Apple Compares Epic’s Behaviour with Fortnite to Shoplifting

“Developers who work to deceive Apple are terminated”
Fortnite on Smartphone Credit: Joshua Hoehne / Unsplash
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In what is shaping up to be the war of the decade, the battle between Apple and Epic Games continues to heat up, with Apple now making it clear in no uncertain terms exactly what it thinks of Epic’s recent behaviour in trying to do an end-run around the App Store’s in-app payment policies, and declaring that it will show no quarter.

The whole controversy, which continues to be fueled by Epic’s penchant for hyperbolic marketing, began a couple of weeks ago when Epic Games decided to sneak its own in-app purchasing system into its extremely popular game, Fortnite, not only offering an alternative to Apple’s in-app purchasing system, but doing so at a 20 percent discount.

This was an unabashedly flagrant violation of Apple’s App Store guidelines, and needless to say Apple was unimpressed with Epic’s move. Fortnite was unceremoniously pulled from the App Store, and less than an hour later, Epic Games launched a lawsuit that it very obviously had waiting in the wings. If this smells like a setup on Epic’s part, that’s of course because it was, and in fact new details have emerged showing that Epic had actually been poking at Apple behind the scenes for several weeks prior in preparation for this move.

Not surprisingly, however, Apple has not only dug its heels in on Fortnite’s removal, but threw a second huge punch last week when it told Epic that it would be terminating its developer account entirely. While it’s clear that Epic was expecting Apple’s first response, it’s less certain whether it really expected Apple to wield the much more thermonuclear option of terminating its relationship with Epic entirely, which would also hamper further development on the Unreal Engine that serves as the foundation for games built by many other developers.

Following that announcement, Epic quickly filed a request with the courts for an injunction against Apple, not only asking that the courts stay Apple’s hand on the developer agreement termination, but going a big step further by actually asking the courts to force Apple to reinstate Fortnite into the App Store as-is, with Epic’s in-app purchasing system still in place.

Epic’s ‘Emergency’ Is of its Own Making

It was a pretty brassy move on the part of Epic, but one could suppose that it doesn’t hurt to ask. Of course such a bold request demands an equally bold and proportional response, and in its court filing opposing Epic’s motion, Apple pulled absolutely no punches in expressing exactly what its take is on Epic’s behaviour.

In the wake of its own voluntary actions, Epic now seeks emergency relief. But the ‘emergency’ is entirely of Epic’s own making. Epic’s agreements with Apple expressly spell out that if an app developer violates the rules of the App Store or the license for development tools—both of which apply and are enforced equally to all developers large and small—Apple will stop working with that developer Developers who work to deceive Apple, as Epic has done here, are terminated.

Apple’s Opposition to Epic’s Motion

The filling also goes on to compare Epic’s behaviour of trying to bypass Apple’s in-app purchasing system as akin to shoplifting products from an Apple retail store.

If developers can avoid the digital checkout, it is the same as if a customer leaves an Apple retail store without paying for shoplifted products: Apple does not get paid.

Apple’s Opposition to Epic’s Motion

The filing also includes a separate statement from newly-minted Apple Fellow Phil Schiller, who still heads up the App Store even after his departure from the role of Senior VP of Worldwide Marketing. In his declaration, Schiller explains the business model for the App Store, and emphasizes that it “has remained unchanged since it launched in 2008: if you charge for software purchased through the App Store, Apple takes a percentage of the charge as commission.”

Schiller goes on to explain that Apple’s monetization strategy is “based on Apple’s role in connecting developers with users that have a willingness to pay because they value the quality of Apple’s devices,” and trust the App Store as a safe place from which to purchase and use apps. On the flip side, Schiller says, Apple’s commision enables it to get a return on the “substantial investments” it has made in the App Store, and to fund future innovation.

In his statement, Schiller then outlines how Epic has in fact had contracts with Apple for many years, with the same terms that every other developer agrees to. He also notes that Epic renewed its Developer Program License Agreement on June 30, 2020, at which point it would have had to assent to agree to the terms of the agreement — terms which it has now explicitly violated as a result of its actions regarding Fortnite.

Epic’s conduct is akin to a manufacturer walking into a retail store and asking shoppers to pay the manufacturer directly for their products, leaving the store itself with nothing for its efforts.

Declaration by Apple Fellow Phil Schiller

A Special Deal

One interesting point that Schiller’s declaration does reveal, however, is that Epic Games CEO Tim Sweeney approached Phil Schiller back on the date of its last renewal, in the form of an email asking for a special deal to allow Epic to bypass Apple’s in-app purchasing system by offering its own store.

In this email, Mr. Sweeney expressly acknowledged that his proposed changes would be in direct breach of multiple terms of the agreements between Epic and Apple. Mr. Sweeney acknowledged that Epic could not implement its proposal unless the agreements between Epic and Apple were modified.

Declaration by Apple Fellow Phil Schiller

In the email, Sweeney specifically asks for the ability to offer “competing payment processing options other than Apple payments, without Apple’s fees,” as well as “a competing Epic Games Store app” to be made available not only through the iOS App Store, but also “through direct installation that has equal access to underlying operating system features” that the iOS App Store itself has.

Apple naturally refused, Schiller notes, because Apple doesn’t make special deals, and therefore it would have had to open this up to all developers, which would have had a “catastrophic effect on the user experience and Apple’s business model.” Apple spelled this out to Sweeney in detail in a formal six-page letter explaining “why it could not give Epic preferential treatment over all other developers.”

Sweeney apparently didn’t let the matter go, however, and according to Schiller, followed up with another email, stating that he was “in a state of substantial disagreement with Apple’s policy and practices” and that Epic Games would continue to pursue this in the same way as it has pursued “other injustices in our industry.”

