Apple last week sent a letter to Epic Games letting the company know that if it does not comply with the App Store rules and remove direct payment options from Fortnite, that all of Epic’s developer accounts and access to Apple development tools will be terminated on August 28.
That would impact Fortnite, other Epic Games, and the Unreal Engine used by third-party developers. Epic in response asked a Northern California court to stop Apple from ending Epic’s App Store access with a temporary restraining order (TRO), and there was a court hearing on the matter today.
Right when the hearing kicked off, Judge Yvonne Gonzalez Rogers, who is overseeing the case, said that after reviewing the details over the weekend, she was inclined to not grant relief with respect to games (including Fortnite) but that she was inclined to grant relief with respect to the Unreal Engine used by third-party developers, primarily because Epic created the current situation with Fortnite and could undo it by reverting to the status quo.
Your client created the situation. Your client doesn’t come to this court with clean hands. Epic made a strategically and calculated move to breach, and decided to breach right before a new season. So in my view, you cannot have irreparable harm when you create a harm yourself.
All Epic has to do is take it back to the status quo and no one suffers any harm. And you can have a trial date in the spring. Flip the switch to the way it was August 3rd and return everybody back to where they were.
Lawyers for Epic and Apple were both able to argue their positions, and given the initial inclinations of the judge, Epic largely focused on arguing why its games should be able to remain in the App Store without changes, while Apple focused on reasons why it should be able to block the Unreal Engine.
Epic’s lawyer’s argued that asking Epic to capitulate and go back to the status quo is akin to “asking us to require consumers to pay more than they should in a competitive environment” and that it had antitrust implications. “We can’t go back into an anticompetitive contract,” said Epic’s lawyer. Epic also argued about the social aspects of the game, suggesting it was more than a mere game and a vital way to communicate during the pandemic.
Apple’s lawyer argued that if Fortnite and other games are blocked from the App Store but development of the Unreal Engine is allowed to continue, Epic could just transfer its bad behavior to other entities. Apple also focused on potential harm to users and the need to enforce contracts, claiming that Epic broke Apple’s App Store model, profited by it, and “placed customers in the middle.” The judge said that it sounded like Apple was overreaching because Apple has separate contracts with Epic Games and Epic International for the Unreal Engine and one should not impact the other.
The contract with Epic International has not been breached. Apple reached beyond its one contract with Epic Games and is using its hard leverage. It’s slammed Epic Games with this additional penalty. It does to me look retaliatory. I don’t see any harm to Apple to restrain you from not impacting the Unreal Engine on that platform or the developer’s engine. It looks like overreach to me.
Epic argued that the Unreal Engine would be “destroyed” if it’s blocked on Apple’s platforms because developers use it for cross platform development. Epic’s lawyers said that Epic has already heard from developers who are abandoning the Unreal Engine due to Apple’s threat. Apple’s lawyer in turn said that everything would be resolved if Epic falls in line with the App Store rules and eliminates the direct payment option in Fortnite.
Toward the end of the meeting, the judge said that the battle isn’t going to be won or lost with a temporary restraining order, as there is a long legal fight to come, and it’s not a “slam dunk” for either company.
There’s some measure of a lack of competition and high barriers to market entry. That said, there appears to be evidence that everyone that uses these kind of platforms to sell games is charging 30%. Whether Epic likes it, the industry and not just Apple seem to be charging that. Right now, Epic is paying Apple nothing. Epic itself charges third parties. This battle won’t be won or lost on a TRO, and Apple has a reputation of going the distance so it’s not surprising they acted the way they did here, but like I said, they overreached.
The judge plans to provide a ruling on the issue in the near future, letting Apple and Epic know whether Apple will be allowed to block Epic from all developer tools and accounts, or whether a temporary restraining order will prevent the Cupertino company from doing so.