Class Action Claims Apple Unlawfully Blocked Microsoft, Facebook, Google from iOS Subscription Gaming Market [UPDATE]
Last Updated on March 31, 2021
Pistacchio v. Apple Inc.
Filed: October 8, 2020 ◆§ 5:20-cv-07034
An antitrust class action alleges Apple engaged in a series of anti-competitive acts upon its launch of the "Apple Arcade" subscription-based mobile gaming service.
Case Updates
March 11, 2021 – Lawsuit Dismissed
The lawsuit detailed on this page has been dismissed after the judge ruled that the plaintiff’s antitrust claims “rest on an insufficiently pled narrow product market.”
In a March 11 order, found here, U.S. District Judge Yvonne Gonzalez Rogers found that the plaintiff’s relevant market definition suffers from “numerous deficiencies” and “sparse supporting allegations.” More specifically, the complaint offers no specific allegations supporting a market definition focused solely on cloud gaming alternatives rather than video games in general or the narrowing of the market to a subscription-based payment model, the judge wrote.
Moreover, the judge noted that the plaintiff had failed to address “his own admissions and allegations” that competitors such as Microsoft, Facebook and Google could still reach iOS customers with their services using an internet browser, a web application or a remote desktop or by following Apple’s own guidelines and letting customers download games individually.
“[The plaintiff] alleges that Apple has placed certain restrictions on subscription cloud gaming or game streaming services, but concedes that workarounds do in fact exist to reach these same iOS consumers,” Judge Gonzalez Rogers wrote.
The order further states that the plaintiff’s complaint is “wholly lacking” substantive allegations regarding the allegedly supracompetitive pricing, noting that “[s]uch a bald conclusory statement is insufficient.”
Judge Gonzalez Rogers wrote that although she is “doubtful” that the plaintiff can address “the fundamental inadequacies” of the complaint, she granted him until March 30 to file an amended complaint. The plaintiff filed a notice of voluntary dismissal on that date.
Apple, shortly after launching its “Apple Arcade” mobile gaming service in September 2019, moved quickly to monopolize the subscription-based game market through “a series of anti-competitive acts,” including blocking Microsoft, Facebook and Google from offering similar services through the App Store, a proposed class action claims.
The 39-page antitrust complaint alleges Apple’s conduct in rolling out the “Apple Arcade” has “foreclosed competition” in the iOS subscription-based mobile gaming market as the company essentially appointed itself as the only entity therein that’s allowed to offer subscription-based games on Apple devices via the App Store.
“There are no pro-competitive justifications for excluding other subscription-based mobile gaming services from the market or any of Apple’s other misconduct, ” the suit contends.
The plaintiff, an Essex County, New Jersey iPhone user who subscribed to the Apple Arcade for $4.99 per month, says he and proposed class members have been forced to pay “supracompetitive prices” for Apple Arcade as a result of the company’s conduct. Moreover, Apple’s apparent grip on the subscription-based mobile gaming market, and more broadly its position as “gatekeeper” of the “walled garden” that is the App Store, has erased consumer choice, stunted innovation and reduced service quality, according to the complaint.
Per the lawsuit, mobile games pull in substantially more revenue than other kinds of apps given consumers are more willing to both pay for games and make in-app purchases. Although multiple companies have developed subscription-based mobile gaming services designed to run on Apple’s iOS operating system, the company has “blocked its competitors from launching these products” given they would compete with the Apple Arcade, the suit alleges.
At the time of its launch, Apple Arcade offered 100 new games accessible to players across all of their Apple devices, the case relays. Shortly thereafter, Google, Facebook and Microsoft developed similar subscription-based gaming models, with Google launching its “Stadia” service with 30 games in November 2019, the suit states.
One Stadia payment tier allowed users to access their games across multiple devices, according to the lawsuit. iOS users, however, are blocked by Apple from using this feature, the complaint says.
“While iOS users can download the Stadia app from the App Store to manage Stadia on other devices, Apple blocked users from being able to play games on iOS claiming that Stadia violated the App Store Review Guidelines,” the suit reads, noting that Apple has since confirmed it will not allow the full version of Google’s Stadia app to be available through the app store.
Apple engaged in similar conduct with Facebook when the social media giant launched its own service, called Facebook Gaming, for $4.99 in April 2020, the case alleges. Recognizing the direct competition, Apple boxed Facebook Gaming out of the App Store until Facebook “agreed to strip the game-playing feature entirely from the iOS version of its app,” per the case.
“Facebook Gaming only became available to iOS users in August 2020—four months after its initial launch and stripped of the very feature that threatened Apple Arcade,” the lawsuit says.
With regard to Microsoft, the complaint says the company was “ultimately forced to abandon” its Project xCloud subscription-based gaming service amid beta testing for an iOS-compatible version when Apple “refused to allow xCloud in the App Store.” From the complaint:
“A Microsoft spokesperson announced ‘we 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.’”
In all, despite the fact that more mobile games are available to consumers than ever before, more than a billion Apple device users are left to rely on Apple Arcade to the exclusion of similar services blocked by the defendant, the lawsuit alleges.
“By foreclosing all competition, Apple has extinguished Plaintiff’s and the Class’s freedom to choose between subscription services, caused reduced innovation and quality of service, and caused Plaintiff and the Class to pay more for Apple Arcade than they otherwise would have in a competitive market,” the case asserts.
Apple is no stranger to antitrust litigation. Developers alleged in a proposed class action filed in June 2019 that the company has sought to squash competition for platforms that may sell their apps, while another case filed days later presented similar allegations. This week, it was reported that a bench trial will begin on May 3, 2021 in the fight between Apple and Fortnite maker Epic Games, who’s alleged the company’s in-app purchase restrictions financially harm game developers.
The lawsuit aims to represent U.S. residents who directly paid a subscription fee to Apple for Apple Arcade from September 19, 2019 through such time as the “anticompetitive effects” of Apple’s alleged conduct have ceased.
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