Save the Developers: What Epic Games v. Apple Means for the Future of Our Tech Economy

Fortnite -- a proud product of the video game conglomerate Epic Games -- is a name that is familiar to anyone interested in the realm of gaming. To any enthusiast, the news of Fortnite’s removal from the App Store should be familiar. With the game’s total audience count amassing 350 million players, the termination of the game from Apple’s markets came as a great shock to the app developers’ community. The subsequent legal feud between Epic Games and Apple represents more than just lost revenues; it sets a stage for an antitrust legislation which perhaps could challenge a heavily established tech monopoly that has been assumed undefeatable for the past decade. 

The history of the App Store’s monopolistic market stretches far beyond just Fortnite. Bubbles of tensions began to show as early as 2009, through Apple’s decision to charge a 30% commission fee on all in-app purchases made through the App Store. In February 2011, this policy was extended to include digital subscription services — including music streaming platforms like Spotify and online news publications like the New York Times — and companies subsequently had to bear the burden of paying these commission fees themselves in order to maintain their customer pool. In lieu of increasing the price of subscription, Spotify chose to redirect all purchases to its website rather than using the iOS App Store as an intermediary platform. Spotify’s initial emails to discourage in-app transactions quickly escalated into the complete removal of an in-app purchase option on the app’s interface. For Spotify, this rerouting was only possible since a user’s account exists on multiple different devices and servers (effectively creating a transaction loophole). However, for other applications that require direct in-app purchases — such as games like Fortnite — the App Store’s 15- to 30% commission charge stood unavoidable.

Apple’s firm control over the tech economy may begin to degenerate with the ruling of Epic Games v. Apple. Epic Games’s lawsuit occurred in the wake of the termination of the company’s account from the App Store in terms of “violating the App Store’s guidelines”. This violation was based on Fornite’s launch of a direct payment option for their in-game currency; players were now redirected to Epic Games’s own payment gateway to receive a 20% discount on the game purchases. This policy effectively circumvented the charging of commission fees through the App Store platform, which Apple interpreted as a definite violation of the platform’s transaction policies. Fornite’s subsequent termination on the App Store quickly instigated the Epic Games v. Apple trial, with the legal basis being Apple’s operation of a complete financial monopoly over a $100 billion applications industry.

After a year-long case, U.S. District Judge Yvonne Gonzalez Rogers ultimately ruled that Apple’s prevention of “buttons, external links or other calls to action in their apps and their metadata that direct customers to purchase mechanisms in addition to in-app purchase” was unlawful. However, she has simultaneously approved the App Store’s commission system as legal, which means that Apple is still able to continue its fee charge policy over all apps listed on its market. This ruling did not constitute a certain victory for either parties of the lawsuit. For Epic Games, Judge Rogers’s endorsement of the legality of the App Store’s commission system has failed to initiate the fundamental overturning of the tech ecosystem, and its breach of the in-app payment system has resulted in a liability of at least $3.6 million over its revenues made through the discount campaign. As for Apple, the ability to redirect in-app purchases would cause damage to their revenue system, with the direct endangerment of the commission profit-making system. In this loss-loss situation, it is not ultimately clear whether one party has been able to attain the goal it originally wished to achieve. 

The question of antitrust regulations and monopolistic competition is an exceptionally difficult one to answer for an industry that is so rapidly evolving and overturning. In the past, Apple has taken a step-by-step approach to tackle antitrust complaints; for example, commission fees for “small app developers” (developers with less than $1 million in annual net sales on its platform) has been adjusted to 15% in 2020. Apple has also argued that their commission fee is representative of other e-commerce industries’ commission charges, so just like the other marketplaces, the 30% charge is justifiable in terms of allowing these developers to situate and advertise their products on Apple’s platform. 

But the solution is not always that simple. For example, Spotify’s discontent with Apple’s commission policies were less about the actual finance itself, but rather associated with Apple's partial behavior of excusing the tax rates from their own streaming platform, Apple Music. Even if Apple’s fee charge may be reasonable in terms of its functions, the fact that Apple holds an absolute monopoly over their operating systems remains unchanged, which is the fundamental grievance among small app developers. Even with the minute success of Epic Games, the fight for financial independence amongst software developers seems to be a difficult one, as Apple has called a request for a stay of injunction. If the request is granted in November, there would be a delay in the execution of the App Store’s changes in policy. The victor and victim of this long-lasting fight seem to be hard to distinguish, for as the future of open market app operations are still in the hopes of most developers. For the case of Apple, it is difficult to draw the line between what is a ‘justified’ commission fee and what is the tyrannic behavior of a monopolistic market owner, since the market itself is one with such high barriers of entry. As the consumers of this unpredictable economy, we can only wait for the results of this trial and wish for the promise of lower prices and encouraged competition for a market that has become such an essential part of our lives. 

Min Namgung is a current sophomore who plans to study IAPA and Behavioral Decision Sciences. She is a Staff Writer of the Law Review's Blog and can be reached at min_namgung@brown.edu.