Australian Financial Review
An epic legal battle between Apple and one of the world’s most popular video game makers is a stark reminder that Australia needs a major overhaul of how Apple and Google are regulated, the competition watchdog says.
Hearings in the protracted stoush over who gets the control app stores and payment systems on mobile phones are set to start in the Federal Court in Melbourne on Monday. Epic Games, a North Carolina-headquartered software developer, has accused Apple of illegally using its control of the iPhone app store to stifle competition.
Epic makes Fortnite, one of the biggest video games in the world. It was one of the most profitable games in history in 2020, when the company first filed suit against Apple.
A separate 2021 lawsuit against Google, over similar allegations of anticompetitive conduct related to control of Android phones, has since been merged into the Apple trial for expediency, as have two class-action lawsuits brought against Apple and Google by Australian phone users, alleging they have been harmed by the same anticompetitive behaviour described by Epic.
All four cases are being heard in the one, 16-week-long mega trial expected to feature the rare sight of Apple and Google executives all testifying for the defence, though each of the four cases will receive its own verdict. However, the class action lawsuits against Apple and Google can only succeed if Epic wins its lawsuits against the companies.
After suffered multiple delays and a change of venue from Sydney to Melbourne before finally getting its day in court, the trial come just as the issue of app store dominance is coming to a head internationally.
On March 7, the European Union enacted the Digital Markets Act, forcing Apple to open the iPhone up to competing app stores, and to allow iPhone apps to be installed from websites. That is largely what Epic wants the Federal Court to do in Australia.
Epic took Apple to court after it had its license to distribute iPhone apps revoked by the tech giant in August 2020, when Epic complained a 30 per cent App Store commission was too high and attempted to lure customers to its own website to complete games purchases.
More than three years into the dispute, Apple still doesn’t allow Epic apps in its store.
This month, Apple also tried to block Epic from setting up its own app store in the EU.
In January, Epic chief executive Tim Sweeney described Apple’s compliance with the new European laws as “devious” and “hot garbage” because the company was forcing developers to agree to “a new also-illegal anticompetitive scheme rife with new junk fees” if they wanted to use other app stores on iPhones.
Apple officials declined to comment on how the EU laws might affect the Australian lawsuit. The company has since reversed its decision to block Epic from setting up its own app store for EU-based iPhone users.
But the Australian Competition & Consumer Commission said in a statement that because the new rules in Europe and similar regulations in the United Kingdom “aren’t rolling out globally, it’s unlikely Australian consumers will gain any benefits unless we enact our own reforms”.
The years-long delays before the start of the Australian trial – where a decision is not expected until late this year or early 2025 – shows that current competition laws “don’t suit rapidly evolving digital markets”, an ACCC spokeswoman said in response to questions from The Australian Financial Review.
But the case does address the same questions of app store market dominance the ACCC has been grappling with since 2020, when it launched a digital platforms inquiry to investigate, among other things, Apple and Google’s market power on mobile phones.
Following a years-long investigation, the ACCC recommended mandatory codes of conduct that would govern the app stores, addressing the high fees charged by the app stores, and the question of whether app developers should be allowed to use their own credit card processing systems, rather than the ones supplied by Apple and Google.
“A mandatory code of conduct for app stores could require digital platforms to make alternative app marketplaces available on mobile devices and allow app developers to offer alternative in-app payment methods,” the commission’s spokeswoman said.
“These changes would give consumers greater access to a variety of apps and app stores and provide app developers with more transparency about the pricing, performance and review processes when distributing their services on app stores.”
In December, the Albanese government agreed to those reforms, in principle, and tasked Treasury to start designing them.
Johanna Weaver, the director of Australian National University’s Tech Policy Design Centre, said that regardless of who wins the matters before the Federal Court, the outcome will provide good political cover for the government to enact the ACCC’s recommendations.
If Apple and Google were to win – Apple did win a similar lawsuit brought by Epic in the United States – the government could argue the outcome proves Australian laws aren’t good enough and need updating. If Epic wins, the government could say the outcome proves Apple and Google need to be regulated, Professor Weaver said.
The fact that legislators in the EU have stepped in during the years Epic was waiting for its Australian trial to begin means that there was now a little less at stake in the trial than there would have been had it not been so delayed, she said.
“But that’s not to say this case isn’t significant. I think everyone will be watching the outcome because it will shape and validate the approach the EU is taking and that the [Australian] government is signalling that it’s going to be taking.
“This case is about the fundamental shape of the internet and the digital infrastructure that we all use. It’s a step away from the walled garden,” Professor Weaver said.