolization claim Although Apple’s mobile op- the iTunes store. IOS mobile requires proof of power to ex- erating system (IOS) is limited “Fortnite” users can continue The Relevant Market clude competitors and raise to Apple iPhones and iPads, to play the game, but “Fort- Epic Games will bear the bur- prices and anticompetitive there are more than 1.5 bil- nite” is no longer available for den of proving that Apple and conduct. Maintaining a closed lion active IOS devices world- purchase or update and, when Google have market power ecosystem and controlling in- wide. Epic Games publishes Apple updates its mobile IOS, in a relevant product market. app billings may not prove to “Fortnite” that has more than “Fortnite” may no longer work. The narrower the market defi- be anticompetitive in a relevant market, depending on its defi- tions, such as its protection Games inflicted its own harm F.Supp.2d 30 (D.D.C. 2000), nition. Similarly, the ability to against viruses, ransomware, by breaching its Developer aff’d 253 F.3d 34 (2001), sell apps and charge gamers privacy breaches, or more ef- Agreement, but granted relief where Microsoft was found directly may not be essential to fective marketing. to allow Epic Games contin- to have maintained monopo- competition in any field where Tying occurs where a seller ued access to Apple’s develop- ly power in the market for PC Epic Games does business. with market power in one good er tools for its Unreal Engine operating systems by bundling Epic’s success to date may be forces purchasers to buy a sec- used to develop software for its OS with Internet Explorer. proof of this. Epic Games like- ond good that they might prefer Apple platforms. A hearing on The court there found Micro- ly has no desire to host a site to get elsewhere or on different an order to show cause regard- soft retaliated against Netscape for apps or operate an online terms. A threshold issue will be ing preliminary injunction is when it refused to discontinue payment processing business. whether app distribution and set for Sept. 28. Because Epic developing Netscape for 32-bit Rather, Epic likely prefers to payment processing are prod- Games seeks injunctive relief versions of Windows.  continue its focus on devel- ucts buyers shop for separately, only, there will be no right to a oping games while capturing or whether they prefer to get jury trial and the court’s ruling Mark Riera is a partner at Jef- a greater percentage of the both together, like left and right may provide a preview of the fer Mangels Butler & Mitch- purchases “Fortnite” gamers shoes. Although tying offenses ultimate ruling. ell LLP. Mark is an antitrust make. While Epic proposes to are deemed per se unlawful, An injunction against Apple lawyer who has represented reduce Apple’s fee by 20% it procompetitive justificationswould strip it of control and leading international compa- would increase its net revenue can still come into play. A fre- oversight of the apps distrib- nies in MDL class and opt- 10%. quent argument is if a seller has uted through iTunes Store, and out actions and cartel cases market power in a tying prod- force it to lodge a hostile com- internationally. Unreasonable uct, why not charge the highest petitor, like forcing a depart- Restraints of Trade price the tying good will bear, ment store to accommodate a and Tying Arrangements instead of increasing costs with competitor’s kiosk on its sales Epic Games complains that an unwanted tied product? floor. Technology advanc- Apple’s Developer Agreement es may be the great equalizer and Google’s OEM Agreement The Road Ahead as the once dominant mobile unfairly prevent it from selling Epic Games applied for a tem- phone manufacturers faded directly to gamers and charging porary restraining order against from the scene as smart phones them for purchases. Apple and Apple on Aug. 17. After oral advanced. Google can refute this charge argument on Monday, the court The claims Epic Games al- by showing procompetitive denied a TRO as to remov- leges here are similar to Unit- justifications for the restric- al of “Fortnite” because Epic ed States v. Microsoft, 87