Class action accuses Apple of monopoly in game market

Apple maintains monopoly power over the subscription-based mobile gaming market by blocking such services on its app store from competitors, a proposed class action alleged.

Piggybacking on congressional antitrust scrutiny and high-stakes legal battles over how the tech giant manages its marketplace for apps, iPhone users claimed the company extracts inflated fees and is able to maintain a lower quality of service, choice and innovation by foreclosing competition with Apple Arcade.

"If subscription-based mobile gaming service providers -- like Microsoft, Facebook, and Google -- cannot constrain Apple's market power, consumers are even more powerless to do so," plaintiffs' attorney Todd Seaver of Berman Tobacco wrote.

Apple did not immediately respond to requests for comment.

Of $62 billion spent on smartphone gaming in 2019, more than half occurred on Apple devices, according to the complaint. There are more than one billion iPhone users worldwide.

Apple Arcade, which costs $4.99 per month and is projected to have 12 million subscribers by the end of the year, launched in September 2019. Over 80% of app store revenue comes from mobile games.

The complaint filed in San Francisco federal court on Thursday detailed several ways Apple engages in anticompetitive conduct. Pistacchio v. Apple Inc., 20-cv-07034 (N.D. Cal., filed Oct. 8, 2020).

By imposing contractual restrictions on developers, Apple "exercises complete control over the App Store" to sell the only subscription-based, mobile gaming suite, plaintiffs' attorneys argued. They are required to distribute their apps solely through the app store and are prohibited from offering their own, third-party marketplaces.

"Apple has taken advantage of its dual role as both gatekeeper and market player, repeatedly abusing its monopoly power to prevent competition with Apple Arcade," Seaver wrote.

The tech giant is also alleged to abuse its app store guidelines to arbitrarily exclude apps that compete with its services. The complaint claimed that Apple can "create new rules, at any time, for any reason."

Apple's guidelines, for example, state that it can "reject apps for any content or behavior that we believe is over the line. What line, you ask? Well as a Supreme Court Justice once said, 'I'll know it when I see it.'"

Plaintiffs' attorneys cited Phillip Shoemaker, former Senior Director of App Store Review, explaining in an interview with congressional officials that Apple's senior executives would routinely find "pretextual reasons" to remove apps, "particularly when [they] competed with Apple services."

Shoemaker continued that even though Apple Arcade was a type of app "consistently disallowed from the store" when created by third-party developers, it was a welcome addition to the app store despite violating existing guidelines. The company's latest guideline revisions, he said, were rewritten "specifically [to] exclude Google Stadia," a rival Apple's subscription gaming service.

While iPhone users can download Google Stadia, Apple blocked them from being able to play games on their devices. It did the same with Facebook, forcing it to launch a stripped-down version of its gaming app.

Microsoft, meanwhile, completely abandoned offering a subscription-based mobile gaming service to iPhone users. A Microsoft spokesperson said at the time "Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services."

Apple has maintained it blocks competing apps to enforce privacy and security safeguards.

In response to the company's procompetitive justifications, plaintiffs' attorneys argued Apple allows Mac users to access several different distribution channels to download software applications on their computers. They said there's no reason the company cannot implement the same structure on iOS devices.

Apple is fighting several lawsuits, mostly in the Northern District of California, over alleged antitrust violations of how it manages its app store and in-app payment processing system.

In a contentious case between Epic Games and the tech giant, an Oakland federal judge ruled on Friday that Apple does not have to reinstate the game maker's massively popular Fortnite game onto its app store but cannot ban Unreal Engine, a popular piece of software it owns that is used by developers in many industries that require visual effects work.