`
`
`
`
`Paul J. Riehle (SBN 115199)
`paul.riehle@faegredrinker.com
`FAEGRE DRINKER BIDDLE & REATH LLP
`Four Embarcadero Center
`San Francisco, California 94111
`Telephone: (415) 591-7500
`Facsimile: (415) 591-7510
`
`Christine A. Varney (pro hac vice pending)
`cvarney@cravath.com
`Katherine B. Forrest (pro hac vice pending)
`kforrest@cravath.com
`Gary A. Bornstein (pro hac vice pending)
`gbornstein@cravath.com
`Yonatan Even (pro hac vice pending)
`yeven@cravath.com
`M. Brent Byars (pro hac vice pending)
`mbyars@cravath.com
`CRAVATH, SWAINE & MOORE LLP
`825 Eighth Avenue
`New York, New York 10019
`Telephone: (212) 474-1000
`Facsimile: (212) 474-3700
`
`Attorneys for Plaintiff Epic Games, Inc.
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`EPIC GAMES, INC.,
`
`vs.
`
`APPLE INC.,
`
`
`
`
`
`Plaintiff,
`
`Case No. ___________________
`
`
`
`
`COMPLAINT FOR
`INJUNCTIVE RELIEF
`
`Defendant.
`
`
`
`
`
`
`
`
`
`
`
`
`
`Complaint for Injunctive Relief
`
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 2 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`TABLE OF CONTENTS
`
`NATURE OF THE ACTION .............................................................................................. 1
`
`PARTIES.............................................................................................................................. 8
`
`JURISDICTION AND VENUE ........................................................................................ 10
`
`INTRADISTRICT ASSIGNMENT .................................................................................. 12
`
`RELEVANT FACTS ......................................................................................................... 12
`
`I.
`
`Apple Monopolizes the iOS App Distribution Market. .......................................... 12
`
`A.
`
`B.
`
`C.
`
`The iOS App Distribution Market. ................................................................ 16
`
`Apple’s Monopoly Power in the iOS App Distribution Market. .................. 17
`
`Apple’s Anti-competitive Conduct in the iOS App Distribution
`Market............................................................................................................ 19
`
`i.
`
`ii.
`
`Technical Restrictions ......................................................................... 19
`
`Contractual Restrictions ...................................................................... 19
`
`iii.
`
`Lack of Procompetitive Justification .................................................. 22
`
`D. Anti-competitive Effects in the iOS App Distribution Market. .................... 23
`
`II.
`
`Apple Monopolizes the iOS In-App Payment Processing Market. ......................... 27
`
`A.
`
`B.
`
`C.
`
`The iOS In-App Payment Processing Market. .............................................. 28
`
`Apple’s Monopoly Power in the iOS In-App Payment Processing
`Market............................................................................................................ 30
`
`Apple’s Anti-competitive Conduct in the iOS In-App Payment
`Processing Market. ........................................................................................ 32
`
`i.
`
`ii.
`
`Contractual and Policy Restrictions .................................................... 32
`
`Lack of Procompetitive Justification .................................................. 33
`
`D. Anti-competitive Effects in the iOS In-App Payment Processing
`Market............................................................................................................ 34
`
`III. Competition in the Sale of Mobile Devices Cannot Discipline Apple’s
`Conduct in the iOS App Distribution or iOS In-App Payment Processing
`Markets. ................................................................................................................... 38
`
`A. Apple’s Mobile Device Customers Face Substantial Switching Costs
`and iOS Lock-In. ........................................................................................... 38
`
`B.
`
`Apple’s Sticky iOS Ecosystem Protects its Dominance in the Sales of
`Mobile Devices. ............................................................................................. 42
`
`Complaint for Injunctive Relief
`
`
`
`
`
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 3 of 170
`
`
`
`
`C.
