Apple Accuses Epic Games of 'Willful, Brazen, and Unlawful Conduct' in Countersuit Asking for Breach of Contract Damages

[amarcus]

But with multiple store fronts you still have that choice

I see your point but disagree. A device with multiple storefronts has weaknesses not present in a walled garden e.g. having to search in multiple places to find new apps, loss of unified parental controls, weakening of the iOS security model (despite best efforts Mac/PC still fall short), etc.

I currently have the choice to use a mobile device (Android) that allows multiple storefronts. However, I chose not to and don't want that decision taken away from me.

 

[Minato1990]

Apple has some ****ing nerve. Their iOS monopoly is falling fast and now they pull this little stunt. The world is not fooled Apple. Your app store stranglehold is coming apart and deservedly so.

That make me chuckle.

 

[brofkand]

I for one applaud Epic for sticking their neck out. I hope it comes to something.

I don't think there's a sound legal argument for Apple controlling all the e-commerce for 50% of the country's smartphones and tablets other than "that's how they wrote the EULA" which is certainly valid but will it hold up to scrutiny is the question.

 

[Carnegie]

People always make this out to be that Epic wants to be on the App Store and not pay the fees Apple charges, but I've always seen this as Epic wanting the ability to bypass the App Store altogether and foot the bill themselves.

Wanting side-loading and not wanting to pay fees while being on the app store are not the same thing.

Epic wants, among other things, to be able to put its own app store on Apple's App Store.

More immediately, Epic wants the court to order Apple to let Epic distribute Fortnite through the App Store while having its own method for IAP in Fortnite. So, at least for now, it does want to be able to use the App Store - and, of course, Apple's intellectual property - and not pay Apple the 30%.

 

[4jasontv]

I would disagree, if you sideload, Apple isn't paying for distributing the app, they aren't paying for app review, they aren't paying for anything about the app.

That's like saying Apple is footing the bill for Mac apps distributed outside of the app store... no, they aren't... people who buy the hardware are paying for the R&D costs of that hardware and software.

iPhones and iPads are not video game consoles sold at a loss with that recouped with future software sales, they're very expensive devices that make Apple huge amounts of profit with each one they sell.

Apple would have a much larger argument here if they sold iOS devices at a very minimal profit (or even a loss) and made their money off subscriptions and software sales.

I would disagree. iPhones and iPads are sold at a loss if they are expected to pay for all the R&D needed to build them to the standard Apple has made them so far. They need to pay for not only the devices hardware and OS but also for development tools, and for other services that add to the devices value. Like the Apple TV, which can not possibly make enough in hardware sales to pay for iteself and which relies on services like the App Store to pay for it.

Secondly, no one but Apple has a right to say what their costs and necessary profit margins are. If they demand a product make 3000% revenue than they deferentially need the 30% cut from app sales. And side-loading would take from that share. They don't have to justify their costs to argue that they lose money by people avoiding their app store.

 

[4jasontv]

I for one applaud Epic for sticking their neck out. I hope it comes to something.

Agreed. Hopefully it gets cut off.

 

[brofkand]

I see your point but disagree. A device with multiple storefronts has weaknesses not present in a walled garden e.g. having to search in multiple places to find new apps, loss of unified parental controls, weakening of the iOS security model (despite best efforts Mac/PC still fall short), etc.

I currently have the choice to use a mobile device (Android) that allows multiple storefronts. However, I chose not to and don't want that decision taken away from me.

macOS has parental controls even though you have always been able to install third party apps on it. And if iOS were truly secure - would there be a jailbreak exploit for nearly every version of the software?

Just because there is a way to load apps onto an Android phone outside of the Play store doesn't mean you have to use it - every Android phone I've ever touched shipped with that option disabled (although it was an easy thing to change of course). And should this be found in Epic's favor, you will not have to use Epic's store on your iPhone. It's all about giving people choice.

I would disagree. iPhones and iPads are sold at a loss if they are expected to pay for all the R&D needed to build them to the standard Apple has made them so far. They need to pay for not only the devices hardware and OS but also for development tools, and for other services that add to the devices value. Like the Apple TV, which can not possibly make enough in hardware sales to pay for iteself and which relies on services like the App Store to pay for it.

Secondly. no one but Apple has a right to say what their costs and necessary profit margins are. If they demand a product make 3000% revenue than they deferentially need the 30% cut from app sales. And side-loading would take from that share.

