Last year Epic Games began legal proceedings against Apple in Australia over Fortnite being banned from the App Store. Epic argues that this goes against Australian consumer law, but Apple is now trying to prevent the case from happening on the grounds of legal jurisdiction.
On Tuesday the Federal Court of Australia had an interlocutory hearing regarding the Apple vs Epic Games case. This was in response to Apple requesting a permanent stay on the case. If granted this would mean Epic would not be able to proceed with its case against Apple within Australia.
What became immediately evident in the hearing is that this case is quite complicated.
Remind me what is happening with Epic Games and Apple
Epic Games first began legal proceedings against Apple and Google in August 2020 in the United States.
Both companies removed Fortnite from their respective app stores after Epic allowed players to purchase Fortnite’s in-game currency directly from the mobile apps on iOS and Android.
This meant skipping the regular in-app payment method that Apple gets a 30 per cent cut of. Epic further enticed players to pay directly by offering a 20 per cent discount on this payment method.
Once the game was removed, Epic filed lawsuits against Apple and Google for “anti-competitive restrictions”. This is also known as the Apple Tax, which has been gaining negative attention since 2020.
What does this have to do with Australia?
Three months later Epic Games sued Apple in Australia. It states that the company’s refusal to allow alternative payment options on its platforms, such as the App Store, is a breach of Australian consumer law.
“This is much bigger than Epic versus Apple – it goes to the heart of whether consumers and creators can do business together directly on mobile platforms or are forced to use monopoly channels against wishes and interests,” Epic founder and CEO, Tim Sweeney, said at the time.
“Apple were pioneers of the personal computer, and [its] original products were open platforms. Anyone could write code, anyone could release software and users could install software from sources of their choosing. Today’s digital platforms must be similarly open to fair competition.”
This complaint comes off the back of a similar argument that Epic has made in the US.
In response Apple reiterated the stance it had publicly stated since August — App Store policy is there for customer safety and Epic’s payment model was not approved.
“For twelve years, the App Store has helped developers turn their brightest ideas into apps that change the world. Our priorities have always been to provide customers with a safe and trusted place to download software and to apply the rules equally to all developers,” Apple said in a statement to Gizmodo Australia at the time.
“Epic has been one of the most successful developers on the App Store, growing into a multibillion dollar business that reaches millions of iOS customers around the world, including Australia. In ways a judge has described as deceptive and clandestine, Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines that apply equally to every developer and protect customers. Their reckless behaviour made pawns of customers, and we look forward to making this clear to Australian courts.”
Apple tries to get the Epic case thrown out of the Australian Federal Court
It seems that since it made those statements, Apple has changed its tune slightly. At least for now.
The company is attempting for the Epic vs Apple case in Australia to be granted a permanent stay on the grounds that Epic was under contractual obligation to only litigate in California due to exclusive jurisdiction clauses.
If not a permanent stay, the company is hoping to at least get a temporary one. This would mean that the case would not be brought before the Federal Court again until after the case in California is resolved.
What Apple is arguing
A lot of arguments get made in a full day at court, but this the condensed version of what is being argued by both sides.
According to Apple’s legal counsel, Epic Games repeatedly entered into commercial arrangements with Apple over several years. Most recently Epic agreed to Apple’s program license on June 30, 2020.
Apple’s counsel claimed that Epic access Apple’s intellectual property and “exploited that opportunity to great affect for many years” and stated the company now “wants to redefine the terms of access in self serving way.”
Court proceedings revealed that Epic Games CEO, Tim Sweeney, sent an email to Apple in the middle of 2020 requesting “fundamentally different” arrangements between Apple and Epic. This included permission for iOS users to access a competing app store created by Epic as well as separate in-game payment system.
Apple refused this request on July 10, 2020 and it was on August 13 that Epic launched a rival payment system within the iOS and Android versions of Fortnite. This ultimately led to the game being removed from the respective app stores and Epic Games began legal proceedings against Apple and Google in the US on the same day.
Apple’s counsel referred to this as a “strategic strike” by Epic Games.
Apple also argued that the cases between Epic and Apple are so similar in both California and Australia that it should be settled in the jurisdiction originally agreed upon by the two companies.
What does Epic have to say about this?
Epic Games’ legal team responded by saying Apple’s commercial agreements are anti-competitive and that Australian law overrides any private contractual agreements.
The basis for this argument is that only apps and games from the App Store can be downloaded onto iOS devices. Furthermore, there is only a single payment method for in-app purchases provided by Apple – one that the company itself gets a 30 per cent cut of under its standard agreement with developers.
In contrast, counsel pointed to MacOS. Mac users don’t have the same constraints as those using iOS – they can choose from multiple payment options as well as places to download apps and games.
“Apple exploits its market power in the iOS [ecosystem],” Epic Games’ counsel argued. They went on to say that this is in and of itself anti-competitive.
They also disputed Apple’s claim that the cases are similar in both California and Australia. Contrary to Apple’s argument, they said they are vastly different, as is competition law in both countries.
“Relief is sought under the Competition Act under Australian consumer law in a form that would not be available in California under any circumstances,” Epic’s counsel said.
They argued that doing so would result in “grave risk of misapplication and misunderstanding of Australian law” as well as risk inconsistency when it comes to Australian consumer law.
“That inappropriateness has to be gauged in the light of the substantial differences between competition laws between each country.”
He went on to say that mandatory protective laws override any private jurisdiction laws when there is a matter of public interest.
In this case, Epic is arguing that because this involves Australian users and app developers in regards to Australian consumer law, it’s in the public interest.
Another argument Epic made was that Apple’s agent in Australia is Apple Pty Ltd — a separate entity to Apple Inc, which operates in the US only.
They stated that because Apple Pty Ltd facilitates app downloads and fee collection within Australia, this case should be tried separately to the one in California.
Similarly, they argued that because it is Epic Games International, not Epic Games Inc, that handles non-US transactions, it should not be bound by any jurisdiction clause.
“[Epic Games International and Apple Pty Ltd are] two parties that are not bound to the jurisdiction clause that participate in this case,” Epic’s counsel argued.
What’s the verdict?
At the time of writing Justice Perram was yet to deliver his verdict on the case. The First Case Management Hearing of Epic Games’ lawsuit against Google in Australia will be heard on Wednesday.
Disclosure: the author owns shares in Apple.