`
`Information Costs and Other Market Inefficiencies in the iOS App
`Distribution and iOS In-App Payment Processing Markets. ........................ 44
`
`COUNT 1: Sherman Act § 2 (Unlawful Monopoly Maintenance in the iOS App
`Distribution Market) ................................................................................................ 47
`
`COUNT 2: Sherman Act § 2 (Denial of Essential Facility in the iOS App
`Distribution Market) ................................................................................................ 48
`
`COUNT 3: Sherman Act § 1 (Unreasonable Restraints of Trade in the iOS App
`Distribution Market) ................................................................................................ 49
`
`COUNT 4: Sherman Act § 2 (Unlawful Monopoly Maintenance in the iOS In-App
`Payment Processing Market) ................................................................................... 51
`
`COUNT 5: Sherman Act § 1 (Unreasonable Restraints of Trade in the iOS In-App
`Payment Processing Market) ................................................................................... 52
`
`COUNT 6: Sherman Act § 1 (Tying the App Store in the iOS App Distribution
`Market to In-App Purchase in the iOS In-App Payment Processing Market) ........ 53
`
`COUNT 7: California Cartwright Act (Unreasonable Restraints of Trade in the
`iOS App Distribution Market) ................................................................................. 55
`
`COUNT 8: California Cartwright Act (Unreasonable Restraints of Trade in the
`iOS In-App Payment Processing Market) ............................................................... 56
`
`COUNT 9: California Cartwright Act (Tying the App Store in the iOS App
`Distribution Market to In-App Purchase in the iOS In-App Payment
`Processing Market) .................................................................................................. 58
`
`COUNT 10: California Unfair Competition Law ............................................................. 61
`
`PRAYER FOR RELIEF .................................................................................................... 61
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Complaint for Injunctive Relief
`
`
`
`
`
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 4 of 170
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`Plaintiff Epic Games, Inc. (“Epic”), by its undersigned counsel, alleges, with
`
`knowledge with respect to its own acts and on information and belief as to other matters,
`
`as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`In 1984, the fledgling Apple computer company released the
`
`Macintosh—the first mass-market, consumer-friendly home computer. The product
`
`launch was announced with a breathtaking advertisement evoking George Orwell’s 1984
`
`that cast Apple as a beneficial, revolutionary force breaking IBM’s monopoly over the
`
`computing technology market. Apple’s founder Steve Jobs introduced the first showing
`
`10
`
`of the 1984 advertisement by explaining, “it appears IBM wants it all. Apple is perceived
`
`11
`
`to be the only hope to offer IBM a run for its money . . . . Will Big Blue dominate the
`
`12
`
`entire computer industry? The entire information age? Was George Orwell right about
`
`13
`
`1984?”
`
`14
`
`2.
`
`Fast forward to 2020, and Apple has become what it once railed
`
`15
`
`against: the behemoth seeking to control markets, block competition, and stifle
`
`16
`
`innovation. Apple is bigger, more powerful, more entrenched, and more pernicious than
`
`17
`
`the monopolists of yesteryear. At a market cap of nearly $2 trillion, Apple’s size and
`
`18
`
`reach far exceeds that of any technology monopolist in history.
`
`19
`
`3.
`
`This case concerns Apple’s use of a series of anti-competitive
`
`20
`
`restraints and monopolistic practices in markets for (i) the distribution of software
`
`21
`
`applications (“apps”) to users of mobile computing devices like smartphones and tablets,
`
`22
`
`and (ii) the processing of consumers’ payments for digital content used within iOS
`
`23
`
`mobile apps (“in-app content”). Apple imposes unreasonable and unlawful restraints to
`
`24
`
`completely monopolize both markets and prevent software developers from reaching the
`
`25
`
`over one billion users of its mobile devices (e.g., iPhone and iPad) unless they go through
`
`26
`
`a single store controlled by Apple, the App Store, where Apple exacts an oppressive 30%
`
`27
`
`tax on the sale of every app. Apple also requires software developers who wish to sell
`
`28
`
`Complaint for Injunctive Relief
`
`
`
`
`
`1
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 5 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`digital in-app content to those consumers to use a single payment processing option
`
`offered by Apple, In-App Purchase, which likewise carries a 30% tax.
`
`4.
`
`In contrast, software developers can make their products available to
`
`users of an Apple personal computer (e.g., Mac or MacBook) in an open market, through
`
`a variety of stores or even through direct downloads from a developer’s website, with a
`
`variety of payment options and competitive processing fees that average 3%, a full ten
`
`times lower than the exorbitant 30% fees Apple applies to its mobile device in-app
`
`purchases.
`
`5.
`
`The anti-competitive consequences of Apple’s conduct are pervasive.
