Epic Games CEO Tim Sweeney is not at all happy with Apple’s new App Store rules, compiling them once again a case of “malicious compliance” and filled with “useless fees”. As reported earlier this week, Apple announced today that it will charge for “uploaded” apps in the EU — that is, apps and games downloaded outside of its own App Store, like what Epic plans to offer. Apple’s new rules, which come into force in the EU as part of the tech giant’s compliance with the bloc’s Digital Markets Act (DMA), target larger developers such as Epic, who must pay 0.50 euros for each installation per year above the 1 million threshold as part of a new “basic technology charge”.
That fee could help Apple make up for losses from no longer hosting apps directly on its App Store, where it currently enjoys a 15% to 30% commission, depending on the size and type of developer.
In the EU, Apple said it would reduce App Store fees to either 17% for digital goods and services or 10% for second-year subscriptions and qualifying small business developers. If apps choose to use Apple’s payment processing technology, they will also be charged an additional 3% fee. Alternatively, developers can choose to stick with Apple’s existing terms – the standard 30% commission, or 15% for small businesses, and the subscription in their second year if they choose. The company provides a fee calculator that will help them decide.
In response to the new rules, Epic Games CEO Tim Sweeney called Apple’s terms “anti-competitive.”
In a post on X, Sweeney writes that Apple is “forcing developers to choose between App Store exclusivity and store terms, which will be illegal under the DMA, or accept a new also illegal anti-competitive system filled with new Junk Fees on downloads and new Apple taxes on payments you don’t process.”
The “junk fees” are a reference to the new “basic technology fee” that covers apps downloaded to users’ devices outside of the App Store and Apple’s payment processing systems.
It seems that Apple’s position is that it is entitled to a commission regardless of how apps are discovered and downloaded because the App Store is not the platform that makes these app-sized businesses possible – rather all of iOS. Arguably, iOS offers quite a large platform for developers, thanks to Apple’s ability to constantly ship new iPhones in response to consumer demand. However, claiming that Apple is entitled Anything installed in its exclusive hardware/software combination is contrary to the intent of the regulation. The DMA was intended to encourage more competition by reducing the App Store’s influence on the app ecosystem. Apple responded by broadening its grip to include the entirety of the iPhone and iOS more broadly.
This certainly puts a dent in Sweeney’s plans to run a profitable game store in the marketplace, as Epic Games will still have to pay Apple for collateral app installs beyond the first million. At €0.50 per install, the number could add up for larger apps with millions of users. (However, Epic said Fortnite will return to iOS in Europe this year, details to come.)
Sweeney also takes issue with the idea that Apple can choose which stores are allowed to compete with its App Store, an apparent reference to Apple’s new “Token Validation” requirements, which Apple claims are necessary to protect users of malware and other security controls. Although Sweeney says Epic has supported the Notarial idea, the company rejects Apple’s use of the process “to undermine competition and continue to tax Apple on transactions they are not involved in.”
Notarization requirements put Apple in control of the apps that end up on users’ iPhones and iPads through third-party purchases. Apple says it plans to encrypt and sign all iOS apps destined for alternative distribution so users can trust they’re getting apps from known sources.
Another surprising requirement associated with alternative app stores is Apple’s rule that providers must show the company €1,000,000 stand-by letter of credit from an “appraisal” financial institution before developers get the right (an exception to its usual rules), to open up the third-party app market. This probably won’t stand in Epic’s way, but it could prevent smaller developers from innovating in this space.
Sweeney’s comments come fresh on the heels of the rulings of two lawsuits where the Fortnite game maker sued both Apple and Google over antitrust concerns. Apple won its case, as the court said it was not a monopoly, but said Apple had to allow app developers to link to their own websites if they wished. Surprisingly, Epic won Google’s case, even though Google today already allows sideloading, probably because the latter was a jury trial, which meant regular people, not judges, had to make the decisions.
Apple responded to this decision as it did with the DMA by “legally” complying with the guidelines, while also imposing its own system of rules, fees and warnings as it saw fit.
Sweeney said he planned to challenge Apple’s “bad faith” compliance with the U.S. District Court ruling.
Regarding the DMA, the announcement reads as follows:
Apple’s plan to circumvent Europe’s new Digital Markets law is an insidious new case of Malicious Compliance.
They force developers to choose between App Store exclusivity and store terms, which will be illegal under the DMA, or accept a new also illegal anti-competitive system filled with new Junk Fees on downloads and new Apple taxes on payments that don’t are processed.
Apple proposes to be able to choose which stores are allowed to compete with their App Store. They could block Epic from launching the Epic Games Store and distributing Fortnite through it, for example, or block Microsoft, Valve, Good Old Games, or new entrants.
The Epic Games Store is the #7 software store in the world (behind 3 console stores, 2 mobile stores, and Steam on PC). We are determined to launch on iOS and Android and join the competition to be the #1 cross-platform software store, based on payment competition, 0%-12% fees, and exclusive games like Fortnite.
Epic has always supported the concept of Apple validation and malware scanning for apps, but we strongly reject the fact that Apple is spinning this process to undermine competition and continue to tax Apple on transactions they are not involved in.
There’s a lot more hot garbage in Apple’s announcement. It will take more time to break down both the written and unwritten parts of this new horror show, so stay tuned.
