Facts

Before this lawsuit, plaintiff Epic Games Inc. offered its app Fortnite for distribution on defendant Apple Inc.'s App Store for iPhone and iPad. The app generated a profitable revenue stream for Epic Games. It was, however, required by contract to pay Apple a 30% commission on in-app purchases made through the app. Apple derives more revenue from gaming apps than from any other category in its App Store. Epic Games attempted to use Fortnite's popularity and profitability as leverage to force Apple to (1) allow Epic to distribute its apps outside of the App Store, without going through Apple's review process and without paying Apple's commission; and (2) allow Epic to offer alternative payment mechanisms in-app. When Apple refused, Epic Games covertly added its own in-app payment system into the Fortnite app, a move in violation of Apple's rules and which Epic Games admitted was a breach of its contract with Apple. Epic's in-app payment system allowed it to collect payments directly from players for features, such as new looks for their character, without paying the contractual commission owed to Apple. When Apple removed Fortnite from the App Store for Epic Games's breach of contract, Epic Games quickly filed suit.

PLAINTIFF'S CONTENTIONS: Epic generally contended that Apple, through its operating system and its App Store engaged in monopolistic behavior in violation of federal and state antitrust and California's unfair competition laws.

DEFENDANT'S CONTENTIONS: Apple denied all contentions. It argued that, here, the relevant market is the market for digital game transactions, and Apple does not have a monopoly in that market; that Apple had legitimate business justifications for all of the challenged conduct, including maintaining the safety, security, and privacy of its devices; and, that developers, including Epic Games, have many different options for distributing their software.

Result

The court ultimately decided first that the relevant market was digital mobile gaming transactions, not digital gaming transactions generally, as argued by Apple--nor as argued by Epic Games, Apple's own operating system as relating to the App Store. As far as Apple's conduct in this particular relevant market, the court found that Epic Games failed in its burden to demonstrate that Apple is an illegal monopolist under either federal or state laws. The court further noted that the final trial record did not include evidence or other critical factors such as barriers to entry nor conduct that stifled output or innovation in this relevant market. Second, the court concluded that while Apple was not liable for violations of the federal antitrust laws, Apple's anti-steering provisions, rules that barred developers from communicating with customers about alternative transaction platforms in-app or using customer information obtained through the app, were "unfair" under California's Unfair Competition Law. Therefore, the judge shaped a nationwide injunction eliminating those provisions for all app developers who distribute on Apple's App Store. Finally, the Court held that Epic Games breached the Developer Licensing Agreement, as Epic Games admitted. Therefore, Epic Games was ordered to pay Apple the commissions owed on revenue it collected, with interest, from its game's app users on Apple's operating system through Epic Game's direct payment system--approximately $6 million.