Apple sent a letter to Epic Games last week informing the company that all Epic developer accounts and access to Apple development tools will be terminated on August 28 for failure to follow the App Store rules and direct payment options from Fortnite removed.
This would affect Fortnite, other Epic Games, and the Unreal Engine used by third-party developers. In response, Epic asked a Northern California court to prevent Apple from ceasing access to Epic’s “App Store” with a restraining order (TRO) and there was a trial on the matter today.
As the hearing began, Judge Yvonne Gonzalez Rogers, who oversees the case, said that she was inclined not to provide relief regarding games (including Fortnite) but that she would be inclined to provide relief regarding the Unreal Engine used by third party developers. Rogers said Epic could create the current situation with Fortnite and undo it by going back to the status quo. If their initial opinion is any indication of the outcome, we might see an injunction preventing Apple from restricting access to the Unreal Engine. However, Apple can terminate the Epic Games developer account.
Your customer created the situation. Your client does not come to this dish with clean hands. Epic took a strategic and calculated move to break and decided to break right before a new season. So in my opinion, if you cause harm yourself, you cannot suffer irreparable harm.
All Epic has to do is get it back to the status quo and no one will be harmed. And you can have a hearing in the spring. Flip the switch to August 3rd and bring everyone back to where they were.
Epic and Apple attorneys were both able to argue their positions, and given the judge’s initial inclinations, Epic mainly focused on arguing why its games should stay in the “App Store” with no changes while Apple is on Focused reasons why it should be able to block the Unreal Engine.
Epic’s attorney argued that asking Epic to surrender and get back to the status quo is tantamount to asking consumers to pay more than they should in a competitive environment and that doing so has antitrust implications. “We can’t go back to an anti-competitive contract,” said the Epic attorney. Epic also discussed the social aspects of the game, suggesting it was more than just a game and an important way of communicating during the pandemic.
Apple’s lawyer argued that if Fortnite and other games from the “App Store” were blocked, but the development of the Unreal Engine was allowed to continue, Epic could easily transfer its bad behavior to other companies. Apple also focused on potential harm to users and the need to enforce contracts, claiming that Epic broke Apple’s benefited “App Store” model and “put customers in the middle”. The judge said it sounded like Apple was going too far because Apple has separate contracts with Epic Games and Epic International for the Unreal Engine and one shouldn’t influence the other.
The contract with Epic International was not breached. Apple has reached beyond its only contract with Epic Games and is using its hard leverage. It’s slammed Epic Games with that additional penalty. It looks like retaliation to me. I don’t see any harm to Apple preventing you from compromising the Unreal Engine on this platform or the developer’s engine. It looks like overreach to me.
Epic argued that if blocked on Apple’s platforms, the Unreal Engine would be “destroyed” as developers use it for cross-platform development. Epic’s lawyers said Epic has already heard of developers abandoning the Unreal Engine due to the threat posed by Apple. Apple’s attorney, in turn, said that everything would be resolved if Epic followed the “App Store” rules and eliminated the direct payment option in Fortnite.
Towards the end of the meeting, the judge said the fight will not be won or lost with a temporary injunction as a long litigation is ahead and it is not a “slam dunk” for either company.
There is some level of lack of competition and high barriers to entry. However, there seems to be evidence that anyone who uses these types of platforms to sell games is charging 30%. Whether Epic likes it, the industry and not just Apple seem to be taking this into account. At the moment, Epic isn’t paying Apple anything. Epic itself charges third parties. That fight isn’t won or lost on a TRO, and Apple has a reputation for distancing itself. So it is not surprising that they acted as they did here, but as I said, they have achieved too much.
The judge plans to make a decision on the matter in the near future and let Apple and Epic know whether Apple can block Epic from all developer tools and accounts or whether a temporary injunction will prevent the Cupertino company from doing so.