Maker of Fortnite says in lawsuit that by controlling in-app purchases, the tech companies are restricting competition and innovation
Sat 16 Mar 2024 20.00 CET
Apple’s Control Over In-App Purchases Tested in Australian Court
When Apple’s first iPhone launched in 2007, all its apps were made by Apple. However, Steve Jobs, the co-founder of Apple, was initially skeptical about allowing third-party developers to create apps for the iPhone. It was only after the launch of the App Store in 2008 that Apple gave in to the pressure to allow third-party apps on its platform, but with strict control over what was allowed.
In a case currently being heard in Melbourne’s federal court, the control of Apple and Google over their app stores is being scrutinized. The case involves Epic Games, the maker of Fortnite, which has been engaged in a legal battle against Apple and Google over the alleged misuse of market power. Epic Games claims that these tech giants are restricting competition and innovation by controlling in-app purchases and app distribution.
Australian Cases Put on Hold Pending US Outcome
The Australian cases against Apple and Google were put on hold in April 2021, awaiting the outcome of similar cases in the United States. Epic Games had taken legal action against both companies, accusing them of misusing their market power. The cases have now been combined in Australia into a single litigation.
Different Platforms, Similar Cases
While Apple’s iOS and App Store operate as a closed ecosystem, tightly controlled by Apple, Google’s Android system offers more openness. Google allows the “sideloading” of apps and permits other app stores to exist. However, both companies charge fees for transactions in their app stores, with Google Play’s fees varying based on developers’ annual revenue and Apple’s fees based on a tier system.
Epic Games argues that it should be able to offer its own app store as competition to Apple’s App Store and have alternative payment options within their apps. The lawsuit also alleges that Google’s actions have harmed app developers and consumers in Australia by limiting app distribution and payment options.
Outcomes of US Cases
Last year, Epic Games lost its antitrust case against Apple, but it won its case against Google. The US jury found Google’s practice of tying the Google Play Store to in-app payments as illegal and determined that the company had engaged in anti-competitive agreements.
In contrast, the judge in the Apple case considered mobile gaming transactions specifically and ruled that Apple was not a monopoly. The judge acknowledged Apple’s competition with rival platforms and supported Apple’s concern regarding the security implications of opening up the App Store.
Parallel Case in Australia
Now, Apple is facing a similar case in Australia, where it argues that the principles underlying Australian competition law are similar to those in US antitrust laws. The company asserts that Epic Games, despite portraying itself as a David fighting against Goliath, is mainly seeking to increase profits at the expense of iPhone users’ security.
Google, on the other hand, contends that it provides more choices and openness compared to other platforms. It emphasizes the availability of alternative app stores and permissions for sideloading apps while maintaining user security.
Implications and Possible Changes to App Stores
The outcome of the ongoing case in Australia may have significant implications for Apple and Google. In the European Union, Apple was compelled to make changes to its App Store, including allowing alternate payment options and marketplaces, after the implementation of the Digital Markets Act. This may signal a need for similar changes in other countries, including Australia.
Epic Games’ case could potentially challenge the current app store monopoly held by Apple and Google, ultimately leading to more competition and better choices for developers and consumers. However, it is expected that the resolution of the case and any subsequent appeals will extend beyond this year.
Apple’s recent changes in the European Union might serve as a stepping stone for further market reforms, potentially leading to a more open and competitive app store ecosystem.