`
`10
`
`Mobile computing devices (like smartphones and tablets)—and the apps that run on those
`
`11
`
`devices—have become an integral part of people’s daily lives; as a primary source for
`
`12
`
`news, a place for entertainment, a tool for business, a means to connect with friends and
`
`13
`
`family, and more. For many consumers, mobile devices are their primary computers to
`
`14
`
`stay connected to the digital world, as they may not even own a personal computer.
`
`15
`
`When these devices are unfairly restricted and extortionately “taxed” by Apple, the
`
`16
`
`consumers who rely on these mobile devices to stay connected in the digital age are
`
`17
`
`directly harmed.
`
`18
`
`6.
`
` Epic brings this suit to end Apple’s unfair and anti-competitive
`
`19
`
`actions that Apple undertakes to unlawfully maintain its monopoly in two distinct,
`
`20
`
`multibillion dollar markets: (i) the iOS App Distribution Market, and (ii) the iOS In-App
`
`21
`
`Payment Processing Market (each as defined below). Epic is not seeking monetary
`
`22
`
`compensation from this Court for the injuries it has suffered. Nor is Epic seeking
`
`23
`
`favorable treatment for itself, a single company. Instead, Epic is seeking injunctive relief
`
`24
`
`to allow fair competition in these two key markets that directly affect hundreds of
`
`25
`
`millions of consumers and tens of thousands, if not more, of third-party app developers.
`
`26
`
`7.
`
`Apple imposes unreasonable restraints and unlawfully maintains a
`
`27
`
`total monopoly in the iOS App Distribution Market. To live up to its promise to users
`
`28
`
`that “there’s an app for that”, Apple, after a short initial attempt to go it alone, opened up
`
`Complaint for Injunctive Relief
`
`
`
`
`2
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 6 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`iOS and invited third-party app developers to develop a wide array of apps for the iOS
`
`ecosystem. Those apps contribute immense value to that ecosystem and are one of the
`
`primary marketing features for iPhones and iPads. But Apple completely bans
`
`innovation in a central part of this ecosystem, namely, any app that could compete with
`
`Apple for the distribution of apps in iOS. Through its control over iOS, and through a
`
`variety of unlawful contractual restrictions that it forces app developers to accept, Apple
`
`prevents iOS users from downloading any apps from any source other than Apple’s own
`
`storefront, the App Store.
`
`8.
`
`The result is that developers are prevented from selling or distributing
`
`10
`
`iOS apps unless they use Apple’s App Store, and accede to Apple’s oppressive terms and
`
`11
`
`conditions for doing so (some of which are discussed further below). For example, as the
`
`12
`
`sole distributor of iOS apps, Apple collects the money from every iOS user’s app
`
`13
`
`purchase, remits only 70% of that payment to the app developer, and retains a 30% tax
`
`14
`
`for itself. iOS developers are thus forced to increase the prices they charge consumers in
`
`15
`
`order to pay Apple’s app tax. There is no method app developers can use to avoid this
`
`16
`
`tax, as Apple has foreclosed any alternative ways to reach the over one billion users of
`
`17
`
`iOS devices. As Representative Hank Johnson aptly summed up at a recent
`
`18
`
`Congressional hearing on technology monopolies: “developers have no choice but to go
`
`19
`
`along with [Apple’s policies] or they must leave the App Store. That’s an enormous
`
`20
`
`amount of power.”
`
`21
`
`9.
`
`Apple’s anti-competitive conduct with respect to iOS app distribution
`
`22
`
`results in sweeping harms to (i) app distributors, who are foreclosed from competing with
`
`23
`
`Apple and innovating new methods of distributing iOS apps to users outside the App
`
`24
`
`Store (such as, for example, curated app stores targeting particular categories of apps, like
`
`25
`
`gaming or travel); (ii) app developers, who are denied choice on how to distribute their
`
`26
`
`apps, are forced to fork over more of their revenue on paid apps than they would if Apple
`
`27
`
`faced competition, and on occasion have to abandon their apps altogether if they cannot
`
`28
`
`earn a profit given Apple’s 30% tax; and (iii) consumers, who are likewise denied choice
`
`Complaint for Injunctive Relief
`
`
`
`
`3
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 7 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`and innovation in app distribution channels and are forced to pay higher prices and suffer
`
`inferior customer service from Apple, the unwelcome middleman. (Part I.)