What evidence do you have to support the assertion that a nearly $2 trillion company sells their hero devices at a loss? Certainly their services are higher margin, but there's simply no evidence that they sell their hardware at a loss.

 

[DelayedGratificationGene]

Apple: If you don't want to make APIs, get out of the OS business
Sick and tired of this excuse that the App Store exists to pay for the OS, which I subsidized with the purchase of a $1200 phone.

If the App Store pays for everything Apple does, then stop charging me sky-high prices for the devices I buy.

Well no one is forcing u to buy an iPhone. Plenty of other choices if you are so sick and tired of it all

 

[4jasontv]

macOS has parental controls even though you have always been able to install third party apps on it.

Just because there is a way to load apps onto an Android phone outside of the Play store doesn't mean you have to use it - every Android phone I've ever touched shipped with that option disabled (although it was an easy thing to change of course). And should this be found in Epic's favor, you will not have to use Epic's store on your iPhone. It's all about giving people choice.



What evidence do you have to support the assertion that a nearly $2 trillion company sells their hero devices at a loss? Certainly their services are higher margin, but there's simply no evidence that they sell their hardware at a loss.

1. How much money someone has has no bearing on what they sell their wares for. Get that argument out of your head now.

2. It's a loss if it doesn't make what you want. It doesn't have to make less than you spend to justify the price. It just has to make less than you want.

3. I didn't say they sell the iPhone at a loss. They don't have to. I said they they have higher than most R&D costs and they have to make up not only the cost of what they sold but also what they didn't sell.

4. They also sell other things at a loss and it's paid for with the help of an App Store. The Apple TV doesn't pull it's own weight, but Apple supported it for years because they believed it added to the iOS ecosystem. Nor did the iPod HiFI system.

Why do people focus so much on one point and assume it's born entirely independently? That's a terrible business strategy.

 

[AuraSphere999999]

Steve Jobs directly stated that developers receive approximately 70% of the money from apps purchased as well as in-app purchases. What Epic chose to do basically dishonors Steve Jobs in some way.

 

[Carnegie]

I'll bet you can't actually define which laws you think are being broken here. Love to see you quote a District or Supreme Court case where this is clarified, or the legal statute in question.

I feel safe in this bet because you keep throwing around the word "monopoly" like it's some amazing term that proves your point.

I'll give you a hand: Apple vs Pystar.

I don't think the Pystar decision considered the tying of markets in an antitrust context. It considered them in a copyright abuse context - i.e., Pystar argued as a defense for its copyright infringement that Apple had abused its copyright. I'll have to pull up that decision to make sure.

That said, under antitrust precedents Apple could be found to have monopoly power in the iOS app distribution market. (Epic also argues that the IAP market is a separate antitrust market, which is possible but I think a tougher case to make.) It is possible to have monopoly power in a single brand market. There are certain showings that need to made to establish that such is a relevant antitrust market, but it can be done. (See, e.g., Eastman Kodak v Image Technical Services (1992)).

A relevant antitrust market can consist of an (single brand) aftermarket created by the sale of a company's products. And that company can have monopoly power in that aftermarket even if it doesn't have monopoly power in the primary market which gives rise to the aftermarket.

Also, Apple could be found to have used its legal monopoly relating to its intellectual property improperly to gain advantages in other markets.

To be clear, I don't think Apple should be found to have monopoly power in a relevant antitrust market or to have improperly used that power. But the way our antitrust laws work, it could be.

 

[dguisinger]

My point is that people saying a contract is not enforceable without having a court to decide is just not correct. As stated, all my family works for the same company that has immediate termination for breaching a non-compete contract. Yes, you are very welcome to go to the courts, but you cannot keep working at the company until they decide otherwise. Thus, a contract is enforceable without a court decision. You basically go to the court to overrule their actions. Getting evicted owning a pet in a non-pet apartment complex for example. You would essentially be having the court overrule their rules. But IN THE MEANTIME you are still evicted or fired.

Grasping at straws as usual

They can't take action against you such as taking your bank accounts without a court, aka suing, which you just said is an option. Thats called a COURT my friend. COURT. Get it yet? Up until that point, you are voluntarily complying with an agreement without it being validated or invalidated.

Yes, they can fire you. If they believe you violated your side of an agreement, they can violate their side assuming it to no longer be in effect - or take the actions they have available to them within your relationship (being an employee) and fire you. Again, its not tested until it reaches court. In court, it could be found that firing is illegal.

Likewise, in a customer/vendor arrangement, if a customer breaks a contract, the vendor can CHOOSE not to do business with the customer. That isn't legal enforcement, that is managing their own business.

