The antitrust lawsuit filed against Apple by Epic, the video game company behind Fortnite, is wrapping up with its final arguments on Monday in a federal court in Oakland, California. At the heart of the case is Apple’s policy requiring that its payment system process all in-app purchases on its mobile devices, a setup that typically nets the device maker a 30 percent commission. After negotiations between the two companies about this fee fell apart, Epic decided to charge ahead with a Fortnite update in August that allowed players to buy the in-game currency known as V-bucks (at a discount) without going through Apple, a stunt that also included a “1984” parody ad mocking Apple and a #FreeFortnite hashtag intended to stir up a user backlash against the company. Apple booted Fortnite from the App Store—blocking updates and leaving just a rump version of the game on iOS—which led Epic to sue.
At stake is Apple’s control over the iPhone and the iPad—not just how much money is made there, but also what apps are allowed on the devices, period. (Epic has ambitions to create a large online gaming store, which it would like to extend to iOS.) Thus, the trial wasn’t just an opportunity to work through technical arguments about software and antitrust law. It was also a rare, behind-the-scenes, and often unflattering peek at how Apple wields power, and how an ambitious potential competitor is trying to chip away at it. Here are some of the most striking, surprising, and occasionally flat-out awkward details about Apple and Epic that were uncovered through the proceedings.
The Biggest Known iPhone Hack
As part of discovery, Apple released emails that surfaced worrying details about the largest known iPhone hack to date. In September 2015, researchers notified managers at the company that 2,500 apps containing malicious code had been downloaded 203 million times by 128 million iPhone users. (Further investigation would later reveal that 4,000 apps had been affected.) Of the victims, 18 million were in the U.S. and more than half were in China. Hackers were able to create a counterfeit version of Apple’s Xcode app development tool that deployed the malicious code and prompted iPhones to divulge information like device identifiers and network info. In the emails, Apple’s managers discuss steps for notifying all the affected users via email, which is best practice for data breaches and often mandated by state law. However, it doesn’t seem that Apple ever ended up sending that email. Instead, it published a blog post that vaguely outlined how the hack worked and only disclosed the 25 most popular apps that had the malicious code. The post has since been taken down, and it wasn’t until this year that the public learned just how many iPhone users the hack had managed to reach.
During the first week of the trial, Epic brought up the indie games marketplace Itch.io, which is accessible through the Epic Games Store. Epic is trying to get Apple to also host competitors’ online stores, so the video game company was demonstrating that it already walks its talk with Itch.io. However, Apple’s attorney Karen Dunn sought to show how such an arrangement could be a liability. While questioning the general manager of the Epic Games Store, Steven Allison, Dunn brought up a title on Itch.io called Sisterly Lust. The game is essentially a dating simulator in which the main character engages in graphic sexual relationships with his estranged mother and sisters after the death of his father. After Allison said he was unaware that such a game was on Itch.io, Dunn said, “You may not be aware then, but the description of that game includes a list of fetishes which include many words that are not appropriate for us to speak in federal courts.”
Apart from potentially trying to embarrass Epic, Dunn was making the point that if Apple were to host third-party marketplaces, it may end up exposing its users to “offensive and sexualized content” that doesn’t meet the App Store’s standards. Apple is, notably, very strict about allowing any sort of sexual content on the App Store and frames its walled garden and mandatory commissions as the cost of it protecting users from low-quality, offensive, and malicious apps. While this mention of Sisterly Lust might not have helped Epic’s case, it did end up being good publicity for the game: The comments section of the game’s Itch.io page is now full of people who say they downloaded it because of the trial. As one user wrote, “Apple’s Lawyer brought me here! And I bought the game in a heartbeat.”
Apple Making Exceptions for Netflix
Emails released through the trial reveal negotiations between Apple and Netflix in 2018. At the time, Netflix was considering putting a halt to purchases through its iOS app. Instead, it would force customers to subscribe directly through a browser. Netflix was apparently concerned about data indicating that users were canceling their subscriptions more often through the iOS app compared with other avenues; having people subscribe outside the app would also allow the company to bypass Apple’s 30 percent commission and pocket more revenue. Emails from the trial show that Apple was alarmed about one of its top-grossing apps making this switch. At first, company managers proposed punishing Netflix by not promoting it in the App Store, but they later changed their tone. One email from July 2018 contains slides from a presentation by Apple employees proposing incentives for Netflix to continue permitting in-app purchases. Some of the ways Apple was already giving Netflix preferential treatment at the time included offering discounts for subscribers and letting the streaming service decide which of its shows and movies the App Store would feature. Apple suggested that it could do even more to cater to Netflix by using the in-app purchase commissions to place search ads for the streaming service or by giving the company “video program benefits,” which likely refers to a program allowing select apps to bypass the 30 percent commission for certain transactions. Those proposals never came to pass as Netflix ultimately decided to go ahead with getting rid of subscribing through the app that following December. However, these emails do demonstrate how Apple is willing to bend some of its App Store rules to appease its most powerful partners—just not, in this case, Epic.
Epic Bungles Massive Fraud Case
In yet another private exchange made public through the trial, Epic CEO Tim Sweeney apologized profusely to Ubisoft CEO Yves Guillemot in a May 2019 email. Scammers had apparently found a way to use stolen credit cards to buy Ubisoft games in the Epic Games Store. In a 48-hour period, Epic found the rate of fraudulent transactions for the Ubisoft game The Division 2 to be between 70 percent and 90 percent. “Fraud rates for other Epic games store titles are under 2% and Fortnite is under 1%. So 70% fraud was an extraordinary situation,” Sweeney wrote. “The fault in this situation is entirely Epic’s, and all of the minimum revenue guarantees remain in place to ensure our performance.” (Epic provides developers with an upfront advance to put games exclusively on its store, regardless of whether those games actually end up selling enough to make that money back.)
In 2015, Sweeney reached out to Cook via email asking that Apple allow other app stores on iOS. Sweeney was making a gentle suggestion and was sure to praise Apple for maintaining an App Store that “has done much good for the industry.” At the time, Apple and Epic were still on good terms; Epic representatives had even appeared onstage at Apple’s WWDC developer event weeks earlier and apparently attended rehearsals for the presentation. Sweeney wrote at the end of the email, “It would be extremely positive for Apple to take this approach proactively before this topic is overly complicated by opposing political, regulatory, moral, and competitive forces.” It was an impassioned plea from a titan in the gaming industry to an even bigger titan in the consumer electronics industry, an email that would preview many of the conflicts laid out in the trial. Yet it seems that Cook didn’t really even know who Sweeney was. Emails released through the trial indicate that, instead of responding, Cook forwarded Sweeney’s appeal to two senior Apple VPs and asked, “Is this the guy that was at one of our rehearsals?”