Epic CEO: I decided to sue Apple due to the ‘negative impact’ of the App Store

Epic Games Inc. CEO Tim Sweeney said he reluctantly decided to sue Apple Inc. despite his respect for the company and its products, as it launched one of the largest high-profile court cases on Monday. technology. to conclude on the negative impact of Apple ”and its economic damage to Epic and other developers, Sweeney said on the opening day of Epic’s lawsuit against Apple AAPL, + 0.82% in federal court in Oakland, California. Epic claims that Apple extracts money from developers by abusing their market power through its App Store; Apple claims that Epic violated its contract.

“Apple’s policies have prevented us from implementing the future we wanted in Fortnite,” said Sweeney, the first witness in what should be a three-week trial. “I support Apple’s right to offer a purchasing system. It’s about the ability to offer a competitive purchasing system for developers to choose from. ”Sweeney denied that the lawsuit was motivated by less interest in the popular video game“ Fortnite, ”when he was pressured by an Apple lawyer during a cross-examination. When pressed further if Epic had trouble paying a 30% commission on other platforms, Sweeney said he wanted Apple to influence others to lower their fees. Apple’s stifling policies with its App Store underscore the difficulties they face. developers on the proprietary digital platform, according to Sweeney. Sweeney’s hesitant and mumbling testimony highlighted a difficult first day in court for Epic, in which he hoped to make a strong first impression. But a problem with Sweeney’s microphone and some difficulty on his part explaining the momentum of the lawsuit did not help. Sweeney, who could recover in testimony tomorrow, was also seen I was overwhelmed with thankless questions like “What is a console?” that did not advance Epic’s case. It wasn’t entirely Sweeney’s fault. The trial got off to an unfavorable start when two public lines and one press line experienced technical difficulties, delaying their start by more than 20 minutes. The mute feature on the public lines did not work, turning both into glorified party lines of players shouting “Epic Games!” and “Fortnite for free!” Read more: Apple v. Epic: What to Expect from a Lawsuit That Could Change Antitrust Law and the Mobile App Ecosystem The Stake is Nothing Less Than Billions of Dollars for Thousands of Mobile Developers, Many of whom are Relying heavily on the App Store sell their products, but consider Apple’s 15% to 30% commission onerous. Their dispute has spread abroad, where the European Commission charged last week that Apple’s restrictions on developers unfairly influenced the music streaming market following a complaint from Spotify Technology SPOT, -1.76% in 2019 which is parallel to those of Epic. Two competing narratives emerged in the early hours of the trial: While Epic insists it was forced to take legal action against Apple for what it claims are crippling business conditions, Apple argues that Epic is seeking an unfair advantage over thousands of other developers in the App Store to maximize revenue. Apple repeatedly mentioned many other gaming platforms that charge a similar commission, some of them used by Epic to promote their products. Apple’s monopolistic behavior was helped in large part by a digital “walled garden” that locked up developers and consumers, Epic attorney Katherine Forrest said in the company’s opening statement to begin the trial Monday. The anticompetitive attitude began with the late Apple co-founder Steve Jobs, argued, and flourished through the current executive team of the company’s CEO, Tim Cook; Eddy Cue, Senior Vice President of Internet Software and Services; Craig Federighi, Apple’s senior vice president of software engineering; and others. “Epic finally said enough” by “taking on the biggest company in the world,” Forrest said. Epic argued that Apple’s iOS need not be a “walled garden” because it is based on the more open MacOS, which allows consumers to download applications from other publishers. Therefore, Epic wants iOS users to be able to download directly from the Epic Games Store. “The facts will support an iOS app distribution market and a totally separate iOS in-app payment solutions market,” he said. “Apple’s repeated claims that we have never raised prices are false,” Forrest said. “Before 2009, developers didn’t have to pay Apple anything for purchases, and after 2009 [when the App Store was