What’s the latest in the Epic Games v Apple stoush?

Sascha: [00:00:00] More from equity based media. This is the Dive, a podcast that says who said business news needs to be all business? I'm your host, Sascha Kelly. Today we're picking up a thread from our Fast three on Friday when we talked about how Spotify is now heading up a movement of tech companies looking at how Apple and Google are using their dominance in app stores and payments. Epic Games, the maker of Fortnite. They've been firmly embroiled in this same stoush. Already for years, Epic sued Apple in 2020 after the game introduced its own payment system into their game. Fortnite, which broke Apple's rules and ultimately got the company banned from the App Store. 

Audio Clip: [00:00:43] Apple has won in federal appeals court in a case where it's accused of running a monopoly. The Ninth Circuit Court of Appeals upholding a lower court's ruling. Apple is being sued by the maker of the game, Fortnite, which says developers are basically held hostage by the App Store and are forced to pay Apple's fees.

Sascha: [00:01:03] A ruling in the U.S. earlier this year in April decided EPIC had not shown that Apple had monopoly power. But despite this, this same fight is still ongoing here in Australia with linked legal proceedings against Google as well as parallel developer and customer class actions against the tech companies headed for a 16 week trial beginning next March in 2024. It's Monday, the 9th of October. And today I want to know what's the latest in this fight between Apple and Epic Games. I have the absolute pleasure of being joined today on the dive by legal and regulatory affairs correspondent Laurel Henning from Capital Brief. Laurel, welcome to the dive. 

Laurel: [00:01:45] Thanks, Sascha. It's great to be with you.

Sascha: [00:01:46] So Apple VP Kyle Andeer appeared before an Australian Senate committee this week and he had some interesting comments to make about Epic Games and Match Group. Epic has an antitrust dispute against Apple in Australia and we kind of touched on this in our previous episode of The Dive, where we're talking about the conversation about monopolies and duopolies that these tech giants have over markets that they operate in. Can you give me a little bit more flesh to the bone here and give us a bit of a lay of the land of what's going on? 

Laurel: [00:02:19] So I think the specific comment that we're talking about here is him saying it's Kyle Andeer saying that he feels like Epic Games Match Group and let's say a handful, five or six other well moneyed developers are basically seeking and these are his words, not mine to cut a special deal with Apple. So just to give you some more context as well of this, Sascha, he was appearing before the Australian Senate Economic References Committee and it has an ongoing inquiry into the influence of digital platforms on Australia's economy. And Apple was appearing alongside Amazon Web Services and Google all on the same morning. It was a big tech morning and Labour Senator Jess Walsh put the idea. This idea raised by actually Australia's competition regulator, the policy in its ongoing digital platforms inquiry, where the agency had said in Australia, Apple and Google each have around 50% of the market for the supply of mobile operating systems, which obviously then filters down to the supply of marketplaces because of the installation of the Google Play Store and the Apple App Store. 

Sascha: [00:03:30] Can I ask you really quickly, Laurel, when you say mobile operating systems, are you talking about mobile phones? 

Laurel: [00:03:37] Yes.

Sascha: [00:03:38] What does that mean? 

Laurel: [00:03:39] I'm saying basically your Apple iOS and your Google Android, your software, the software that runs your phones. 

Sascha: [00:03:48] Yeah. So it's really easy to see then how they're linking that with iOS and the Apple Store. The Apple App Store, because yeah, when you have that duopoly operating, then there's not a huge a lot of choice for a consumer to use, right. 

Laurel: [00:04:00] So that's what Welsh then puts to Andeer. She says, Do you accept this idea of an effective duopoly in Australia because in the Australian market you've got this essentially 50% cut and he just flat out rejects that. He says from a business perspective, Apple knows that its developers have many choices and he pointed as well to the US lawsuit that Epic had taken against Apple, which actually concluded that Epic hadn't managed to show that Apple has monopoly power. So then that's the link to the Australian lawsuit, because here Epic is arguing that Apple and also Google have misused their market power. And that case, as we know, section has been underway for quite a while and it's scheduled for a 16 week trial starting next March. 

Audio Clip: [00:04:44] The App Store isn't just a store, it's like a studio stocked with canvases, brushes and paint the tools that artists need to create their works. And it's a gallery where they can display and sell their creations. And that is how the App Store. Everyone went to build apps. 

Sascha: [00:05:02] So you just gave us the lay of the land with Apple VP and deus thoughts there. Let's move across to Epic's basic argument. Can you roll me through what they are presenting? [00:05:12][10.4]

Laurel: [00:05:13] Yes, they Epic's alleged in its lawsuit against Apple that the company has breached Australian competition law by misusing the market power that it's alleged that Apple has and that Apple's conduct has also harmed competition as exists, but also potentially future competition, because not only does it have that control, Epic would argue that the alleged control of the market for app stores and also in the market for in-app payments so that when you make a payment within an app on your phone. So this is going not only to the percentage cut taken by Apple for any in-app purchases you might make, but to the fact that Apple prevents developers from using their own in-app payment systems. I mean, you'll remember that that is exactly how Epic ended up in this situation. It was Epic's attempt to introduce its own in-app payment system to the Fortnite game that saw the game being pulled from not only the Apple App Store, but also Google Play stores. 

Audio Clip: [00:06:13] The price change was really intended for Fortnite mobile versions, so that Epic could undercut the Apple and Google Play stores. Now when you try and buy V-bucks on iOS or Android, you'll be given two options: buying directly from Epic or buying through the device's built in store. Only the direct purchase from EPIC has the new cheaper price. This is Epic's way of getting around Apple and Google royalties. 

