Restrictive contracts fuelled profits for Google and Apple and led to higher prices for app users, the firm behind the popular game Fortnite has claimed in a landmark court case.
Epic Games has filed two lawsuits against the tech giants, claiming they engaged in anti-competitive and unconscionable conduct against those developing apps distributed through iOS and Android devices.
"Epic is not alone in harbouring dissatisfaction with the anti-competitive conduct that Apple and Google have been engaging in," the firm's barrister Neil Young QC said on Monday.
As a 61-day Federal Court hearing started, Mr Young said Apple's conduct stifled competition, leading to higher prices for consumers.
"If the contravening conduct is removed, there will be a vast improvement in the competitive position," he told the court.
This included more efficient app review processes, better ways of discovering apps and higher security, he said.
But Apple had rigorously enforced its terms and conditions, forcing apps to strip out functionality or removing software from its App Store entirely.
Apple required the use of its exclusive payment system through which it charged a commission of up to 30 per cent for purchases of digital goods, the court heard.
"(Apple has) rejected thousands of applications for violating that prohibition concerning only using (its system) and not giving users a choice of an alternative payment system at a much-lower cost," Mr Young said.
Epic, which runs its own software business, charged a commission of 12 per cent through a non-mandatory payment system, he said.
After this payment system was introduced into Epic's Fortnite game in August 2020, it was promptly removed from Apple's App Store and Google's Play Store.
This meant users could not download Epic's apps from those stores or update apps, Mr Young said.
In its lawsuits, Epic is seeking injunctions barring Apple and Google from certain conduct as well as a number of declarations by the court.
It is not seeking damages.
"(Epic) has been motivated to produce system-wide changes that enhance competition for the benefit of all developers, itself included, but not just itself," Mr Young said.
The barrister said the launch of the Epic Games Store in December 2018 brought competition with the dominant PC games provider Steam and led to lower commissions.
Steam reduced its own commissions by 10 per cent and Microsoft matched the 12 per cent Epic offered, Mr Young said.
Microsoft also abandoned a requirement to use its own payment system, he said.
"That's the real-world evidence ... of what happened in relation to PCs when competition broke down these artificial restrictions."
Justice Jonathan Beach heard Google and Apple claimed their restrictions were required to protect the privacy and security of users.
But Mr Young questioned Apple's insistence the restrictions to its own payment platform were necessary, pointing out Google allowed Android users to download apps from multiple app stores, including directly from third-party websites.
"Remarkably the existence of those two alternatives in Google and Android did not cause the sky to fall in on Android, yet Apple contends the availability of such alternatives would have that consequence for iOS."
An Apple spokesperson accused Epic of trying to "redo" a 2021 case it lost in a US district court - and later an appellate court in January - that mostly ruled in favour of the tech giant, finding it had not violated anti-trust laws.
"Under the guise of competition law, Epic is now asking an Australian court to grant it a free and unfettered licence to use Apple's intellectual property to enhance its own bottom line at the expense of the user experience and other developers," he said.
"The evidence we present in court will once again substantiate that the App Store business model provides a safe and trusted place for users and a pro-competitive business opportunity for all developers."
Epic won a separate US case against Google in December after a jury found it had engaged in anti-trust conduct through the Google Play Store.
The Federal Court hearing continues on Tuesday.
