Epic Games, developer of the popular game Fortnite, filed proceedings in the Federal Court of Australia alleging that Apple misused its market power by forcing developers to distribute their software to Apple iOS only through the Apple App Store and charging "monopoly" commissions on paid apps and in-app purchases. This action adds to a short but growing list of private and government actions since Australia amended its competition law in 2017 to include the so-called "Effects Test." Australia's competition law provides that a corporation that has "a substantial degree of market power" must not engage in conduct that has the "purpose, or has or is likely to have the effect of substantially lessening competition."
Epic alleges that Apple has market power in an "iOS App Distribution Market" and Apple requires that users only pay through a mechanism in which Apple receives a 30 percent commission. Epic introduced direct payment for in-game purchases, and Apple subsequently removed Fortnite from its App Store. Apple claimed that Epic's move violated its rules, designed to protect Apple customers, and which applied equally to all developers. Epic is seeking a declaratory judgment that certain App Store terms are unlawful, as well as an injunction that would allow it back into the App Store for five years. Epic's Australian lawsuit includes similar allegations to a lawsuit that it filed against Apple in the United States in August, as well as a complaint from Spotify to the European Commission.
Epic's action is the latest private misuse of market power lawsuit in Australia following the 2017 legislative changes. So far, there have been just two private actions and one government action under the Effects Test, one of which recently settled.
The 2017 amendment did not indicate what conduct violates the Effects Test, and to date, no court has issued an opinion under the amendment. Therefore, the outcome of these cases will have significant implications for businesses with high market share in Australia. In addition to a dispute over market definition, these cases should provide guidance about the types of conduct that violate the Effects Test and how the courts approach quantifying "effects."
Originally Published by Jones Day, December 2020
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