Sascha: [00:06:36] And this is kind of where we had the conversation on our episode on the dive on Friday was we're talking about Spotify argument with Apple about the rollout of audiobooks and the fact that they had a lot of trouble kind of getting that in place because of Apple wanting to take 30% of a cut of the in-app payments. 

Laurel: [00:06:54] That's exactly what we're talking about here. Yeah. 

Sascha: [00:06:57] We're focusing a lot of this conversation on Apple. But you mentioned in that opening there that Google also has 50% of the market share. And how are they a part of the conversation here? 

Laurel: [00:07:08] So they're a part of this legal conversation because of the similar allegations that Epic has brought against Google in Australia. Again, it's all about misuse of market power. It's about stifling competition when it comes to app stores and in-app payments. But the allegations obviously going against a different company. Different evidence is being required, so hence the separate cases. But really from the get go, these cases have run in parallel in Australia and have even expanded now. So there's a class action dispute not only brought by developers but also brought by consumers alike. It's a real bumper legal fight in Australia. 

Sascha: [00:07:41] Because you mentioned earlier that it was going to be 16 weeks. I mean, I'm not a court reporter. This is your area of expertise. Is that quite unusual? Is that a lengthy amount of time?

Laurel: [00:07:50] Oh, cases really, really vary. It depends on the arguments, the cases, the companies. But yeah, that would be one of the longest ones that sat in on that special. 

Sascha: [00:08:00] I'll be right back with more of my conversation with Loral in just a moment. Welcome back to The Dive. Today I'm talking to legal and regulatory affairs correspondent Laurel Henning from Capital Brief. So you did mention in your answer before that there's been a similar case in the US where The New York Times reported that Apple emerged largely the victor. That was their words, not mine. I want to understand how this influences what's happening here in Australia. I understand that, you know, it's a completely different legal system and so therefore we can't make direct parallels. But what is the influence when you have these multinationals that operate in different markets and there's, you know, court cases happening simultaneously? How much can we kind of look at what's happened in the U.S. and assume or draw conclusions about what might happen to us? 

Laurel: [00:08:55] Yeah, I think it's a difficult one, Sascha, because from a consumer perspective, you're looking at this huge global company, Apple, and you would assume that businesses, global technology is global. And so these decisions and these lawsuits alike must have influence in multiple jurisdictions, regardless of where they take place. But I would say because this really is about Australian consumers and the case is ABC then pertaining to Australian law, The case has most impact really in the courtroom, like the US case has most of its impact in the courtroom in Australia. And then even then, as you point out, it's a different legal system. So from both a business and a legal perspective, I would see these matters as clearly related. But potentially in terms of the outcomes quite separate. But obviously it's hard to think of that when you look at these huge global companies. 

Sascha: [00:09:47] Yeah. And I guess the other prong to that is that we've seen the EU make decisions that have then had impacts globally, you know, like Apple changing their charging cords, for example, just to take a random example. That's been a decision that's happened in the EU marketplace that Apple's then decided to roll out globally.

Laurel: [00:10:04] Yeah, I think it would be naive to say there's no influence, but at the same time, Australia has its own legal system, its own economy, its own consumers that are protected in different ways. And so regulators and judges or courtrooms alike maintain that right to make a very different decision. And it happens not infrequently to other jurisdictions, but obviously what happens elsewhere will be in some way taken into account, whether it's just by reference in a courtroom or in terms of a business decision official. 

Sascha: [00:10:37] So let's kind of imagine ourselves in the future, as you said, like this bump up court case has come to an end. What does the future look like where Epic wins in their minds? What changes do they want to see happen? 

Laurel: [00:10:51] Well, this, I think, then comes full circle. Flash back to the start of our conversation when we were talking about the Senate committee. We've also talked about the intricacies of ongoing work in terms of its review of digital platforms. This is about so many angles in terms of how epic is tackling these issues. Now, I think most people expect damages. They expect payment and compensation when they hear about companies and legal disputes. But that's actually not part of Epic's case in Australia. The Fortnite developer has focussed largely on declarations. So what does that mean? Well, that's where you want a court to say, Yes, you're right, Epic. Apple and Google did receive their market power. They did it in X, Y and Z ways and now they must behave in different ways listed here in a judgement to rectify that. And Epic has also been really vocal in its support of industry codes of conduct, which the Australian Competition Regulator has proposed to government, and those would aim to respond to the policy's concerns over stealth preferencing on app marketplaces in terms of pre installation and interoperability as well. So that goes to that point of sort of tackling concerns from multiple or from multiple angles. Epic is also calling for measures to address trying self preferencing and pre installation, so they sort of overlap with each other. What Epic is saying to the regulator is needed, what the regulator has found and spend and is calling for from the government and EPIC is really going at this, as I've said from every angle, not just in the courtroom but in its written submissions to the policy and its oral evidence given to parliamentary reviews. Epic is pursuing what it wants and pursuing it hard. 

Sascha: [00:12:33] Yeah, Laurel, I think that's a good place to finish for today. For those who are interested in your reporting, where can they find more of what you're filing? 

Laurel: [00:12:42] I'll just go to capitalbrief.com and you will find me there. 

Sascha: [00:12:46] Excellent. Well, thank you so much for joining me on the dive today. 

Laurel: [00:12:49] Thanks, Sascha. It's been a pleasure. 

Sascha: [00:12:50] And a massive thank you to you for listening and supporting us. We have just found out we're in the shortlist for Best Business Podcast of the Year, nominated through the Australian Podcast Awards. It means the world to us that you listen to us every week. So a massive thank you from myself and everyone here at Equity Mates. We could not do it without you. That's the honest truth. So sincere. Thanks to you for listening to us. I'm going to be back in your feeds with a news story on Wednesday. Until next time.