`
`10. Apple also imposes unreasonable restraints and unlawfully maintains
`
`a total monopoly in the iOS In-App Payment Processing Market. Among the oppressive
`
`terms that app developers have to accept, Apple coerces all app developers who wish to
`
`use its App Store—the only means with which to distribute apps to iOS users—to use
`
`exclusively Apple’s own payment processing platform for all in-app purchases of in-app
`
`content. Apple thus requires third-party app developers to agree they will not even offer
`
`iOS users the choice of additional payment processing options alongside Apple’s. And
`
`10
`
`Apple goes as far as to gag app developers, preventing them from even mentioning to
`
`11
`
`users the option of buying the same content outside of the app—for example, by
`
`12
`
`purchasing content directly from the app developer, or using a web browser. Because
`
`13
`
`Apple has a monopoly over the distribution of iOS apps, app developers have no choice
`
`14
`
`but to assent to this anti-competitive tie; it is Apple’s way or the highway.
`
`15
`
`11.
`
`In this market too, Apple thus stands as the monopolist middleman,
`
`16
`
`positioning itself between developers and consumers. As the sole payment processor,
`
`17
`
`Apple is able to take an exorbitant 30% fee on all in-app purchases of in-app content.
`
`18
`
`12. Apple’s anti-competitive conduct with respect to iOS in-app payment
`
`19
`
`processing harms: (i) other payment processors, who are foreclosed from competing with
`
`20
`
`Apple on price and innovating new methods of in-app payment processing (such as, for
`
`21
`
`example, rewards points or payment through carrier billing); (ii) app developers, who are
`
`22
`
`denied choice on how to process payments and the benefits of innovation in payment
`
`23
`
`processing, and are forced to pay Apple’s tax—set by fiat—rather than by competitive
`
`24
`
`market forces; and (iii) consumers, who are also denied choice and innovation in payment
`
`25
`
`processing and suffer higher prices and inferior service. (Part II.)
`
`26
`
`13. Apple’s anti-competitive conduct in these markets is unchecked;
`
`27
`
`Apple faces little, if any, constraint on its monopoly power in both the iOS App
`
`28
`
`Distribution and iOS In-App Payment Processing Markets, as Apple has foreclosed all
`
`Complaint for Injunctive Relief
`
`
`
`
`4
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 8 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`direct competition in these markets. And Apple stands as the sole middleman between a
`
`vast and dispersed group of iOS users, and a vast and dispersed group of app developers,
`
`each with little power individually to constrain Apple.
`
`14. Further, competition in the sale of mobile devices does not limit
`
`Apple’s market power. The threat of users switching to non-iOS devices does not
`
`constrain Apple’s anti-competitive conduct because Apple’s mobile device customers
`
`face significant switching costs and lock-in to the Apple iOS ecosystem, which serves to
`
`perpetuate Apple’s substantial market power. This power manifests itself in the data, as
`
`Apple is able to gobble up over two thirds of the total global smartphone operating
`
`10
`
`profits. Furthermore, when making mobile device purchases, consumers are either
`
`11
`
`unaware of, or cannot adequately account for, Apple’s anti-competitive conduct in the
`
`12
`
`downstream app distribution and payment processing markets. The cost of app
`
`13
`
`downloads and in-app purchases will play an insignificant (if any) role in swaying a
`
`14
`
`consumer’s smartphone purchase decision. (Part III.)
`
`15
`
`15. Epic is one of the many app developers affected by Apple’s anti-
`
`16
`
`competitive conduct. Epic is a developer of entertainment software for personal
`
`17
`
`computers, smart mobile devices and gaming consoles. The most popular game Epic
`
`18
`
`currently makes is Fortnite, which has connected hundreds of millions of people in a
`
`19
`
`colorful, virtual world where they meet, play, talk, compete, dance, and even attend
`
`20
`
`concerts and other cultural events. Fortnite is beloved by its millions of users. In the
`
`21
`
`first year after Fortnite’s release in 2017, the game attracted over 125 million players; in
`
`22
`
`the years since, Fortnite has topped 350 million players and has become a global cultural
`
`23
`
`phenomenon.
