The topic of monopolization, which has never lost its relevance, has sparkled with new colors in the light of the freshest confrontation between Epic Games and Apple. What happened, how it affects the market, what fate awaits the parties to these proceedings, and whether the iOS kingdom will be able to maintain its isolation from the entire technological world – let’s figure it out.
What Is the Matter?
On August 14, 2020, video game company Epic Games filed a lawsuit against Apple technology corporation. The reason was the blocking of one of the most famous games from Epic Games, Fortnite, in App Store. The 62-page complaint filed on the day the game was banned contains allegations of antitrust and freedom of competition violations, and demands that Apple’s restrictive terms be revised.
What Is the Reason for Banning Fortnite?
According to the official App Store rules, all payments must go through the App Store payment system, for which a 30% commission is charged. Disagreeing with this state of affairs, Epic Games released a Fortnite update on August 13, which provides for the alternative method of in-game purchases. It’s about reducing prices for in-game currency V-bucks and the possibility of purchasing them through the Epic Direct system. By using it and bypassing App Store rules, players could purchase skins and in-game items with a 20% discount.
Apple reacted quickly: Fortnite was completely removed from App Store. The already installed game will continue to function, but will no longer be able to update. And now it is not possible to download the game for new players.
Apple’s statement“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. We will make every effort to work with Epic to resolve these violations so they can return Fortnite to the App Store.
Google followed Apple’s lead by removing Fortnite from the Play Store. However, unlike Apple, Android users can install the game from other sources.
Google’s statement“While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies. However, we welcome the opportunity to continue our discussions with Epic and bring Fortnite back to Google Play.
Monopolist Territory: Play for High Stakes
Accusations against monopolists arise every year. Tech giants like Amazon and Apple are often accused of damaging competition, tax evasion, undermining democracy and breaching privacy.
Companies cooperating with monopolies are faced with the problem of a complete lack of alternatives: they become dependent on the conditions of the monopolists and are forced to pay all imposed commissions in order to stay afloat and promote their business.
As a company directly involved in the video games industry, Kevuru Games is opposed to monopolization of any kind. Instead of a fruitful partnership, this form of cooperation turns into outright extortion, damaging small and medium-sized businesses. And the tougher the conditions, the more colossal the damage. Consequently, there is a chance that there will be even more companies dissatisfied with monopolization. And they will look for alternative ways of business development.
Increased taxation, the introduction of new regulations and antitrust investigations are the first steps in establishing the global economic balance. And we fully support these initiatives.
What’s Next for Epic Games?
The creator of Fortnite strongly disagrees with Apple’s actions. From their point of view, Apple is abusing its power over iPhone users and restricting them in everything from the inability to install applications and games from third-party sources to the limitation of the only possible payment system. The overly restrictive App Store moderation rules have also always been the subject of bitter controversy and discussion.
Epic Games created a special page where it explained to the players the essence of what was happening in detail. The hashtag #FreeFortnite is extremely popular on Twitter right now.
Epic’s statement“Apple’s removal of Fortnite is yet another example of Apple flexing its enormous power in order to impose unreasonable restraints and unlawfully maintain its 100% monopoly over the market for in-app payments on iPhones.
As for the prospects, it definitely succeeded to draw attention to the issue of monopolization. Many large companies have spoken out in support of Epic Games: Facebook, Spotify, Telegram, BaseCamp, Netflix, ClassPass, Airbnb, Match Group and others. Fiji Simo, the head of Facebook’s main app, said they had asked Apple to cut a 30% fee or allow using Facebook Pay to cover the costs of businesses struggling during COVID-19, but were refused.
In March 2019, the streaming music service Spotify filed a complaint against Apple with the EU Antitrust Commission regarding the same notorious 30% commission for user purchases through the iOS app. By demanding a commission from Spotify, Apple is thus forcing the service to raise prices and lose its competitive advantage. Then the prices will be higher than Apple Music has, which Spotify competes with.
The streaming service also decided to implement a subscription scheme bypassing Apple’s payment system and commissions, after which the latter stopped updating the application and threatened to remove it from the App Store.
Other companies such as Rakuten, Match Group, and Tile have also complained about similar recurring trends at Apple: Apple is entering the technology, apps, music and e-book market without paying any commissions and thus outperforming competitors in terms of price. In this way, Apple fights competition by preventing possible alternatives from entering the iOS application distribution market. The company, among other things, prohibits installing app stores and programs themselves directly from third-party sites, preinstalls App Store and does not allow it to be removed.
The US Congress has already spoken out about the monopoly state of Apple and specifically about the too high commission in App Store. The European Union also did not stand aside: back in June, an antitrust investigation was opened regarding App Store and Apple Pay commission practices.
