Fortnite' Will Remain Out of Apple's App Store Ahead of Trial, Judge Rules -- 3rd Update

By Sarah E. Needleman

A California federal judge said Apple Inc. doesn't have to return the popular videogame "Fortnite" to its App Store but maintained that the tech giant can't block the game's creator from accessing its critical software development tools.

The ruling Friday on Epic Games Inc.'s motion for a preliminary injunction yielded a split decision similar to Judge Yvonne Gonzalez Rogers's order in August.

"Given the novelty and the magnitude of the issues, as well as the debate in both the academic community and society at large, the Court is unwilling to tilt the playing field in favor of one party or the other with an early ruling of likelihood of success on the merits," Judge Gonzalez Rogers wrote in her ruling.

The decision sets the stage for a May bench trial. Analysts estimate that Apple's App Store generates at least $15 billion in annual sales for the Cupertino, Calif., company. The app marketplace has become an increasingly important revenue driver for Apple in recent years as part of its growing services business.

It also comes a few days after a report from the Democratic-led House Antitrust Subcommittee accusing Apple of abusing its market power with regard to how it operates the App Store. The report referenced an article by The Wall Street Journal last year that said Apple's apps routinely appeared in search results in its App Store ahead of those from rivals. At the time Apple said it doesn't give its own products an advantage over others and that it uses an algorithm reliant on machine learning and past consumer preferences to determine results, and that app rankings fluctuate.

"Our customers depend on the App Store being a safe and trusted place where all developers follow the same set of rules," Apple said in a statement. "We're grateful the court recognized that Epic's actions were not in the best interests of its own customers and that any problems they may have encountered were of their own making when they breached their agreement."

A spokeswoman for Epic said the company appreciates the judge's decision to preserve its access to Apple's software-development tools but that it will continue to fight the tech giant on antitrust grounds. "We will pursue all avenues to end Apple's anticompetitive behavior," she said.

Epic sued Apple as well as Google in August after the companies yanked its shooter-survival game from the App Store and Google Play, citing the addition of an unauthorized payment system that skirted their 30% commission on in-app purchases of digital goods.

Epic claims that Apple's App Store commission is excessive, that Apple unfairly prohibits developers from processing customer transactions themselves and that the tech giant abuses its control of the marketplace to stifle competition. The Cary, N.C., company said in its lawsuit that Apple violated the Sherman Antitrust Act in addition to California state rules regarding anticompetitive conduct.

Apple, which countersued Epic, disputes Epic's characterizations, saying that the developer can distribute its software through multiple other channels and that its own app marketplace's commission -- used to cover expenses such as security and maintaining user privacy -- is similar to what other app marketplaces charge. It also accused Epic of deliberately flouting its rules and engaging in a campaign aimed at hurting its business.

Epic has to prove Apple has monopoly power in the relevant market and that it willfully acquire or maintain that power, the judge's ruling said. The "Fortnite" maker has argued that Apple is a monopolist in forcing developers to use only its App Store to reach iPhone and iPad users as opposed to other app stores.

Friday's outcome undermines Epic's case, according to David Hoppe, a tech and media attorney at Gamma Law in San Francisco. "The judge is indicating skepticism over Epic's narrow definition of the relevant market," he said. If Apple's App Store "isn't the relevant market then Apple is not a monopolist."

As of late August, Epic Games' mobile titles had been downloaded more than 159 million times since 2012 across Apple's App Store globally, generating approximately $1.2 billion in consumer spending, according to Sensor Tower Inc. Thirty percent of this revenue, or about $360 million, went to Apple, the app analytics firm said.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

October 09, 2020 22:06 ET (02:06 GMT)

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