A US judge has ruled on the antitrust lawsuit of game developer Epic Games v. apple, but both companies seem to have lost.
2 Epic Games’ lawsuit seems to be mainly about mobile game payment options, not IOS applications or the larger game market.
The judge held that Apple has not occupied a monopoly position in the field of mobile games, at least not yet. But the lack of competition in the app store is worrying.
4 apple and epic have been arguing about how much benefit Apple’s in app purchase system brings to developers.
5 even if there is no in app payment fee, apple can levy “Apple tax”.
The judge held that the contract signed by epic and Apple had legal effect, and the former deliberately breached the contract and should bear compensation.
Tencent technology news on September 13, California judge Yvonne Gonzalez Rogers has ruled on the antitrust lawsuit of influential game developer Epic Games v. apple, and both sides seem to have become losers. The judge concluded that apple did not unfairly monopolize the mobile application market through IOS or its in app purchase system, and asked epic to pay liquidated damages because the company’s popular game fortress night violated the developer agreement signed with apple. But at the same time, judge Rogers ordered apple to cancel the “anti steering rules”, which prohibit developers from recommending alternatives to buying systems in Apple applications to users.
However, for consumers outside the two companies, judge Rogers’s views can be used for reference. She clearly believes that many behaviors of Epic Games and apple have problems, and many arguments of the two companies are also very bad. But she carefully examined all these debates and outlined a blueprint for further reform of mobile platforms, application monopoly and modern antitrust law. Therefore, we will pay close attention to the ten revelations brought by this ruling and what they mean to each of the two companies.
1) The fortress night lawsuit is mainly about mobile game payment, not IOS applications or the larger game market
During the trial, Epic Games and apple debated which market the IOS application of Fortress night belongs to. The former claims that Apple abused its monopoly on the IOS application ecosystem, while the latter believes that fortress night is in the more competitive overall digital game market.
But judge Rogers said both definitions were wrong, although Apple’s definition was less wrong. On the contrary, the question is whether Apple has an illegal monopoly in the “digital mobile game transaction”. Judge Rogers pointed out that the user base of mobile games is usually different from PC or game console players. They rely very much on the “free value-added” mode of in-game goods sales, which is not so important for mobile applications, game consoles or PC games.
Epic Games has filed 10 charges against apple, most of which depend largely on whether Apple implements unfair monopoly under the Sherman anti trust act or California’s anti-monopoly focused Cartwright act. Although the ruling sympathized with several basic arguments of Epic Games, almost all claims were rejected.
2) Apple has not occupied a monopoly position in the field of mobile games, at least not yet
Mobile games account for a large part of Apple’s App Store revenue, accounting for about 70% according to the ruling. Apple has great power in the field of mobile games. Judge Rogers concluded that IOS and Android are almost double monopolies, although she believes that Nintendo switch and cloud game services will become their potential competitors in the near future. The ruling estimates that Apple’s share in the mobile game trading market is about 55%, and there is a “very high profit margin”, which may be a symbol of monopoly power.
However, judge Rogers believes that although Apple has great power and ultra-high profit margin, “these factors alone can not prove its antitrust behavior. After all, success is not illegal.” although Epic Games argues that IMessage and other factors deliberately lock users on IOS, judge Rogers does not believe this reasoning.
This ruling opens the door to future antitrust complaints. Judge Rogers wrote: “the evidence does show that with its considerable market share, apple is on the verge of having considerable market dominance or monopoly. Apple was saved because its share is not higher, competitors in relevant sub markets are entering the mobile game market, and perhaps because Epic Games does not focus on this topic.”
However, for now, this judgment weakens Epic Games’ allegations that Apple maintains monopoly or illegally restricts trade under the Sherman Act, helping to overturn four Epic Games charges against apple. The ruling said that, by extension, this means that Apple has not violated California’s Cartwright act, and rejected two other charges.
The seventh allegation said that IOS was a “necessary facility” for apple to unfairly refuse access, but Epic Games did not seriously refute this statement. Judge Rogers said that for mobile application developers, it can only be said that network applications and other digital platforms provide a reasonable but not ideal distribution choice.
3) The lack of competition in the app store is worrying
In the ruling of Epic Games v. apple, there are many words that are quite harsh for the app store. Judge Rogers once pointed out: “Apart from legal proceedings, nothing seems to have prompted apple to reconsider its pricing policy and reduce its price. In other aspects, Apple has done a poor job in mediating disputes between developers and customers, and in the application review process, it has either adopted automated tools to improve speed and accuracy, or hired more reviewers. Part of the reason for Apple’s slow innovation is its Low investment in the app store. ”
At the same time, although judge Rogers was pessimistic about the economic analysis of Epic Games, she admitted that “Apple’s operating profit margin related to the app store is very high.” she specifically pointed out that the lack of competition is a big problem. In her ruling, she wrote: “The problem is not that Apple provides poor services. This is not the case. The key is that third-party app stores can pressure apple to innovate by providing features Apple ignores.”