Margrethe Vestager, the head of the EU’s antitrust division“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books.
What Will Happen to Apple?
The maximum penalty of 10% of all revenue is what Apple can expect if all claims against it are considered fair. However, not everyone believes that this will radically affect the future strategy of the corporation. The example of Google, which was also fined for violating EU antitrust laws, showed that large players view fines only as business costs.
However, there are some nuances here. Apple is going through a difficult period: in the light of iPhone sales decline, the company will have to be more careful with statements and decisions. Therefore, it is likely that it will still make some concessions. For example, allowing third-party browsers and email apps, and easing HomePod restrictions for third-party music apps, including Spotify. But while these are only suggestions, there have been no official statements from Apple.
Is It Possible to Loosen the Tension of the iOS Bridle?
The Epic Games complaint suggests that the app developers have no real power to influence Apple’s behavior. They face a choice: pay a commission or ditch a billion-user base.
According to Epic Games, no developer has the ability to single-handedly overcome network effects and cope with the cost of re-attracting users to another platform. The company believes that iOS users cannot be lured somewhere else so that it remains profitable.
IOS users are unlikely to be able to abandon their platform for a number of reasons:
- The need to retrain: users are accustomed to design, control system, functions and are not eager to switch to other platforms.
- Losing personal data and financial investments in iOS applications: everything will have to be transferred manually, and paid content will have to be bought again.
- Moving away from profitable iOS family services: the platform encourages family or mass use of the system by offering useful group communication, file sharing packages and features for iOS.
- The loss of ability to use the kit: often users buy Apple devices in addition to other Apple devices due to the advantages of their work in combination.
- The loss of opportunity to participate in programs: for example, Apple allows you to get a new iPhone every year in exchange for recurring payments.
- The loss of ecosystem benefits: there are many benefits that make Apple virtually invulnerable in a competitive environment, so other companies will have to negotiate with everyone involved to duplicate the benefits of the iOS ecosystem.
Thus, in the near future, an iOS alternative similar in capabilities and characteristics is hardly foreseen.
But What About Fortnite?
Despite temporary problems, Fortnite remains available for download and does not lose its audience. Players are free to get it on Android devices through the Epic Games app or Samsung Galaxy Store. We hope that this situation will soon be resolved and that all loyal fans of the game will be able to enjoy it without any restrictions.
The Show Must Go On: Confrontation Continues
Apple is serious about keeping the confrontation high: on August 28, it removed the account of Epic Games from the App Store. Now the developer will not be able to download updates and new games to the store. After deleting an account in the App Store, the Epic Games page on which the developer’s games were previously collected disappeared. The Fortnite page disappeared even earlier.
Apple’s statement“We are disappointed that we had to delete our Epic Games App Store account. We’ve worked with the Epic Games team for many years on their releases. The court recommended that Epic adhere to the platform’s principles during the trial, following the rules the company has followed over the past decade. Epic refused. Instead, they’ve repeatedly downloaded Fortnite updates that violate App Store policies. This is unfair to all the other developers in the App Store and is drawing users into Epic’s struggles. We hope to be able to work together in the future, but unfortunately this is not possible today.
The reaction of the head of Epic Games, Tim Sweeney, followed almost immediately.
Tim Sweeney, the founder of Epic Games“Apple’s statement isn’t forthright. They chose to terminate Epic’s account; they didn’t *have* to. Apple suggests we spammed the App Store review process. That’s not so. Epic submitted three Fortnite builds: two bug-fix updates, and the Season 4 update with this note.
After Apple threatened Epic Games with not only deleting the account, but also depriving them of the rights to use all development tools for iOS and Mac, Microsoft spoke out in defense of Epic Games and said that such actions were unacceptable. Epic Games again appealed to the court, considering the actions against it unfair and likely to harm other participants in the industry. Microsoft has filed a statement in support of Epic, urging not to deny the company access to development tools while the lawsuit against Apple is ongoing.
According to Microsoft, Unreal Engine, developed and maintained by Epic, is a critical technology for the industry, and losing access to it on iOS and macOS would deprive Microsoft and other game creators of a critical component. This can be a disaster for developers if an Unreal-based game is under development.
In such a situation, one will have to choose between restarting development, dropping support for Apple devices, or canceling the project. Issues may also appear in existing games as iOS and Mac users will not be able to receive new features, bug fixes, and security updates. In addition, there will be a market split as users of Apple devices will not be able to play online with users of other platforms.
Microsoft’s statement“If Unreal Engine cannot support games for iOS or macOS, Microsoft would be required to choose between abandoning its customers and potential customers on the iOS and macOS platforms or choosing a different game engine when preparing to develop new games.