Video game ‘Fortnite’, another battle in the trade war between the United States and China

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On July 29, the four leaders of the most powerful technology companies in the world attended the United States Congress. Mark Zuckerberg (Facebook), Jeff Bezos (Amazon), Sundar Pichai (Microsoft) and Tim Cook (Apple) testified for hours before the subcommission in charge of investigating the dominance imposed by these digital giants and possible oligopolistic practices. Little attention was drawn to the confrontation between Republican Hank Johnson and Cook about the operation of the App Store.

– Is the reduction in commissions, like the one obtained by Amazon Prime since April, is it available to other application developers ?, the congressman asked.

– It’s available to anyone who meets the conditions, replied Cook.

Epic Games logo at the GDC Game Developers Conference on March 20, 2019 in San Francisco, California.
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– Has Apple ever retaliated or disadvantaged a developer who went public with their frustrations with the App Store?

– We neither retaliate nor harass people. It is totally against our corporate culture.

Three weeks later, those commissions that tiptoed through Congress have unleashed a dogfight between Apple and Google, on the one hand, and Epic Games – developer of Fortnite , a video game with a community of 350 million around the world, according to the Statista portal. The official complaint: 30% that are pocketed by payments made by users while using the apps available on Google Play and App Store. A complaint that was accompanied by the launch by Epic Games of its in-game payment platform, and for which it charges 12% to third parties. Amid these accusations of monopolistic practices, the escalation of tension has already left Fortnite out of mobile and Twitter campaigns under the #FreeFortnite.

The trade and technology dispute between the United States and China opens an additional front . 40% of Epic Games belongs to Tencent, one of the largest Chinese giants, global dominator of the gaming industry and of almost everything that sounds like the Internet in its country. Although the control of the developer remains in the possession of its CEO and founder, Tim Sweeney, as Guillermo de Haro, professor of the IE systems area explains, we are facing another episode of the conflict between both powers. “It’s a strange move by Epic Games, but they have enough head to know the financial risk involved in getting off these platforms.”
Faced with this geopolitical drift, the creators of Fortnite present themselves as a defenseless David – he generates 254 million euros a month, according to Superdata – in the fight against the all-powerful Goliath of Cupertino. It even seeks to appropriate Apple’s initial values. As soon as the conflict broke out, he posted a video on his social networks and in-game in which he parodied Apple’s 1984 ad , which he used to criticize IBM’s monopolistic conduct. “It is a marketing strategy thought to the millimeter. They appear as the saviors of the world. They knew what was going to happen as soon as they released their payment platform, that’s why they had prepared the video, ”says Loreto Gómez, an expert in digital marketing.

None of the steps are guided by chance. The campaign against the commissions is so marked that, at least in Gómez’s words, it is also worth looking at a direct rival that emerged just over two weeks ago : Fall Guys . It has millions of downloads, has surpassed the number of viewers on Twitch to the Epic Games game and the industry does not stop paying attention to it. Despite Fortnite’s vertigo figures , the truth is that it has never felt so much competition. The style of both titles has nothing to do with it, but the target audience is similar. “This is a business that brings them a lot of money. They want more of the pie ”, ditch.

Usual commissions

Commissions are part of the rules of the game imposed by the platforms. What the video game developer denounces as abusive is the usual percentage in the sector. Microsoft, Sony, Nintendo and Steam work with the disputed figure of 30% – Apple and Google cut it in half for developers who have been in their stores for more than a year. If we look at other sectors, the number shoots up. Amazon takes half of purchases and rentals on Prime Video and 65% of publications on Kindle that cost more than $ 10; StubHub 37% of ticket resale; Google 45% of YouTube ads; and Kobo up to 68% of audiobooks. “For a startup , reducing these percentages can mean the difference between dying or persisting,” says De Haro.

Epic Games’ strong market position has allowed it to make a move, but, so far, no other draft names have joined the fray. These small business attacks seek to supplant political inaction for two decades in the face of the creation of a natural digital oligopoly – “Apple and Google have changed the conditions of service countless times,” says De Haro. The tech big are under the public microscope. There is a stir around it, although it needs more proper names to be planted in order to prosper. “If more and more organizations enter this game, they are upset, maybe they will get Apple to change its policies,” he says.

However, the tiny rift opened by Fortnite has a rated impact. In this contest, everything seems very calculated. 22% of all users play on mobile phones and only an unspecified part of the 17.8% that those in Cupertino invoice for their services comes from the App Store (10.5% on Google Play), according to the data by Visual Capitalist. “Everything related to fees or commissions in the marketplace , the authorities flee from regulating it. They are looking for self-regulation ”, reasons Xavier Ribas, a lawyer at Rivas y Asociados, an expert in digital law.

Legal tour

What has led to the exchange of blows is still the complaint of abuse of a dominant position. It was the first tab that started this domino of world consequences and whose prognosis is the most uncertain. Aware of this, Sweeney himself has promised that it will be a “hellish battle.” The journey seems long. Ribas indicates that, for Epic Games to prosper in the courts, it has to prove two issues: the commissions harm the final consumer and these practices distort competition due to lack of competition in the market. “The burden of proof rests with Epic Games, not Apple. It has to show that this oligopoly harms free competition ”.

Court records don’t help. The US Supreme Court has always ruled in favor of the apple . The most recent ruling is from May 13 of last year, when it dismissed the lawsuit for monopolistic behavior of the App Store in the so-called Apple vs. Pepper case . After a careful deliberation, resolved only by a vote of difference, the Supreme Court determined that those who buy in this mobile store are direct buyers of application developers, so they cannot sue Apple for monopolizing the market and increasing prices.

In Europe, it is less rare that competition issues do not lead to some type of administrative sanction. The European Commission is used to being on top of the behavior of big technology. Google, Intel, Qualcomm and Microsoft, among others, have been fined for abusing their dominant position. Those of Mountain View, without going any further, hold the record with two penalties totaling almost 6,800 million euros . “Apple and Google are very powerful. The normal thing is that you leave scalded. Epic Games has broken the ice. Now it remains to be seen what position the Federal Trade Commission adopts ”, concludes Ribas.

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