4) Apple has reasonable security concerns about opening IOS
Apple’s trial witnesses claimed that IOS is an extremely safe ecosystem because it pursues the “walled garden” model, saying that there is no other choice suitable for sensitive data on people’s mobile phones. Epic Games said this statement is an excuse to close competition.
The ruling weakened Apple’s view. Judge Rogers told Craig federighi, Apple’s vice president of software engineering Judge Rogers generally accepted Epic Games’ suggestion that Apple could review and notarize the security of IOS applications, but allow distribution through other sources, similar to MacOS. She concluded: “Although unrestricted application distribution may reduce security, it is easy to achieve the same purpose even if other modes are not adopted at present.”
However, judge Rogers does not think this will make Apple’s statement an excuse. She agrees with apple that comprehensive human review can provide a “safe and trusted user experience” and is actually beneficial to consumers. In contrast, she believes that the solution proposed by Epic Games “mainly seems to eliminate the review of applications”.
The ruling shattered Epic Games’ hope that apple must legally allow sideloading apps and third-party app stores on IOS, which is the worst case Apple encountered in the trial.
5) Apple has the right to require its in app payment options
The dispute between Epic Games and apple began with the in app purchase payment processing (IAP) mechanism. The former adjusted fortress night on IOS so that players can buy v-bucks in the game in two ways: Apple App store or epic direct payment with 20% discount.
Epic Games described Apple’s IAP system as a beautified payment processor with excessive charges, and argued that Apple illegally bundled IAP with the entire app store. In Epic Games’s view, developers should be able to provide a variety of payment processing options, or simply reject Apple’s payment system. This is a major dissatisfaction of major app developers, but judge Rogers’s decision It’s not very promising for them.
Judge Rogers was skeptical of some of Apple’s arguments for its currently locked system and the subsequent 30% commission rate. She also pointed out that “there is no evidence that IAP provides developers with any unique functions” compared with standard payment processing. However, she opposed Apple’s split of the system directly, saying that Epic Games’s requirements for the system were reasonable “Defective”.
Throughout the trial, apple always said that the company did not simply charge for payment processing on IAP, but only charged commissions for transactions with higher value in the app store. Epic Games countered that Apple earned a lot of commissions, saying that although the app store helped connect users with developers, Apple should not get a share of every subsequent transaction 。
6) Apple and epic have been arguing about how much benefit the in app purchase system brings to developers
The ruling said that the matching description was “partially true”, but Apple “never argued that the Commission was only because it was a bridge between developers and customers”. On the contrary, “IAP is Apple’s way of charging developers license fees for the use of Apple’s intellectual property rights”.
Judge Rogers admitted that although Apple hired a consultant to testify about the value of its patents, she found that the specific 30% rate was “unfounded”. Apple still has the right to charge a fee to license these intellectual property rights, and requiring developers to use Apple’s payment system can “achieve this goal in the simplest and most direct way.”
At the same time, the ruling said that the unbound alternative of Epic Games would “seriously damage” the system. Judge Rogers said: “in fact, to some extent, Epic Games implied that Apple should not benefit from in app purchases on its platform. This remedy is inconsistent with the current intellectual property law.”
Rogers concluded that Epic Games did not win the monopoly maintenance or trade restriction claims discussed above, because two of them were specifically related to IAP. She also said that IAP was not an independent product, so apple did not illegally tie it to the app store. Therefore, it rejected two charges under Sherman and Cartwright act.
7) IOS developers have the right to talk about alternatives
Judge Rogers concluded that apple did not monopolize the mobile game market, but the company’s “anti diversion rules” did violate California’s unfair competition law (UCL), which restricts developers from telling users that they can buy digital products outside Apple’s ecosystem. The ruling focuses on this part of Apple’s developer agreement: “the application and its metadata may not include buttons, external links or other calls to action that lead customers to purchase mechanisms other than in app purchase.”
Judge Rogers almost unreservedly opposed Apple’s policy. She wrote: “by using the anti diversion clause, consumers do not know what developers may offer on their website, including lower prices.” developers are allowed to send e-mails to customers for advertising, but only through the addresses they collect outside the IOS registration process, and consumers do not necessarily know these addresses.
Users may not even know the Commission Apple charges. For example, if they subscribe to their favorite newspaper on the Internet, all the revenue will go to the newspaper, rather than the amount reduced by subscribing to IOS devices. Some people appreciate that Apple provides a unified place to manage subscriptions. But others may not, and “Apple actively rejects their choice”, including looking for alternatives.
8) “Apple’s innovation platform is also a black box”
Judge Rogers concluded: “Apple has created a new innovation platform, but it is also a black box. It enforces silence to control information and actively prevents users from acquiring knowledge in order to obtain digital products on other platforms. Apple uses this lack of knowledge to consolidate its position.”
