Epic Lawsuit Vs. Apple's 30% App Store Cut Aims For Leverage, Pressure, And A Better Deal

Epic Games' lawsuit and tug-of-war with Apple over App Store fees are part opportunism, given big tech scrutiny, part good business, and a lot of leverage.

Also: Apple mercilessly mocked by Epic where it hurts

Apple on Thursday removed Epic Games' Fortnite from its App Store after the company implemented its own in-app payment system. The upshot was Epic bypassed Apple's 30% cut. Enter lawsuit.

Apple's 30% cut, which looked like a deal when first instituted, has been under scrutiny due to the company's market dominance in the app economy. Google's app distribution has also been under fire.

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Epic is ultimately looking to leverage its Fortnite community to put pressure on Apple. Fortnite offered permanent discount prices on virtual offers for every purchase on PlayStation, Xbox, Nintendo Switch, PC, and Mac, and then Apple made its iOS move.

In its lawsuit, Epic said:

Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation. Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear. At a market cap of nearly $2 trillion, Apple's size and reach far exceeds that of any technology monopolist in history.

Epic continues to argue that Apple exacts "an oppressive 30% tax on the sale of every app."

Apple's rebuttal:

Today, Epic Games took the unfortunate step of violating the App Store guidelines that are applied equally to every developer and designed to keep the store safe for our users. As a result their Fortnite app has been removed from the store. Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services. 

Epic has had apps on the App Store for a decade, and have benefited from the App Store ecosystem - including its tools, testing, and distribution that Apple provides to all developers. Epic agreed to the App Store terms and guidelines freely and we're glad they've built such a successful business on the App Store. The fact that their business interests now lead them to push for a special arrangement does not change the fact that these guidelines create a level playing field for all developers and make the store safe for all users. We will make every effort to work with Epic to resolve these violations so they can return Fortnite to the App Store.  

In addition, Epic said it is looking for injunctive relief on fees instead of monetary. Epic also said it is sticking up for the little developer.

Epic brings this suit to end Apple's unfair and anti-competitive actions that Apple undertakes to unlawfully maintain its monopoly in two distinct, multibillion-dollar markets: (i) the iOS App Distribution Market, and (ii) the iOS In-App Payment Processing Market (each as defined below). Epic is not seeking monetary compensation from this Court for the injuries it has suffered. Nor is Epic seeking favorable treatment for itself, a single company. Instead, Epic is seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers.

At its WWDC, Apple made sure to mention how much it has supported developers and enabled them to build businesses. On Apple's earnings call July 30, CEO Tim Cook said:

This quarter, a new study by independent economists at The Analysis Group found that the App Store facilitated more than $0.5 trillion in commerce globally in 2019 alone. Especially in a time of COVID-19, you can measure economic resilience in the ways in which the App Store supports remote ordering for restaurants, digital commerce for small businesses and an enduring entrepreneurial opportunity for creators and visionaries.

Epic begs to differ and said Apple's requirement that developers use its App Store means developers have to ultimately charge consumers more to maintain margins. The recent Congressional hearing on technology monopolies brought up similar points.

Must read:

• Free Fortnite: Epic sues Apple after Fortnite removed from iOS App Store GameSpot
• Fortnite 1984 short sees Epic Games attack Apple with #FreeFortnite campaign GameSpot

Ultimately what Epic is looking to do is force Apple to negotiate, but it's doubtful threats are going to get Apple to budge. Questions that'll need to be addressed going forward:

• How much should Apple's cut be to distribute apps: 20% or 10%?
• What implications will the Epic-Apple face-off have for Google?
• Will other developers with clout join the Epic fray?
• And will any of these issues garner antitrust scrutiny or give developers some legal wins?

Update: A couple of hours after its saga against Apple kicked off, Fortnite was removed from the Google Play Store entirely. When users search for the game, they are greeted with the page below.