 

[brofkand]

1. How much money someone has has no bearing on what they sell their wares for. Get that argument out of your head now.

2. It's a loss if it doesn't make what you want. It doesn't have to make less than you spend to justify the price. It just has to make less than you want.

3. I didn't say they sell the iPhone at a loss. They don't have to. I said they they have higher than most R&D costs and they have to make up not only the cost of what they sold but also what they didn't sell.

4. They also sell other things at a loss and it's paid for with the help of an App Store. The Apple TV doesn't pull it's own weight, but Apple supported it for years because they believed it added to the iOS ecosystem. Nor did the iPod HiFI system.

Why do people focus so much on one point and assume it's born entirely independently? That's a terrible business strategy.

My point is you have no evidence of that. Sure they want to make more money on services, as the smartphone market has matured that's their best chance at growing the balance sheet - but to say that services subsidize iPhone's selling price, I don't see any evidence of that. If Apple were selling their devices at cost (like Amazon does with their Fire devices) maybe you could make the argument, but we're talking about incredibly high priced and profitable devices. Does the Apple TV only cost $30 like Amazon's TV stick? Absolutely not.

 

[grundoon]

Wow, feels like MacRumors dropped the ball on this, in failing to report the actual punitive request.

scene: Tim Sweeney reads all the way to the end of the filing...

"and," [because Epic can't be trusted] "(c) the removal of IAP as an available payment mechanism for in-app purchases through any iOS apps, including Fortnite."

"Oh sh— did not see that coming."

 

[Meñito]

Apple says that Epic's lawsuit is "nothing more than a basic disagreement over money,"

All is over money, always.

 

[4jasontv]

My point is you have no evidence of that. Sure they want to make more money on services, as the smartphone market has matured that's their best chance at growing the balance sheet - but to say that services subsidize iPhone's selling price, I don't see any evidence of that. If Apple were selling their devices at cost (like Amazon does with their Fire devices) maybe you could make the argument, but we're talking about incredibly high priced and profitable devices. Does the Apple TV only cost $30 like Amazon's TV stick? Absolutely not.

Of course I have proof. All income subsidizes expenses. What I am not saying is that money from X pays for Y. That's because it doesn't matter. It all goes into a pot before it pays for things. Again. Apple has to pay for the R&D to build devices. Hundreds of designs built and scraped still have to be paid for.

Stop comparing one product and demanding it's cost has to justify its existence. It's clear that isn't how Apple operates. Amazon works that way because that's how they choose to operate. And as a result we get the Fire Stick. A $30 product that feels like a $5 product.

 

[Carnegie]

I don't think it would be quite that easy. From what I got from the lawsuit, the direct payment method they used is simply an embedded web link to an extra payment processor, not any kind fancy kind of executable file. Similar to how some apps embed webpage feeds.

My understanding, based on filings from both Epic and Apple, is that the functionality that allowed both payment methods to be offered was in the version of the Fortnite app (13.40) which was submitted to Apple on August 3rd. Epic had the app check with the server whenever it started to see whether that functionality should be activated - i.e., whether the second payment option should be shown to users. (Epic says that the Fortnite has always checked on start up to see if there was content to download or if existing functionality should be made accessible.)

Starting on August 13th, Epic's servers effectively told the Fortnite app to make both payment methods available.

 

[bousozoku]

Microsoft did that once, the govt fined them 1M a day for giving away windows explorer for free. They ended up paying over 200M so your statement isn't always true. Apple needs to tread lightly bc if the govt feels they are a monopoly. They will break them up like they did with AT&T back then.

The U.S. government made Apple divest themselves of their own software. That's how Claris ended up with Apple's software.

 

[Brandon916]

Apple won't lose an Antitrust Battle with Epic over Pricing.

But, they could lose an Antitrust Battle with other companies over "App Discovery".

In fact, they could lose complete control of the App Store over it !

And if that were to happen, then Apple would ALSO lose control over Pricing, as control of that would either go to the Govt (defining an App Store as a Utility, which would be best), OR to whoever runs / controls the new iOS App Stores !

IMO, there absolutely should be Other / Alternative iOS App Stores !

But, they must be run / controlled by third-party companies that have NO ties to third-party apps, & the penalty MUST be severe for any of them Playing Favorites.

Trusted, Verified, & Transparent should be the Goal !

Apple's existing App Store is Trusted (by the General Public), but it is NOT Verified, & certainly NOT Transparent !

