‘Fortnite’ and Epic now have much bigger problems than Apple

• Epic Games is currently engaged in a heavily publicized legal battle with Apple over Fortnite, which is currently unavailable on iPhone, iPad, and Mac following Epic’s App Store violations.
• Epic now has to deal with a much bigger problem than the antitrust action against Apple. The US government is supposedly investigating how various US companies handle personal data security, Epic included.
• Chinese conglomerate Tencent holds either majority or minority stakes in these companies, including a 40% stake in Epic.

Epic Games has started a battle that it knows it can’t win — at least not yet. The company quietly updated the Fortnite app for iPhone and iPad with code that enabled Epic’s payments option for in-app purchases. Apple promptly banned the app, and Epic then unleashed a PR campaign against the iPhone maker while simultaneously suing Apple and Google on anticompetitive grounds.

In the days that followed, we learned that Apple went even further than banning the app, telling Epic that it would revoke its developer accounts for both Fortnite and the Unreal Engine. Epic tried to stop this with a temporary restraining order but lost the battle on Fortnite. The judge said those were self-inflicted wounds that Epic could fix on its own if it wanted to. But the verdict also noted that the Unreal Engine should not be affected. Epic continued its PR campaign, claiming Apple was solely at fault, and making it clear it would not budge. Apple revoked the Fortnite developer account without blinking, and now the game is unplayable on iPhone, iPad, and Mac. A new hearing in the case is scheduled for September 28th, and the fates of both Fortnite and Unreal are still in play.

It turns out that the Apple lawsuit isn’t even Epic’s most pressing problem right now. The company might have a bigger adversary than that in the form of the US government.

There’s no question there’s some merit for Epic’s antitrust suit targeting Apple if you remove all the PR smoke and lies that Epic peddles. The App Store rules may need changing, including the tax that Apple gets for digital purchases. And the US government might have a say in all of that at some point in the future, and that sort of decision might impact other digital stores as well, including Google Play and games storefronts on consoles.

But before we even get to that, Epic will have to face the government for a different reason: China.

Tech conglomerate Tencent holds a 40% stake in Epic Games, and it owns Riot Games. It also has stakes in other US companies, including Activision Blizzard, Discord, Reddit, and Snap. Bloomberg reports that the Trump administration has now asked companies to provide information about user data security.

The Committee on Foreign Investment in the US (CFIUS) has sent letters to Epic, Riot, and Blizzard, asking them about security protocols involving the personal data of American customers.

This is just another escalation in Trump’s war against China following the administration’s moves against popular Chinese apps TikTok and WeChat. The latter is also a Tencent creation.

From its inception, CFIUS has been investigating foreign acquisitions of American businesses for national security risks. The committee has the authority to examine full acquisition and minority stakes and make recommendations to the president to block and unwind deals.

“When you’re talking about massive amounts of data, there’s probably something for the committee to look at,” Aimen Mir told Bloomberg. Mir ran CFIUS reviews at the Treasury Department when he was the deputy assistant secretary for investment security. “The question then becomes is the risk high enough that it actually warrants forcing deals apart.” He also said that the committee has traditionally looked at protecting sensitive data like health, financial, and government-employee information, but it’s now expanding its reach.

It’s unclear what can happen going forward. Bloomberg Intelligence speculates that Tencent runs the risk of forced divestment similar to ByteDance’s TikTok. Bloomberg says that Tencent’s US assets could be worth at least $22 billion. The Trump administration urged tech companies to consider buying the US side of the TikTok business, with Oracle being the front-runner after Microsoft dropped out. ByteDance sued the administration.

The Commerce Department is expected to announce more information about the scope of WeChat and TikTok restrictions on September 20th, with Reuters already reporting that the Trump administration is about to block US downloads of both apps.

Regardless of how long the Epic vs. Apple fight takes, Epic might first have to face the Tencent problem well before that. The Reuters report does note that the action against WeChat and TikTok will not affect Tencent’s other businesses, including its online gaming operations.

Chris Smith started writing about gadgets as a hobby, and before he knew it he was sharing his views on tech stuff with readers around the world. Whenever he's not writing about gadgets he miserably fails to stay away from them, although he desperately tries. But that's not necessarily a bad thing.