Apple, Google lose out to Fortnite developer in landmark ruling
By David Swan
Tech giants Apple and Google have lost a landmark Federal Court trial in a judgment that is likely to reshape Australia’s digital app stores and potentially lead to one of the largest class action payouts in Australian history.
In a 2000-page judgment on Tuesday, Justice Jonathan Beach ruled largely against the tech companies, finding they abused their market power to reduce competition. He rejected claims from Fortnite maker Epic Games, however, that Apple and Google had breached consumer law or engaged in unconscionable conduct.
Tech giants Apple, Google and Fortnite maker Epic Games squared off in a Federal Court trial.Credit: Matt Davidson
The high-stakes legal trial began five years ago as four separate cases: Epic v Apple, a class action lawsuit brought by small Australian app developers against Apple dubbed “Anthony v Apple”, and two separate cases against Google. Each case dealt with overlapping issues, so they were heard as one 16-week trial last year.
The trial centred largely around Apple and Google’s fee that it takes from app purchases – in many cases a cut of up to 30 per cent – and allegations that the companies maintained an illegal monopoly over their app stores.
The issues date to August 2020 when Epic implemented a direct payment option in Fortnite, bypassing Apple’s 30 per cent commission fee. Apple, in response, kicked Fortnite off its App Store for breaching its rules, and Epic then filed suits in Australia against both Apple and Google in November 2020.
Epic argued that Apple and Google created “walled gardens”, effectively locking out competition, and misused their market power in breach of Australian competition law.
“The industry is being strangled by a few gatekeepers imposing insane amounts of control and extracting huge taxes, which not only raise prices for consumers but also make a lot of kinds of products just unviable,” Epic boss Tim Sweeney said in a past interview. Sweeney last year flew in from the US to appear at the trial.
Apple and Google had argued that they do not have a monopoly, and that their app store restrictions are necessary for privacy and security reasons.
Beach found Apple had a “substantial degree of market power” and that it and Google had breached Section 46 of Australia’s Competition Act, which prohibits “engaging in conduct that has the purpose, effect, or likely effect of substantially lessening competition in that or any other market”.
The legal firms that brought the class action suits against Apple and Google described the judgment as a landmark win for consumers.
“This judgment is a turning point,” said Kimi Nishimura, principal at Maurice Blackburn Lawyers. “It sends a clear message that even the most powerful corporations must play by the rules and respect the rights of consumers and developers alike.”
Phi Finney McDonald principal lawyer Joel Phibbs.
Joel Phibbs, principal at law firm Phi Finney McDonald, said the victory could result in one of the largest class action payouts in Australian legal history, with potential compensation of several hundreds of millions of dollars.
A Google spokesman said,“we will review the full decision when we receive it and assess our next steps”, while an Apple spokeswoman said, “we welcome the Australian court’s rejection of some of Epic’s claims, however, we strongly disagree with the court’s ruling on others”.
An Epic Games spokesman said the ruling would pave the way for Fortnite to be made available on iPhones in Australia.
“The Epic Games Store and Fortnite will come to iOS in Australia. An Australian court just found that Apple and Google abuse their control over app distribution and in-app payments to limit competition,” the spokesperson said.
“There are 2000-plus pages of findings that we’ll need to dig into to fully understand the details. This is a WIN for developers and consumers in Australia.”
Australia’s competition watchdog, the ACCC, said it would closely examine the judgment.
“We believe that private enforcement of competition laws can complement public enforcement and has the potential to enhance deterrence,” a spokesman said.
“However, court proceedings as the sole tool is insufficient due to the long time required in which competitive harm continues. Few private litigants also can afford the significant resources required for court action.
“The ACCC continues to advocate for its recommendations in its Digital Platform Services Inquiry. Throughout the course of its five-year inquiry, the ACCC has observed conduct by the most powerful digital platforms that is distorting the competitive process.
“This conduct includes denying interoperability, self-preferencing and tying, exclusivity agreements, impeding switching, and withholding access to important hardware, software, and data inputs.”
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