Epic Battles in Two-Sided Markets

• Published date: 01 September 2023
• DOI: http://doi.org/10.1177/0003603X231180250
• Author: Brianna L. Alderman,Roger D. Blair
• Date: 01 September 2023
• Subject Matter: Articles

https://doi.org/10.1177/0003603X231180250

The Antitrust Bulletin

2023, Vol. 68(3) 519 –532

© The Author(s) 2023

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DOI: 10.1177/0003603X231180250

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Article

Epic Battles in Two-Sided Markets

Brianna L. Alderman* and Roger D. Blair**

Abstract

Epic Games, the developer of the enormously popular Fortnite, sued Apple for allegedly violating §1

and §2 of the Sherman Act. The central issue was Apple’s requirement that iPhone-compatible apps

be purchased in its App Store. Because Apple collects a 30 percent ad valorem tax on each transaction,

Epic Games offered an alternative payment option to iPhone owners through the Fortnite app so that

consumers could avoid Apple’s 30% fee. When Apple expelled Epic Games from its App Store, Epic

sued. In this article, we examine the flawed analysis of the District Court, which can be traced to a

fundamental misunderstanding of economic principles.

Keywords

antitrust policy, two-sided markets, monopolization

I. Introduction

Epic Games developed the enormously popular Fortnite, which has some 400 million registered play-

ers. Initially, Fortnite was played on game consoles such as Sony’s PlayStation and Microsoft’s Xbox,

as well as desktop and laptop computers. When Epic moved Fortnite into the mobile games space, it

began its relationship with Apple.

Before its expulsion from Apple’s App Store, Epic Games (Epic) conducted its business on the plat-

form provided by Apple. It participated in a two-sided market with app developers on one side and

iPhone owners on the other side of the market.1 Epic made in-app sales directly to the Fortnite players,

but all in-app sales had to pass through Apple’s App Store. Apple charges an ad valorem commission

on each transaction in its App Store. Epic objected and tried to provide its customers with other

payment options in violation of its contract with Apple. When Epic and Apple could not reach an

accommodation, Apple expelled Epic, which meant that Fortnite was no longer available to iPhone

owners in the App Store. In response, Epic filed an antitrust suit.2

*Theodore H. Ashford Fellow, Department of Economics, Harvard University, Cambridge, MA, USA

**Professor, Department of Economics, University of Florida, Gainesville, FL, USA; Affiliate Faculty, Levin College of Law,

University of Florida, Gainesville, FL, USA

Corresponding Author:

Brianna L. Alderman, Theodore H. Ashford Fellow, Department of Economics, Harvard University, 1805 Cambridge St,

Cambridge, MA 02138, USA.

Email: briannaalderman@g.harvard.edu

1180250ABXXXX10.1177/0003603X231180250The Antitrust BulletinAlderman and Blair

research-article2023

1. With some modification, the present analysis applies to Epic’s dispute with Google, Epic Games, Inc. v. Google LLC

(3:20-cv-05671).

2. Epic Games, Inc. v. Apple Inc. 20-cv-05640-YGR.