Science & Technology

Epic Games appeals verdict in Apple antitrust case

Epic Games Inc. is not satisfied with the partial victory it won in its antitrust lawsuit against Apple Inc. and is calling on a higher court to reexamine the ruling.

On Sunday, the company filed a notice of appeal: “Notice is hereby given that Epic Games, Inc…. appeals to the United States Court of Appeals for the Ninth Circuit from the final Judgment entered on September 10, 2021,” the appeal document states.

Few details were given on the legal basis of the appeal, but it’s likely Epic Games will continue to press on federal antitrust allegations dismissed in the ruling.

The original lawsuit centered on Epic’s dismay over the Apple App Store’s terms of service. Games developers are obliged to accept the terms of service to publish their apps in the marketplace. Under the agreement, a developer may use only Apple’s payment system to process users’ in-app transactions.

The dispute began last August when Epic Games rolled out its own in-app payment system to the iOS version of its popular “Fortnite” game. Because the App Store terms of service mandate that in-app purchases may only be processed through Apple’s payment system, “Fortnite” was removed from the App Store. Epic Games launched its lawsuit against Apple after the app’s removal.

In a ruling Friday, U.S. District Judge Yvonne Gonzalez Rogers sided with Apple on most counts, notably rejecting Epic’s claims the App Store is a monopoly. She declined to rule that Apple must restore “Fortnite” to the App Store, rejected the need for third-party app stores and did not force Apple to reduce the revenue it takes from in-app sales from its current 30% cut, which was another point of contention.

On the other hand, she said Apple had engaged in some anticompetitive conduct and, in a big blow to Apple, ordered the company to allow app and games developers to be able to direct users to alternative payment methods. So developers will now be able to include a button in their apps that will let users go to an outside website and pay from there, circumventing the 30% cut Apple takes.

Gonzalez Rogers, however, also ordered Epic to pay $4 million in damages to Apple over breach of contract as a result of the payments it collected outside Apple’s in-app purchase system prior to the ruling.

Patrick Moorhead of Moor Insights & Strategy told SiliconANGLE the ruling against Apple was a “major black eye” for the company, but probably justified given that it doesn’t really invest much of that money in improving the App Store.

For Epic, though, the ruling probably won’t even benefit it, as Apple is under no compulsion to bring “Fortnite” or other titles back to the App Store.

Epic Chief Executive Tim Sweeney left no doubt on Twitter that he was unhappy with the verdict:

What isn’t clear yet is if Apple might also decide to appeal the judgment. Although the company has publicly proclaimed the ruling as a “resounding victory” that validates the app store’s business model, it’s clearly not the big win the company was hoping for. If thousands of app developers start adding the ability to make in-app payments via PayPal or Stripe instead of Apple’s own system, the company could start bleeding millions of dollars in revenue as a result.

Holger Mueller, an analyst with Constellation Research Inc., told SiliconANGLE the battle of control over app stores is far from over.

“This was just round one, as the appeal demonstrates, and there’s a lot at stake both for Apple and independent software vendors in terms of service revenue for the former and license revenue for the latter,” he said. “It will be an interesting one to watch as there’s a lot at stake, especially for Apple.”

Photo: Epic Games

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