With lawsuit, Epic Games seeks to exploit tech giant’s congressional woes

Epic Games has capitalized on a congressional antitrust probe into big tech by suing Apple and Google over their app store policies in claims that go to the heart of the lawmakers' concerns that they stifle competition.

Seizing upon bipartisan interest to reign in the tech giants, Epic Games advanced narratives raised in the investigation concerning Apple Inc. abusing its alleged monopoly power by offering developers no alternatives to its app store and Google extracting massive amounts of data in play store transactions to further its lucrative advertising business.

The maker of Fortnite, a massively popular online battle royale game, does not seek monetary damages in either of its lawsuits.

"Instead, Epic seeks injunctive relief that would deliver Google's broken promise: an open, competitive Android ecosystem for all users and industry participants," plaintiffs' attorney Paul Riehle of Faegre Drinker Biddle & Reath LLP wrote.

The complaint filed in San Francisco federal court on Thursday cites Rep. Hank Johnson's, D-Georgia, statement at the congressional hearing that "developers have no choice but to go along with [Apple's policies] or they must leave the App Store. That's an enormous amount of power."

Apple noted in a statement that Epic violated policies "applied equally to every developer and designed to keep the store safe for our users."

"The fact that their business interests now lead them to push for a special arrangement does not change the fact that these guidelines create a level playing field for all developers and make the store safe for all users," the statement read.

Alphabet Inc.-owned Google and plaintiffs' attorneys did not respond to requests for comment.

Epic is challenging Apple's and Google's control over their marketplaces for apps and their in-app payment systems. Epic Games, Inc. v. Google LLC, 20-cv-05671 (N.D. Cal., filed Aug. 13, 2020); Epic Games, Inc. v. Apple Inc., 20-cv-05640 (N.D. Cal., filed Aug. 13, 2020).

The legal action followed a calculated series of provocations against both of the companies designed to supplement Epic's allegations.

In a significant escalation by the one of the world's largest video game and software developers, Epic implemented on Thursday its own in-app payment system for virtual currency that bypassed the tech giants' standard 30% cut. It offered users a choice between paying $7.99 for 1,000 "v-bucks" by paying Epic directly or $9.99 for the same amount by processing the payment through the companies.

Flexing their alleged monopolies and market power, Apple and Google immediately removed Fortnite from their app stores, after which Epic filed the lawsuits and posted a protest video to its 350 million registered users mocking the iPhone maker's iconic "1984" ad challenging the International Business Machine's alleged monopoly over the computing technology market at the time.

"Epic Games has defied the App Store monopoly," the ad stated. "In retaliation, Apple is blocking Fortnite from a billion devices."

According to the complaint, Apple stifles competition by requiring developers to go through the app store, where it exacts a 30% tax on the sale of every app. It also requires those who sell digital in-app content to use its own payment processing option, which similarly carries a 30% fee.

Plaintiffs' attorneys argued Apple enforces its anticompetitive practices by preventing users from downloading other app stores or apps directly from websites and requiring all app developers to distribute their products solely through the app store, among other provisions.

While the claims against Google's in-app payment system is identical, the lawsuit against the Android developer slightly differs with respect to allegations over its play store because it allows users to download app stores or apps directly from developers' websites.

But Google, plaintiffs' attorneys claimed, maintains its monopoly through a series of contractual and technical barriers that make it difficult for users to do so. For example, Google forced OnePlus to renege on a deal with Epic to make its games available on its phones through an exclusive Epic Games app, which would have allowed users to install and update company games like Fortnite without the obstacles imposed by Google's operating system. It cited concerns over Epic having the ability to operate its mobile games while "bypassing the Google Play Store."

Echoing lawmakers' concerns about Google's data policy, the lawsuit also alleged that the company siphons massive amounts of personal information on its users through its in-app payment system.

"Google inserts itself as an intermediary between each seller and each buyer for every purchase of digital content within the Android ecosystem, collecting for itself the personal information of users, which Google then uses to give an anti-competitive edge to its own advertising services and mobile app development business," Riehle wrote.

Robins Kaplan LLP partner Aaron Sheanin, who is not involved in the case, emphasized that these lawsuits, unlike others against the companies, only seek injunctive relief. Plaintiffs will not have to prove monetary damages and standing to proceed as a class, he said.

"They're not seeking a jury trial," he said. "They're just seeking a court ruling."

The complaint, Sheanin continued, suggests Epic is solely focused on upending Apple's and Google's play store policies because it believes it will wind up recouping the costs of the litigation in the long run.

Fortnite was downloaded 2.4 million times in the last 30 days from Apple users, generating roughly $13 million for the company from in-app sales, according to data from Sensor Tower.