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Epic Argues That Apple's Rules Are "Unlawful" and "Anticompetitive"

By Evan Niu, CFA – Oct 27, 2020 at 8:00AM

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The "Fortnite" maker fires back at the Mac maker in a fresh court filing.

Apple (AAPL 1.37%) and Fortnite maker Epic Games remain embroiled in an intensifying legal war over the App Store and its evolving set of rules. Over the weekend, Epic countered in a new court filing and argued that the Mac maker has a monopoly on iOS content distribution, highlighting the key antitrust criticism that regulators and lawmakers have been expressing in recent years.

Here's the latest development in the dispute.

Fortnite poster with characters holding weapons

Image source: Epic Games.

Apple's view is "misguided"

"When Epic took steps to allow consumers on iOS devices to make [in-app purchase] payments directly, it breached some of the contractual restrictions that Apple imposes on iOS developers," Epic wrote in the latest filing. "Epic did so because those contractual restrictions are unlawful."

Epic is referring to the direct payment system that it activated in August, which it knew would trigger swift retaliation from the Cupertino tech giant since Epic was bypassing the App Store and its 30% cut of digital sales. It was a drastic move, as approximately 73 million people play Fortnite exclusively on iOS, which was disclosed in a filing earlier this month. The developer is leveraging the popularity of Fortnite to take a principled stand against Apple, even if that means a large chunk of the player base gets caught in the crossfire.

"Epic [activated the direct payment system] believing, as it still does, that Apple's contractual restrictions are anticompetitive, denying choice to developers and consumers alike," Epic continues. "Epic did so to show that these restrictions are not a necessary part of the iOS ecosystem; they are just the tools Apple uses to maintain its monopoly."

Apple often cites privacy and security as primary justifications for its strict App Store guidelines. Epic notes that Apple has not alleged that Epic's direct payment system hurt security and privacy of users in any way, somewhat undermining that rationale.

Epic CEO Tim Sweeney argues that Apple's position is "misguided."

The digital content that Epic sells within Fortnite is the result of its own creative efforts, and Apple "has no right to the fruits of Epic's labor," the smaller company maintains.

A matter of perspective

Epic is smartly aligning its arguments with broader antitrust concerns. Earlier this month, the House Judiciary Committee released a report detailing the findings of a lengthy antitrust investigation into major tech corporations. Lawmakers similarly alleged that the App Store represents an illegal monopoly, but Apple defended itself by arguing that the App Store represents a small part of the overall market for all software distribution. It's a matter of perspective.

Epic says that if it fails to prove its antitrust claims when the case goes to trial next summer, it will "be responsible for any sums owed to Apple."

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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