Apple and Fortnite maker Epic trade blows as antitrust court battle begins
Epic says Apple's business model is anti-competitive. Apple says Epic just doesn't want to pay fees.
Apple and the company behind Fortnite are in an epic battle antitrust. (Get used to these jokes.)
Apple and Epic, the developer behind the hit game Fortnite , began arguments in a California courtroom Monday for their high-profile antitrust lawsuit over the future of the iPhone and iPad App Store. In their opening statements, the two companies dueled over Apple's policies and whether its notoriously tight control over its devices constitutes a monopoly.
Epic argued that Apple's App Store policies, which require that developers submit apps to Apple for review before they can be sold or given away for free, was unnecessary. Epic also said that the up to 30% commission Apple charges on some purchases of items in apps, such as a new look for a Fortnite character, raises costs for iPhone and iPad owners and locks them into its system.
"Epic is not suing for damages," one of Epic's lawyers said. "Epic is suing for change, not just for itself, but for all developers."
Apple pushed back, saying its App Store has helped fuel new multibillion-dollar companies. "Epic speculates about a world where Apple is a different company," Apple argued. "It's asking the court to make a big bet that world is a better world than the one we live in. It's not."
The fiery speeches from both companies kicked off what may be one of the most important antitrust lawsuits in years. Apple's iPhone is one of the most popular consumer products ever made, with more than 1 billion of them being used today. That success has helped grow Apple's business to more than $274.5 billion last year, with Wall Street valuing the company at more than $2 trillion. But Epic argues that Apple's success has come in part because of how it treats competitors on its devices, handicapping them while giving itself preferential treatment.
On its surface, the lawsuit looks like a quarrel between a multibillion-dollar company and a $2 trillion company about who gets how much money when we all buy stuff in apps. But the outcome of this case could change everything we know about Apple's App Store and about how mobile transactions work on other platforms like the Google Play store as well. It could also invite further scrutiny from lawmakers, who are already debating whether tech giants like Apple and Google wield too much power.
The companies are arguing before a California judge in what's called a bench trial, meaning there's no jury. This allows the companies to plead their cases without having to educate and then sway a jury, setting up an easier appeals process when a decision is handed down.
The nature of a bench trial also means both companies will likely dig into the weeds of their arguments, tussling over theories that could inform antitrust debates for years to come.
"Epic's antitrust lawsuit threatens the billions of dollars in revenue the App Store generates," Jennifer Rie, a litigation analyst at Bloomberg Intelligence, wrote in recent research report. But Apple's argument that its approach protects the security and privacy of users will weigh heavily on the proceedings, she added. "We're skeptical that Epic will prevail in the long term," she wrote.
Although Epic says allowing competing App Stores and payment processing on iPhones would lower prices and foster competition, Apple said it would need to find new ways to recoup the development and operation costs for its App Store.
"Apple would still be entitled to collect a commission, and developers would have to pay extra for services Apple now covers," Apple argued. "The cost could be passed down to consumers, which will also create more friction from a transaction, which in turn will be bad for developers."
Sweeney's story
Tim Sweeney ditched his trademark T-shirt and cargo pants for a suit and tie at Monday's hearing in Oakland, California.
Epic's first witness was its CEO, Tim Sweeney, who walked through specifics of how his hit game Fortnite worked and the partnerships he forged with Microsoft, Sony and Nintendo to bring the game to the Xbox, PlayStation and Switch game consoles.
He described Fortnite not as a game but as an experience: His company has held virtual music concerts, movie watch parties and other social events alongside its run-and-gun battle royale mode.
"Our aim of Fortnite is to build something like a metaverse from science fiction," he said, referring to author Neal Stephenson's 1992 novel Snow Crash, in which humans interact with one another as avatars in a virtual world. The novel's influenced many virtual reality enthusiasts, who often refer to the metaverse as part of a larger prediction of how pervasive technology will become in our society.
Soft-spoken and bordering on mumbling, Sweeney testified that the fight with Apple was his decision and that he'd wanted to take on Apple's policy against competing app stores on the iPhone as well as its 30% commission.
"I didn't initially take a critical view of Apple policies," he told the court, referring to when Epic's first apps for the iPhone were made in 2010. When his team signed intellectual property agreements with Apple back then, which the Apple says he's now violated, Sweeney said he didn't exactly agree with it but he had chosen not to attempt to renegotiate the terms.
"I support the right for Apple to offer a purchasing system," he said. The fight, he added, is "about the ability to offer a competing purchasing system so developers can choose."
Epic's lawsuit against Apple began May 3 and is expected to run for several weeks. The audio of the in-person courtroom proceedings will be carried live over a teleconference, and chosen pool reporters will be in the room.
CNET will be covering the proceedings live, just as we always do -- by providing real-time updates, commentary and analysis you can get only here.