Tuesday, October 13, 2020

Class action complaint against Apple over offering Apple Arcade while not allowing Microsoft xCloud, Google Stadia, Facebook Gaming, GeForce Now

App distribution antitrust cases--especially class actions--are springing up like mushrooms now. A few days ago I was wondering about the connection between Epic Games CEO Tim Sweeney and Bonny Sweeney, a San Francisco-based antitrust lawyer suing Google over its Google Play terms on an indie app developer's behalf. But there's also a new case against Apple. It was filed five days ago and I just became aware of it because it was referenced in a case management statement. The new complaint is Pistacchio v. Apple and alleges that consumers overpaid for Apple Arcade because of Apple not allowing allegedly competing services such as Google Stadia, Microsoft's xCloud, Facebook Gaming, and Nvidia's GeForce Now (this post continues below the document):

20-10-08 Pistacchio v. Appl... by Florian Mueller

As the aforementioned case management statement notes, the Pistacchio case appears to be related to the other App Store cases already pending in the Northern District of California (Epic Games v. Apple, Pepper v. Apple, and Cameron v. Apple. Presumably it will soon be assigned to Judge Yvonne Gonzalez Rogers. And then the question will be what implications this will have for the schedule. Potentially, this new case could even cause a delay for Epic Games v. Apple.

In addition to its own Google Stadia service, Google does allow xCloud (Xbox Game Streaming), Facebook Gaming, and GeForce Now on Android. Whether the unavailability of those alternative game services on iOS actually results in Apple Arcade games being more expensive is going to be hard to prove--but without evidence that there is such an effect, the theory of harm will be limited to the vague notion of "limited choice, stymied innovation, and reduction of quality of service associated with subscription-based mobile gaming services on iOS" (para. 16 of the Pistacchio complaint).

As always in antitrust cases, and especially in those app distribution cases, market definition is the single most important question. The Pistacchio complaint is centered around a very narrow one, the "iOS Subscription-Based Mobile Gaming Market." Why only iOS and not including other platforms? Why only "mobile" when gamers play on all sorts of devices? Why only "subscription-based" when gamers actually have the choice between free-to-play games with in-app purchases, free-to-play games without in-app purchases, free-to-play games with optional subscriptions, pay-for-download games, and so forth?

In the Pepper case, the Supreme Court basically sidestepped the Illinois Brick doctrine regarding indirect purchasers' antitrust standing by holding that consumers are direct purchasers from Apple, also paving the way for the Pistacchio complaint:

"When [Pistacchio] and the Class purchased Apple Arcade, they did so directly through the App Store and paid Apple directly, using their credit card or other payment sources."

This new complaint also tries to get mileage out of the recent Congressional report, Investigation of Competition in Digital Markets, and the ongoing European Commission investigation of Spotify's complaint against Apple. By the way, there is a discovery dispute between Apple and counsel for the plaintiffs in the earlier-filed class actions over whether any documents Apple provided to the European Commission must be produced in the private U.S. antitrust actions in the Northern District of California. That one may have to be resolved by the court.

The Pistacchio complaint was filed on the same day on which Microsoft made a public statement on app distribution terms (seeking to distinguish Microsoft's own Xbox developer terms from mobile app stores on the basis that console hardware is less profitable, a theory that Judge Gonzalez Rogers has meanwhile rejected in the Epic case as being unsupported by antitrust case law and which long-standing Microsoft critic Dr. Roy Schestowitz dismisses as "Microsoft 2020 Spin: We're a Tiny Little Startup Challenging Giant and Evil Monopolies"). But the Pistacchio complaint quotes an earlier and shorter statement by Microsoft:

"[W]e do not have a path to bring our vision of cloud gaming with Xbox Game Pass Ultimate to gamers on iOS via the Apple App Store. Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass."

But the complaint mentions an example in which a game streaming app ultimately was approved by Apple after complying with the App Store terms: Steam Link.

Two months ago Epic CEO Tim Sweeney even predicted that "games with user created modes" (I guess that's a typo and he meant "mods") such as Fortnite, Minecraft (which belongs to Microsoft), and Roblox would be affected by a change in Apple's App Store guidelines (this post continues below the tweet):

So far, only Fortnite has run into problems, but not because of mods. It was removed as a result of Epic's strategic decision to fall out of compliance with the App Store rules.

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