`
`24
`
`16. Epic—and Fortnite’s users—are directly harmed by Apple’s anti-
`
`25
`
`competitive conduct. But for Apple’s illegal restraints, Epic would provide a competing
`
`26
`
`app store on iOS devices, which would allow iOS users to download apps in an
`
`27
`
`innovative, curated store and would provide users the choice to use Epic’s or another
`
`28
`
`third-party’s in-app payment processing tool. Apple’s anti-competitive conduct has also
`
`Complaint for Injunctive Relief
`
`
`
`
`5
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 9 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`injured Epic in its capacity as an app developer by forcing Epic to distribute its app
`
`exclusively through the App Store and exclusively use Apple’s payment processing
`
`services. As a result, Epic is forced, like so many other developers, to charge higher
`
`prices on its users’ in-app purchases on Fortnite in order to pay Apple’s 30% tax.
`
`17. Contrast this anti-competitive harm with how similar markets operate
`
`on Apple’s own Mac computers. Mac users can download virtually any software they
`
`like, from any source they like. Developers are free to offer their apps through the Mac
`
`computer App Store, a third-party store, through direct download from the developer’s
`
`website, or any combination thereof. Indeed, on Macs, Epic distributes Fortnite through
`
`10
`
`its own storefront, which competes with other third-party storefronts available to Mac
`
`11
`
`users. App developers are free to use Apple’s payment processing services, the payment
`
`12
`
`processing services of third parties, or the developers’ own payment processing service;
`
`13
`
`users are offered their choice of different payment processing options (e.g., PayPal,
`
`14
`
`Amazon, and Apple). The result is that consumers and developers alike have choices,
`
`15
`
`competition is thriving, prices drop, and innovation is enhanced. The process should be
`
`16
`
`no different for Apple’s mobile devices. But Apple has chosen to make it different by
`
`17
`
`imposing contractual and technical restrictions that prevent any competition and increase
`
`18
`
`consumer costs for every app and in-app content purchase—restrictions that it could
`
`19
`
`never impose on Macs, where it does not enjoy the same dominance in the sale of
`
`20
`
`devices. It doesn’t have to be like this.
`
`21
`
`18. Epic has approached Apple and asked to negotiate relief that would
`
`22
`
`stop Apple’s unlawful and unreasonable restrictions. Epic also has publicly advocated
`
`23
`
`that Apple cease the anti-competitive conduct addressed in this Complaint. Apple has
`
`24
`
`refused to let go of its stranglehold on the iOS ecosystem.
`
`25
`
`19. On the morning of August 13, 2020, for the first time, Apple mobile
`
`26
`
`device users were offered competitive choice. Epic added a direct payment option to
`
`27
`
`Fortnite, giving players the option to continue making purchases using Apple’s payment
`
`28
`
`processor or to use Epic’s direct payment system. Fortnite users on iOS, for the first
`
`Complaint for Injunctive Relief
`
`
`
`
`6
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 10 of 170
`
`
`
`
`time, had a competitive alternative to Apple’s payment solution, which in turn enabled
`
`Epic to pass along its cost savings by offering its users a 20% reduction in in-app prices
`
`as shown below:
`
`20. Rather than tolerate this healthy competition and compete on the
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`merits of its offering, Apple responded by removing Fortnite from sale on the App Store,
`
`17
`
`which means that new users cannot download the app, and users who have already
`
`18
`
`downloaded prior versions of the app from the App Store cannot update it to the latest
`
`19
`
`version. This also means that Fortnite players who downloaded their app from the App
`
`20
`
`Store will not receive updates to Fortnite through the App Store, either automatically or
`
`21
`
`by searching the App Store for the update. Apple’s removal of Fortnite is yet another
`
`22
`
`example of Apple flexing its enormous power in order to impose unreasonable restraints
`
`23
`
`and unlawfully maintain its 100% monopoly over the iOS In-App Payment Processing
`
`24
`
`Market.
