Epic v. Apple and the Plan to Avoid ‘Looking Like the Baddies’

Epic v. Apple and the Plan to Avoid ‘Looking Like the Baddies’

“You’ll enjoy the upcoming fireworks show,” wrote Epic Games CEO Tim Sweeney in an email to Microsoft head of Xbox Phil Spencer. It was August 7, 2020, mere days before Epic would publicly launch Project Liberty, its master plan to dismantle the $91 billion mobile gaming market as we know it. Sweeney wanted to shatter Apple and Google’s iron grip on mobile app stores and pave the way for a more open market, and he wanted Microsoft to help.

Project Liberty is now underway, as the first week of Epic’s antitrust trial against Apple comes to a close. Sweeney’s crusade against Apple is not quite David and Goliath—it’s a fight between two multibillion-dollar tech companies, after all. And yet, Epic’s strategy to win friends (corporate peers like Sony, Microsoft, and Samsung) and influence people (the general public) appears so far to be paying off.

The inner workings of Epic’s years-long plan to present itself as gaming’s knight in shining armor are now public thanks to court filings. Epic has been laying the groundwork for Project Liberty since 2018. The goal? As outlined in one 2020 email from chief operating officer Daniel Vogel to Epic executives: Get the public to turn on Apple (and Google) “without us looking like the baddies.”

Last August, Epic initiated stage one: rallying the children. Epic, which publishes hit game Fortnite, decided to sell discounted V-bucks, its in-game currency—but only through Epic’s own direct payment system, including on smartphone. The move was bound to provoke Apple, which requires mobile developers to use its payment system and pay up to a 30 percent commission. Epic took issue with that 30 percent cut, alleging Apple was exercising monopoly power over this ecosystem, and its 30 percent cut was a monopoly tax that ultimately was paid by consumers.

“Our message is about passing on price savings to players,” Vogel wrote in that same email.

Shot fired. The chaser was a cleanly produced bit of anti-Apple propaganda titled “Nineteen Eighty-Fortnite – #FreeFortnite​.” In a July 2020 Project Liberty pitch deck to Epic’s board, Epic noted that Fortnite had 81.2 million monthly active users in May of that year. Potentially, a little army. Not many would be sympathetic to Apple’s argument about App Store commissions, but cheap V-bucks were easy to rally behind. Apple booted Fortnite from its platform. The kids were mad. #FreeFortnite trended.

Shortly after this stunt, Epic filed a lawsuit against Apple, alleging Apple’s control over the iOS market is “unreasonable and unlawful,”—the “two” in Project Liberty’s “one-two” punch. (Epic is also suing Google over similar charges; that trial date has not yet been set.) For Epic, the thinking is simple: Apple controls iPhones. Apple controls their operating system, the mobile iOS. And Apple controls the App Store, the only option for distributing apps and games on the mobile iOS. Epic designed its “fireworks show” to prove that they couldn’t distribute Fortnite or sell V-bucks on iPhones through anything other than the App Store.

When Epic filed its complaint last August, its charges did not come as a surprise to Sally Hubbard, director of enforcement strategy at the anti-monopoly think tank Open Markets Institute. “I’ve long thought that Apple had monopoly power in the App Store,” she says. US law defines monopolies by their power to control prices and exclude competition “So when Apple is unilaterally setting the 30 percent commission,” she says, “that is direct evidence of monopoly power, because that’s the power to control prices.” It’s not about whether Apple is offering superior-quality services to consumers, she says; their consumers aren’t going to switch to Android or Xbox or PlayStation to avoid App Store prices.

In the trial, Apple is arguing that Epic breached its contract in an effort to make more money, and that Apple deserves its 30 percent commission due to its development and curation of the app store. However, Apple’s practices are facing increased scrutiny around the world. Late last month, the European Union charged Apple with violating antitrust regulations, in connection with a 2019 complaint from Spotify.

Published at Fri, 07 May 2021 14:47:15 +0000