August 26, 2020

Apple v. Fortnite – a pandora’s loot box for online marketplaces?

So the biggest story involving Apple, and one which could have a knock-in effect on all of these other headlines, is the fact that people can (for now) not install Fortnite - the wildly popular video game - on their iPhone or iPad. Who’d have thought?

What happened?

Earlier this month, Epic Games - the maker of Fortnite - offered iPhone and iPad players the option to pay for in-game currency direct through their own platform, bypassing the App Store and therefore the 30% cut which Apple requires of all purchases made through their platform. A fee which Epic Games says is unfair.

Apple very quickly responded by removing Fortnite from the App Store, a move which Epic Games had clearly expected as they immediately sued the tech giant and released and video on Twitter mocking Apple’s famous 1984 TV ad:

Whilst this is the most overt example of a developer calling out Apple’s practices on the App Store, it is not the first.

Microsoft has also had problems delivering its xCloud gaming platform on the App Store, and Google also with its own game streaming service, Stadia. Apple, citing the fact that it cannot individually list and assess each game in each service in accordance with their rules, has said it will not allow these apps on its store.

A ‘cut and dried’ outcome?

At first glance, it would appear that the outcome of this case will be ‘cut and dried’. Epic Games broke the App Store’s rules, and therefore in accordance with these rules have had their product removed.

"With support from other big tech firms such as Spotify I don’t think this is going to be an issue which goes away over night.”

However in light of Apple’s actions against Microsoft and Google’s game streaming platforms, and the exceptions it has made for the same rule-breaking behaviour Epic are exhibiting, the question of who is in the right here - even legally - is in question.

Charlotte Ebbutt, from our Commercial team, explains:

“The point here is that although Epic may have breached various T&Cs of Apple, the bigger question is whether such T&Cs are anticompetitive in the first place.

Whilst smaller companies or developers may have complained about Apple (and Google’s) practices and the control they have in relation to the distribution of apps in the past, Epic’s size and market influence means that it is in a position whereby it can afford to take Apple on.

With support from other big tech firms such as Spotify I don’t think this is going to be an issue which goes away over night.”

A question for all online marketplaces?

Charlotte’s comment raises a good point. As this is being framed as an ‘Epic Games v Apple’ fight, a quick glance at the news fails to identify that Google is also caught up in this issue. Certainly a big player in search, and with a large share of the smartphone market in the US and EU, Google is already itself mired in antitrust suits across the globe, and this Fortnite story is no exception.

It is also worth mentioning that Fortnite is still available on Xbox, Playstation and other gaming marketplaces which expect a similar cut of revenues, perhaps undermining Epic's stand against what they perceive to be anti-competitive behaviour by Apple and Google.

Seeing two huge online marketplaces making the news for anti-competitive practices though, and a third (Amazon) also involved in similar disputes of its own, makes me wonder - how can, and should, online marketplaces be more effectively regulated as we move into a new economic era post-COVID-19? And especially in the UK, which is set to leave the EU’s regulatory framework next year?

Online marketplaces have existed for some time now - Amazon and Ebay perhaps being the most obvious - but only now is the power they wield over the market being challenged. It would seem that if someone owns a marketplace they should be able to set the rules of selling through it, but when they quickly become the only marketplace in town for a specific thing, that’s a problem. And with more companies pivoting to online service in the wake of the pandemic, could we see more uncompetitive marketplaces springing up for certain sectors?

As Charlotte Ebbutt says, this isn’t going to go away overnight.

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