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Tech Anti-Trust Fight is More Than a Game

Tim Sweeney, the Colossus of Cary, is fighting even bigger foes – Apple and Google. The multibillionaire chief executive of Epic Games has opened a multi-front war on the tribute that app developers are forced to pay to reach smartphone users.

On the first front, Epic offered app users a less expensive way to pay for in-game weapons in its mega-popular game Fortnite, incurring the wrath of the giants who siphon money from these transactions.  According to the Wall Street Journal, “Apple and Google pulled “Fortnite” from their app stores Thursday after Mr. Sweeney’s Epic rolled out a new way of making in-game purchases that circumvent the 30% cut the tech giants take from digital transactions within apps—a percentage established in Apple’s case more than a decade ago and some developers have called to reduce for years.”

On the second front, Epic Games quickly filed a lawsuit against Apple, calling the smartphone/tablet manufacturer “the behemoth seeking to control markets, block competition, and stifle innovation.”  Epic even illustrated it position in the conflict with a terrific parody of Apple’s famous 1984 commercial, where, in 2020 Apple is now the IBM Big Brother dominant oppressor.

It doesn’t help that Apple has truly become the IBM or Microsoft-style market presence Steve Jobs used to love fighting – a financial giant, making most of its money by leveraging long-established dominant market positions.  In 2020, rather than inventing new insanely great products, Apple makes billions draining 30% of the revenue from developers operating through its app store.

Apple requires that all apps for its phone customers be purchased through its Apple App Store, a policy decried by the U.S. Supreme Court as a violation of anti-trust laws. According to the Wall Street Journal, Apple’s “Services revenue—which includes the App Store, plus Apple Music and AppleCare, among other businesses—jumped 15% to $13.16 billion last quarter.”

Google yanked Epic’s app from the Android stores as well. Epic reacted by immediately filing suit against Google, claiming the search company is “using its size to do evil upon competitors, innovators, customers, and users in a slew of markets it has grown to monopolize.” Sweeney is uniquely situated to fight these industry leaders as his games have massive consumer followings, Epic has several important income streams like the Unreal Engine for developing games, and the company is closely held and so less vulnerable to public and shareholder pressures.

The other front in this war will be fought in new retail business models. Epic Games opened its own digital computer game store in 2018, collecting 12% of sales revenue from developers. Currently, this store deals primarily in console-based games, competing with online game markets Steam and itch.io. Don’t be surprised if Epic makes a move to smartphone apps as well, breaking the current duopoly, opening up a new revenue stream for Epic, and providing access to new markets at a lower price for game developers. Sweeney may need help from courts or Congress to achieve this goal.

Epic Games has already forced important sandbox-busting changes in the gaming industry, leveraging its leading Fortnite game to force big game console manufacturers like Sony to open its formerly locked platform to cross-device play.  As Polygon wrote about this battle, “Sony has given in, because Fortnite is now dominant. You can play it on Xbox One, Nintendo Switch, PlayStation 4, PC, iOS devices, or on certain Android devices. And anyone can either play against the community on their device, or join the huge pool of players in cross-platform play. Only Minecraft rivals it in terms of games that have become part of the gaming monoculture.”

With increasing calls for regulation of big tech and with Congress grilling the tech giant CEOs, Sweeney may have found the perfect time to play the anti-trust card against his rivals. All of Sweeney’’s time playing strategy games may pay off if this war turns against Apple and Google.

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume X, Number 231

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About this Author

Theodore Claypoole, Intellectual Property Attorney, Womble Carlyle, private sector lawyer, data breach legal counsel, software development law
Senior Partner

As a Partner of the Firm’s Intellectual Property Practice Group, Ted leads the firm’s IP Transaction Team, as well as data breach incident response teams in the public and private sectors. Ted addressed information security risk management, and cross-border data transfer issue, including those involving the European Union and the Data Protection Safe Harbor. He also negotiates and prepares business process outsourcing, distribution, branding, software development, hosted application and electronic commerce agreements for all types of companies.

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