It’s a sad state of affairs that Apple’s senior executives would hand Epic’s sincere request off to Apple’s legal team to respond with such a self-righteous and self-serving screed — only lawyers could pretend that Apple is protecting consumers by denying choice in payments and stores to owners of iOS devices.

Epic Games CEO Tim Sweeney, in an email to the Apple Executive Team

Sweeney then sent another e-mail to Apple’s executive team shortly after 2:00 a.m. on August 13 — the same day that the fight went public — 2020, stating that “Epic will no longer adhere to Apple’s payment processing restrictions,” and advising Apple that Epic would be “changing the Fortnite app on the iOS platform to circumvent Apple’s IAP.”

I’m writing to tell you that Epic will no longer adhere to Apple’s payment processing restrictions. Today, Epic is launching Epic direct payments in Fortnite on iOS, offering customers the choice of paying in-app through Epic direct payments or through Apple payments, and passing on the savings of Epic direct payments to customers in the form of lower prices. We choose to follow this path in the firm belief that history and law are on our side. Smartphones are essential computing devices that people use to live their lives and conduct their business. Apple’s position that its manufacture of a device gives it free rein to control, restrict, and tax commerce by consumers and creative expression by developers is repugnant to the principles of a free society.

Epic Games CEO Tim Sweeney, in an email to the Apple Executive Team

In his statement, Schiller also goes on to point out how “Mr. Sweeney did not identify anything Apple had recently done to provoke Epic’s decision to breach its contracts with Apple” pointing only to “longstanding Apple policies” which Epic had repeatedly agreed to be bound by, while also warning that Epic is prepared to “litigate with Apple for years, if necessary.”

Epic chose to hide unauthorized software in our App Store to deprive Apple of the commission the parties had agreed upon. Epic’s conduct is akin to a manufacturer walking into a retail store and asking shoppers to pay the manufacturer directly for their products, leaving the store itself with nothing for its efforts.

Declaration by Apple Fellow Phil Schiller

Schiller’s declaration goes on to explain the timeline of the actions Apple took after that point, which of course included sending a formal App Store removal notice to Epic Games, followed later by a formal notice of Apple Developer Program termination.

If tolerated, Epic’s unilateral and ongoing breach of its contractual commitments will send giant ripples across the entire App Store business model and ecosystem to the detriment of not only Apple, but also the users and developers who depend on the integrity and security of the App Store.

Declaration by Apple Fellow Phil Schiller

A Relationship Gone Bad

What’s perhaps most interesting about this whole recent series of events is that Epic Games and Apple were once the best of friends. One of the first marquee games released for the iPhone platform back in 2010 was Epic’s Infinity Blade, which debuted at an iPod event in the fall of 2010, back when it was still known simply as “Project Sword,” and when Steve Jobs was still very much at Apple’s helm.

In fact, Epic Games’ then-President, Mike Capps, took the stage at Apple’s September 2010 event to show the game off, and returned in early 2012 to show off Infinity Blade: Dungeonsfor the launch of the third-generation iPad.

Tim Sweeney, who was one of the original founders of Epic Games, took over as CEO again in 2012, and also appeared personally on stage at Apple’s Worldwide Developers Conference in 2014 to show off the capabilities of the new Metal engine in iOS 8, and when Apple brought Metal to the Mac the following year, Fortnite’s lead gameplay programmer, Billy Bramer, was on stage at WWDC 2015 to present Apple’s latest graphics technology.

In fact, in his statement, Schiller cites this as an example of how Epic has benefited from its relationship with Apple, adding that Bramer explained on stage how Metal “revolutionized graphic design” and enabled developers “like us create richer 3D worlds.”

Metal, however, as Schiller notes, is part of the technology that Apple offers developers at no additional charge beyond the standard App Store commission.

Through its conduct, Epic is benefitting monetarily from this crisis of its own making. The Fortnite app remains functional for millions of iPhone and iPad users. Epic has been and is acting in violation of its agreements with Apple, selling to users in our App Store without paying Apple the commission it agreed to pay, and circumventing our app review process. And, critically, if Epic’s misconduct is permitted, it would demonstrate to all developers that they can simply disregard the commitments they made in their contracts with Apple.

Declaration by Apple Fellow Phil Schiller

Based on the fact that Epic has blatantly breached its contracts with Apple, it seems very unlikely that its motion for an injunction will be granted — at least not fully, although it does seem possible that the courts could side with Epic on Apple’s attempts to block development of the Unreal Engine, which is used by many other developers.

In that regard, even Microsoft has come out in support of Epic, adding that the Unreal Engine is “critical technology for numerous game creators,” including Microsoft, and that if Epic is denied access to Apple’s SDK it would place many game creators “at a substantial disadvantage.”

Perhaps when Sweeney and his team started this fight they felt that the Unreal Engine was too big for Apple to touch, and it certainly seems like that may become the hot button issue at this stage, but at the same time the courts — and Apple — are likely to find a way to divorce the Unreal Engine from the issue of Epic’s App Store stunt, and it’s certainly possible Apple could be forced to capitulate in that one area — allowing Epic to continue to have access to the necessary developer tools to support Unreal Engine without otherwise allowing its apps onto the App Store. In fact, the very idea that the two are tied together could even be called into question by the time this whole thing is over.

However, it’s not likely to be over for a long time. Sweeney has already clearly stated that he’s prepared to wage this particular war for years, and clearly Apple isn’t about to back down anytime soon either, since as far as it’s concerned the entire future of the App Store ecosystem is at stake here. Court cases like this can take years, and antitrust investigations can take even longer.

One thing that does seem certain is that Fortnite isn’t going to be making a return to the App Store anytime soon.

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