Would love to see my U.S. Congress FORCE AAPL to disclose per-Qtr, per-Category Revenue Numbers for the entire history of the App Store (here in the States) !

That alone would do magical things INSIDE Apple !

It would force Apple to get their act together OUTSIDE of Game Apps & Little Kid Apps, where they have focused 99% of their efforts !!!

Make NO mistake, if Apple were to disclose per-Qtr, per-Category Revenue Numbers for the entire history of the App Store (here in the States), it would have the single BIGGEST impact (in the App Store) of anything they OR anybody else could do !

The stock would take a 20% hit, but it would probably quickly Recover if Apple detailed to the General Public how they are addressing the current limitations.

I'm all for the android route where other publishers can setup their own store. Competition is great and good for consumers. That has been proven to be fact. This way if Trump ever bans WhatsApp, they won't lose the Chinese market. The end user can still sideload the app.

 

[techfreak23]

Personally, I’m team Epic. I don’t think device makers like Apple, Sony, or Microsoft should also be allowed exclusive access to be the only storefront. It’s anti competitive.

So if you want to spend billions on developing a platform and customer base over many years, you would be okay with some entity telling you that you have to let 3rd parties run rampant and not let you have control of said platform? If you license your software which then creates a majority share in an industry, then sure the argument can be made there. The difference between Apple and Google/Microsoft is that Apple license their software to NO ONE and they don’t have dominant market share. They package the hardware and software as one product, whereas Google and Microsoft license their software to other vendors. People don’t seem to understand that very important distinction.

 

[TiggrToo]

To be clear, I don't think Apple should be found to have monopoly power in a relevant antitrust market or to have improperly used that power. But the way our antitrust laws work, it could be.

As SCOTUS ruled in Pacific Bell Telephone Co. v. linkLine Communications, there are two tests that need to be applied in Antitrust rules: Trinko (Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP) and Brooke (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp).

Of the two I personally feel Brooke is the more important of the two as it states that the accused has to be found operating predatory pricing - hence Apple reducing their fees could actually land them in peril of failing the Brooke Test, unless it's done as part of an overall industry reduction.

 

[4jasontv]

As SCOTUS ruled in Pacific Bell Telephone Co. v. linkLine Communications, there are two tests that need to be applied in Antitrust rules: Trinko (Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP) and Brooke (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp).

Of the two I personally feel Brooke is the more important of the two as it states that the accused has to be found operating predatory pricing - hence Apple reducing their fees could actually land them in peril of failing the Brooke Test, unless it's done as part of an overall industry reduction.

Will you clarify what you mean by predatory pricing? To me selling things to children that have historically been free unlockable components of games is predatory. Charging children money to see ads is predatory. Offering a special contract to an adult who has more to offer you than others seems totally reasonable.

 

[TiggrToo]

The U.S. government made Apple divest themselves of their own software. That's how Claris ended up with Apple's software.

Huh? Please provide Citations they the Government forced this.

I was under the impression Apple chose to do this in an initial attempt to split the hardware and software divisions apart.

Also, last I checked, Claris was a wholly owned subsidiary of Apple.

 

[deevey]

My point is you have no evidence of that. Sure they want to make more money on services, as the smartphone market has matured that's their best chance at growing the balance sheet - but to say that services subsidize iPhone's selling price, I don't see any evidence of that. If Apple were selling their devices at cost (like Amazon does with their Fire devices) maybe you could make the argument, but we're talking about incredibly high priced and profitable devices. Does the Apple TV only cost $30 like Amazon's TV stick? Absolutely not.

The manufacture cost of an ATV 4k is around $180 excluding marketing, R&D, Shipping, Taxes ...
The manufacture cost of the HomePod is believed to be in the $220 range, again before marketing, R&D, Shipping, Taxes..

So yes, Apple do sell these products at cost just like the Amazon Stick. But just happens its a much higher end product and not generic off-the-shelf components with a customised Opensource OS

You think that courts should step in and set an upper ceiling on profit margins ? Should all products in the world carry this maximum wholesale to retail ratio ?

 

[TiggrToo]

Will you clarify what you mean by predatory pricing? To me selling things to children that have historically been free unlockable components of games is predatory. Charging children money to see ads is predatory. Offering a special contract to an adult who has more to offer you than others seems totally reasonable.

Predatory or Below-Cost Pricing

Can prices ever be "too low?" The short answer is yes, but not very often. Generally, low prices benefit consumers.

www.ftc.gov