The ruling said that Apple’s situation was “significantly different” from another case that allowed American Express to use the “anti diversion rule” against physical businesses, because even in the latter case, businesses can still say that they also accept visa and MasterCard. Therefore, a new ban will soon prevent apple from banning “buttons, external links or other calls to action”, which can guide users to other payment mechanisms. This could be a big deal for apple, although it’s unclear how much it means.
9) Even if there is no in app payment fee, apple can levy “Apple tax”
Judge Rogers’s ban left many strange ambiguities about what developers can do. In theory, developers can add buttons to guide users to safari or other applications for payment, but it seems to be no different from the option of using apple system for payment.
However, developers like Epic Games do not just control the payment method out of principle, although it provides some unique benefits, such as handling refunds. Their concern is to give up Apple’s 30% commission. Rogers said bluntly that things are not that simple.
Even if developers can completely stop using the IAP system, Rogers wrote: “apple can still charge developers a commission. It will only be more difficult for apple to charge a commission.” the ruling details this situation in a footnote, and apple is completely prohibited from allowing developers to use its payment options:
“In such a hypothetical world, developers can avoid commissions and benefit from Apple’s innovation and intellectual property rights free of charge. The court speculated that in this case, Apple may rely on imposing and utilizing a contractual right to conduct an annual accounting audit of developers to ensure compliance with its commission mechanism and other methods. Of course, any alternative to IAP seems to be Will bring more money and time costs to apple and developers. ”
U.S. law currently stipulates that Apple cannot prevent developers from offering cheaper prices outside IOS applications and tell users this. However, if large developers succeed in transferring a large amount of money from the app store in this way, judge Rogers’s ruling seems to open the door to collecting “Apple tax” in other ways.
10) The contract between epic and apple is valid, and the former deliberately breaches the contract
The ruling in Epic Games v. Apple declared that part of Apple’s developer agreement was illegal. But Epic Games still has to pay for the change of the payment system of Fortress night. Similarly, if Epic Games does not agree to comply with Apple’s regulations, it cannot restore fortress night in the app store or retain other applications of Epic Games on IOS.
The first reason is basically that Apple’s agreement is not illegal. Epic Games claimed that the contract was “illegal and unenforceable” because it violated the Sherman Act, Cartwright act and UCL. Judge Rogers concluded that the single violation of UCL was not sufficiently relevant or serious to justify the violation of Epic Games. She also refuted the claim that the apple contract was “unreasonable”.
The second reason is that Epic Games violated another rule in the process. When Apple’s policy stipulates that Epic Games cannot “provide, unlock or enable additional features or functions through distribution mechanisms outside the app store”, it hides the standby payment system in remote “repair”. This specific provision has nothing to do with antitrust allegations. The ruling concluded that Epic Games “never showed why it must violate the agreement” to challenge Apple’s so-called anti competitive behavior.
What exactly is a game is still not clearly defined
Of course, all the above issues are legally relevant and important to consumers, and set a detailed precedent for future antitrust legislation and litigation. But after witnesses spent so much time arguing about what a video game is, does this ruling give us a clear definition?
In short, the answer is no, because it is not necessary to do so. Judge Rogers said: “the court does not need to make a final decision on the definition of video games or games, because everyone believes that fortress night itself is regarded as a video game both externally and internally.” Fortress night positions itself as a game, even Tim Sweeney, the chief executive of Epic Games, believes that this is to build a larger virtual world The foundation of the “meta universe”, even though the “meta universe” is still in its infancy.
As for the definition proposed by the witness, unfortunately, no one agreed, and neither party provided any evidence of a generally accepted industry definition. This includes what Sweeney said about a game “involving some kind of win or loss or score increase”, and what trystan kosmynka, head of Apple’s app audit, said about “the game has a beginning and an end” And “the challenge is in place”.
However, judge Rogers did spend a lot of time analyzing the core elements of video games. The following is a short definition: “the court concluded that video games include a variety of game types, which are connected at least through different degrees of interaction and participation of game players.”
There is a more refined method: “At least, video games seem to require a certain degree of interaction or participation between players and the media. In other words, games require players to enter a certain degree of commands or choices, which are then reflected in the game itself. This definition of games is in contrast to other forms of entertainment, which are usually passive forms enjoyed by consumers (e.g. movies, TV, music). Video games are usually presented or animated graphically, rather than recorded live or through motion capture, as in movies and TV. ”
Judge Rogers admitted that she did not clarify the “external boundary of the definition of video games”. She refused to disclose specific non Epic Games, such as roblox and Netflix’s black mirror: Bandersnatch She also said that she could not determine whether some games in itch.io store had pornographic content or other problems because the corresponding materials were not submitted to the court.
Judge Rogers finally said: “in the definition of video games, what is properly included and what is excluded, the court finally left more difficult problems to scholars and commentators.” fortunately, many people in these two groups seem to be ready to meet the challenge. (reviser of Tencent technology / golden deer)