`
`25
`
`21. Accordingly, Epic seeks injunctive relief in court to end Apple’s
`
`26
`
`unreasonable and unlawful practices. Apple’s conduct has caused and continues to cause
`
`27
`
`Epic financial harm, but as noted above, Epic is not bringing this case to recover these
`
`28
`
`damages; Epic is not seeking any monetary damages. Instead, Epic seeks to end Apple’s
`
`Complaint for Injunctive Relief
`
`
`
`
`7
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 11 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`dominance over key technology markets, open up the space for progress and ingenuity,
`
`and ensure that Apple mobile devices are open to the same competition as Apple’s
`
`personal computers. As such, Epic respectfully requests this Court to enjoin Apple from
`
`continuing to impose its anti-competitive restrictions on the iOS ecosystem and ensure
`
`2020 is not like “1984”.
`
`PARTIES
`
`22. Plaintiff Epic is a Maryland corporation with its principal place of
`
`business in Cary, North Carolina. Epic’s mission is “to create fun games we want to play
`
`and to build the art and tools needed to bring those games to life”.
`
`10
`
`23. Epic was founded in 1991 by a college student named Tim Sweeney
`
`11
`
`who was studying mechanical engineering. Mr. Sweeney ran Epic out of his parents’
`
`12
`
`garage and distributed by mail Epic’s first commercial personal computer software, a
`
`13
`
`game named ZZT. Since then, Epic has developed several popular entertainment
`
`14
`
`software products that can be played on an array of platforms—such as personal
`
`15
`
`computers, gaming consoles, and mobile devices.
`
`16
`
`24. Currently, Epic’s most popular game is Fortnite, which has connected
`
`17
`
`hundreds of millions of people in a colorful virtual world where they meet, play, talk,
`
`18
`
`compete, dance, and even attend concerts and other cultural events.
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Complaint for Injunctive Relief
`
`
`
`
`
`
`8
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 12 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`25. Although some video games or other apps require users to pay before
`
`11
`
`they download and use the software, Fortnite is free to download and play. Epic
`
`12
`
`generates revenue by offering users various in-app purchases of in-app content. For
`
`13
`
`example, players who wish to further express themselves within Fortnite through digital
`
`14
`
`avatars, costumes, dances, or other cosmetic enhancements may purchase them within the
`
`15
`
`Fortnite app. Through this model, Epic makes Fortnite widely accessible at no cost to
`
`16
`
`consumers, while earning a return on its artistic and engineering investments through the
`
`17
`
`sale of cosmetic enhancements.
`
`18
`
`
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Complaint for Injunctive Relief
`
`
`
`
`9
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 13 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`26. Fortnite has become a global phenomenon. As noted, in the first year
`
`after Fortnite was released in 2017, the game attracted over 125 million players; in the
`
`years since, Fortnite has topped 350 million players and has become a global cultural
`
`phenomenon.
`
`27. Epic also built and runs the Epic Games Store, a digital video game
`
`storefront through which gamers can download various games, some developed by Epic,
`
`and many offered by third-party game developers. The Epic Games Store is currently
`
`available on personal computers. Epic distributes Fortnite to users of personal
`
`computers—including users of Apple’s own Mac computers—through the Epic Games
`
`10
`
`Store. Epic also distributes other developers’ games for a modest fee through the Epic
`
`11
`
`Games Store. Worldwide, approximately 400 million users have signed up to play Epic’s
`
`12
`
`games, and each day 30 to 40 million individuals log into an Epic game.
`
`13
`
`28. Epic creates and distributes the Unreal Engine, a powerful software
`
`14
`
`suite that allows users to create realistic three-dimensional content including video
`
`15
`
`games, architectural recreations, television shows, and movies. An Epic subsidiary also
`
`16
`
`develops and distributes the popular Houseparty app, which enables video chatting and
`
`17
`
`social gaming on mobile devices and personal computers.
`
`18
`
`29. Defendant Apple is a California corporation with its principal place of
`
`19
`
`business in Cupertino, California. Apple is the largest public company in the world, with
`
`20
`
`a current market capitalization of close to $2 trillion. Apple designs, markets and sells
`
`21
`
`smartphones (including the iPhone), personal computers (including Macs), tablets
`
`22
`
`(including the iPad), wearables and accessories, and sells a variety of related services.
`
`23
`
`Apple also owns and operates the Apple App Store (the “App Store”), including
`
`24
`
`contracting with all app developers that distribute their apps through the App Store and is
`
`25
`
`therefore a party to the anti-competitive contractual restrictions at issue in this Complaint.