already profitable, with a 77.8% profit margin] they did it. Before 2011, they didn’t have to pay 30% for subscriptions, after 2011, they did. “(Apple disputes the 77.8% figure. Last month, Kyle Andeer, Apple’s head of compliance offering , told Congress that the company does not report profit and loss for the App Store.) “There is a name for companies that set prices regardless of cost: monopoly,” Forrest said. It concluded that the evidence “will show that iOS is much bigger and much more ingrained in all respects that matter than the Kodak copier in question in the market-leading single-brand case. [in 1992] it once was. “In addition, it compared the iPhone maker to a car dealer that receives a 30% commission on the transaction every time a car owner buys gas. Apple attorney Karen Dunn responded that the Epic’s lawsuit is a “fundamental assault on Apple’s secure and integrated ecosystem, which is what has made all that growth possible. Epic, a $ 28 billion company, has decided it no longer wants to pay for Apple’s innovations. So Epic is here, demanding that this court force Apple to enter their App Store, untrusted and untrusted apps and app stores, which is something Apple has never done. ” (Sweeney later confirmed under cross-examination that he is the majority shareholder of Epic Games.) Apple didn’t create a secure, integrated ecosystem to keep people out, but to “invite developers in,” Dunn said in Apple’s opening statement. “Epic requires this court to overturn Apple’s fundamental design decisions” to protect the security, privacy, reliability and quality that customers have come to expect from Apple, Dunn said. “You’ll even hear Tim Sweeney acknowledge that privacy and security are competitive differentiators for Apple – it gives consumers the choice between the iPhone and its competitors,” Dunn said. “And that choice is made possible by the same App Store rules that Epic requires this court to get rid of.” One of the main points of his presentation focused on “Project Freedom,” an internal scheme against Epic’s mobile platform fees to break away from the App Store and negotiate a side deal with Apple to avoid commission fees. “But Apple disagreed,” Dunn said. “Apple refused to compromise the equitable application of its guidelines, so Epic went one step further, willingly and flagrantly in breach of its agreements with Apple. Epic has stipulated your breach of contract, and your conduct in the summer of 2020 will defeat all your affirmative defenses. “While Epic was negotiating with Apple, it had devised its own payment system, or” hot fix, “to bypass the App Store and hinted at Microsoft Corp. MSFT, -0.13%, Dunn said. Another misnomer for Epic is the unfairness of Apple’s 30% commission, an industry standard already charged by Google‘s parent company Alphabet. Inc. GOOGL, -0.44% GOOG, -0.62%, Samsung Electronics Co. Ltd. 005930, + 0.25%, Microsoft, Amazon. Com Inc. AMZN, -2.33%, and others, according to Dunn’s Steam platform, he continued, from Valve Corp., helped set the 30% standard for digital revenue sharing in 2003. The App Store launched in 2008. According to Apple, Fortnite has made $ 6 billion on PlayStation. , $ 3.5 billion on Xbox, and much less through Apple, yet he is not opposed to their similar commission rates. “The market proposed by E pic is too narrow because there are many, many platforms where consumers and developers participate in gaming transactions, ”he said. “PC, Mac, iPhone, Android, consoles like Xbox, PlayStation and Switch. Even within devices, there are sometimes multiple options. “” Epic’s proposed single-brand market is also too narrow because consumers have multiple homes, “Dunn said.” They use more than one device to play games. This is one of The results of a survey by our survey expert: found that 95% of iOS users regularly use devices other than their iOS devices, such as PC, Mac, or a game console. ” In addition, he said that as more developers and users participate in the App Store, Apple’s commissions for gaming applications were 8.1% in 2019 and 4.7% for all applications. About 84% of developers offer apps for free, he added. “Epic speculates about a world in which Apple was a different company and asks this court to make a big bet that this world is better than the one we live in. But it is not,” concluded Dunn. “The result for consumers and developers will be: Less security. Less privacy. Lower reliability. Low quality. Less choice. All the things that antitrust laws seek to protect. ”