`
`26
`
`27
`
`JURISDICTION AND VENUE
`
`30. This Court has subject matter jurisdiction over Epic’s federal antitrust
`
`28
`
`claims pursuant to the Clayton Antitrust Act, 15 U.S.C. § 26, and 28 U.S.C. §§ 1331
`
`Complaint for Injunctive Relief
`
`
`
`
`10
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 14 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`and 1337. The Court has supplemental jurisdiction over Epic’s state law claims pursuant
`
`to 28 U.S.C. § 1367. The Court also has subject matter jurisdiction over the state law
`
`claims pursuant to 28 U.S.C. § 1332 based on the diversity of citizenship of Epic, on one
`
`hand, and of Apple, on the other. Although Epic does not seek monetary damages, the
`
`amount in controversy exceeds $75,000.
`
`31. This Court has personal jurisdiction over Apple. Apple is
`
`headquartered in this District. Also, Apple has engaged in sufficient minimum contacts
`
`with the United States and has purposefully availed itself of the benefits and protections
`
`of both United States and California law such that the exercise of jurisdiction over Apple
`
`10
`
`would comport with due process requirements.
`
`11
`
`32. Further, Apple has consented to the exercise of personal jurisdiction
`
`12
`
`by this Court. Apple is party to an Apple Developer Program License Agreement (the
`
`13
`
`“Developer Agreement”) with Epic. Section 14.10 of the Developer Agreement provides
`
`14
`
`that “[a]ny litigation or other dispute resolution” between the parties “arising out of or
`
`15
`
`relating to this Agreement, the Apple Software, or Your relationship with Apple will take
`
`16
`
`place in the Northern District of California”, and that the parties “consent to the personal
`
`17
`
`jurisdiction of and exclusive venue in the state and federal courts within” the Northern
`
`18
`
`District of California. Section 14.10 further provides that the Developer Agreement “will
`
`19
`
`be governed by and construed in accordance with the laws of the United States and the
`
`20
`
`State of California”. At least some of the claims raised in this Complaint “relate to”
`
`21
`
`Epic’s relationship with Apple.
`
`22
`
`33. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)
`
`23
`
`because Apple maintains its principal place of business in the State of California and in
`
`24
`
`this District, and because a substantial part of the events or omissions giving rise to
`
`25
`
`Epic’s claims occurred in this District. In the alternative, personal jurisdiction and venue
`
`26
`
`also may be deemed proper under Section 12 of the Clayton Antitrust Act, 15 U.S.C.
`
`27
`
`§ 22, because Apple may be found in or transacts business in this District.
`
`28
`
`Complaint for Injunctive Relief
`
`
`
`
`11
`
`
`
`Case 3:20-cv-05640-EMC Document 1 Filed 08/13/20 Page 15 of 170
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`INTRADISTRICT ASSIGNMENT
`
`34. Pursuant to Civil Local Rule 3-2(c), this antitrust case shall not be
`
`assigned to a particular Division of this District, but shall be assigned on a District-wide
`
`basis.
`
`I.
`
`Apple Monopolizes the iOS App Distribution Market.
`
`RELEVANT FACTS
`
`35. To understand how Apple maintains a complete monopoly over the
`
`iOS App Distribution Market, it will be helpful to provide a background on smart mobile
`
`devices and Apple’s control over key aspects of the devices.
`
`10
`
`36. Apple designs, markets, and sells mobile computing devices including
`
`11
`
`smartphones, which it brands as iPhones, and tablets, which it brands as iPads.
`
`12
`
`Smartphones and tablets are portable electronic devices that can connect wirelessly to the
`
`13
`
`internet and are capable of multipurpose computing functions, including, among other
`
`14
`
`things, internet browsing, sending and receiving email, accessing workplace software,
`
`15
`
`editing documents, using social media, streaming video, listening to music, or playing
`
`16
`
`games.
`
`17
`
`37. Similar to laptop and desktop personal computers, mobile devices
`
`18
`
`such as smartphones and tablets require an operating system or “OS” that enables
`
`19
`
`multipurpose computing functionality. An OS for mobile devices (a “mobile OS”), just
`
`20
`
`like the OS of any computer, is a piece of software that provides basic functionality to
`
`21
`
`users of smartphones, such as butto