To mark the moment the European Union’s new antitrust law on big tech comes into effect, Tim Cook’s Apple has decided to test its limits with an extraordinary escalation of its long-running feud with Tim Sweeney’s Epic Games.
The Digital Markets Act (DMA) introduces many new obligations for so-called “gateway” services that connect businesses and consumers, and the iPhone operating system iOS and its App Store are classified as such.
So, as of Thursday, Apple is required to allow third-party app stores on iPhones — a move that will allow developers to distribute apps without having to give Apple a large portion of the transactions conducted within them.
Epic planned to become one of the first major players to launch an iOS app store, but on Wednesday Fortnite the manufacturer revealed that Apple blocked the move by terminating the developer account that Epic’s Swedish subsidiary had set up to launch the store, which provides Epic’s games on Apple’s App Store.
“This is a serious violation of the DMA and shows that Apple has no intention of allowing real competition on iOS devices,” Epic wrote in a blog post. “By ending Epic’s developer account, Apple is removing one of the biggest potential competitors to the Apple App Store.”
The revelation quickly drew a response from the European Commission, which will directly enforce the DMA, which said it had asked Apple for “further explanations” under the new law.
A long-standing feud
To understand what just happened, we need to go back to the beginning of the decade when Epic and Apple started a fight over the issue of in-app payments, which traditionally gave Apple a 30% cut on the iOS platform.
Epic, which has long railed against this reduction, deliberately made the changes in the iOS version Fortnite in August 2020 so that in-app purchases could bypass Apple’s payment system in favor of Epic’s.
This violated Apple policy, but Epic claimed it was doing it to pass the savings on to its users.
Apple has removed Fortnite from the App Store. Epic sued. Apple countersued and (mostly) won that fight, with a California court ruling in September 2021 that Apple has the right to terminate any developer account associated with Epic at its “sole discretion.”
Epic had to pay Apple $3.65 million in damages for breach of contract. (Apple also recently launched an attempt to claim more than $73 million in legal fees stemming from the case, which Epic is fiercely resisting.)
Fast forward to the end of January this year.
With DMA’s debut just over a month away, Apple has announced that it will allow third-party iOS app stores, but that any developer distributing the app through the new channels will have to pay a new €0.50 ($0.54) ” core technology fee” for each first install of that app, regardless of whether that install is through a third-party store or Apple’s own App Store.
Alternative app store downloads alone would also trigger a fee to be paid by app store developers.
Apple’s move sparked an apoplectic reaction from many companies that planned to launch their own iOS app stores—Meta and Microsoft are lobbying hard in Brussels to rule it out of DMA—but Epic’s CEO, Sweeney, was the first to speak out.
“They’re forcing developers to choose between App Store exclusivity and store terms, which will be illegal [the] DMA, or accept a new also illegal anti-competitive scheme replete with new spam fees,” Sweeney wrote on X is Jan. 25.
‘Undercut’ guarantees
Despite its protests over Apple’s “malicious compliance” with the DMA, Epic said it would accept Apple’s terms and launch an iOS app store in Europe.
However, on February 23, Apple CEO Phil Schiller wrote to Sweeney – Epic released the email exchange yesterday – to point out that Epic had previously “entered into agreements with Apple and then breached them”.
Schiller noted Sweeney’s “vivid critique of our DMA compliance plan” and said it “strongly” suggests that Epic will once again terminate its developer agreement with Apple.
Schiller asked Sweeney for “a written assurance that you are also acting in good faith and that Epic Games Sweden, despite your public actions and rhetoric, will honor all of its obligations.”
Sweeney quickly responded: “Epic and its affiliates act in good faith and will abide by all terms of current and future agreements with Apple, and we will be happy to provide Apple with any additional assurances on the subject matter you desire.”
Three days later, Sweeney again took to X to accuse Apple of “contradictions between their stated principles and the intended and actual consequences of their current policies,” adding that its rival is “a few bold and visionary decisions away from being the company it once was and still advertises itself to be: a beloved commodity a brand to consumers, a partner to developers, and a master to no one.”
In a March 2 legal letter released by Epic yesterday, Apple cited the post as partial justification for its decision to cancel the account of developer Epic Games Sweden, which was supposed to operate the mobile Epic Games Store and Fortnite in Europe.
In the letter, Apple’s lawyers said Sweeney’s “litany of public attacks on Apple’s policies, compliance plan and business model” had “undermined” his “minimal assurances” to Schiller. Citing a 2021 California ruling that gave Apple the right to unilaterally cancel all contracts with Epic developers, they announced that Apple is doing just that.
“Epic’s egregious breach of its contractual obligations to Apple has led the courts to find that Apple has the right to terminate ‘any or all subsidiaries, affiliates and/or other entities controlled by Epic Games’ at any time and in Apple’s sole discretion.’ “In light of Epic’s past and present conduct, Apple has decided to exercise this right,” Apple said in a statement.
In its post yesterday, Epic said that Apple is “undermining our ability to be a viable competitor and to show other developers what happens when you try to compete with Apple or are critical of their unfair practices.”
Commission testing
Apple will likely have a hard time convincing the Commission that the US court’s ruling gives it the right to undermine the DMA’s key board just as the new law takes effect.
For starters, Apple’s whole approach to DMA compliance—the very thing Sweeney protested loudly—was downright snarky.
When it announced the changes it was making to comply, Apple did so while complaining that they “bring greater risks to users and developers.”
Then, in February, Apple used another new DMA requirement — to allow developers of third-party browsers like Chrome to avoid using Apple’s WebKit browser engine — as an excuse to once again kill web apps on the iOS home screen in the name of security.
That would remove another avenue for developers who want to avoid Apple’s reduction in in-app payments, and the Commission quickly threatened an investigation, forcing Apple to change its plan.
Then, ending a pre-DMA case in which Spotify was the plaintiff, the Commission fined Apple $2 billion on Monday for preventing streaming app developers from telling their iOS users that they could get cheaper subscriptions outside of Apple’s platform—which is possible because , again, a way to avoid Apple’s big subscription cuts.
Apple has to give up this “anti-governance” tactic under the DMA anyway and, when it announced its appeal, it accused the Commission of trying to “enforce the DMA before the DMA becomes law.” He also accused Spotify and the Commission of “coordination” in the case.
So Apple and the Commission were already at war before this latest Epic episode.
In response to Epic’s revelation, the Commission not only said it was investigating the case under the DMA — it also said it was “evaluating whether Apple’s actions raise doubts about their compliance” with the two else law, the Digital Services Act (DSA) and the Platform for Business (P2B) Regulation.
The still-brand-new DSA is a sister law to the DMA, covering the platforms’ content rather than their competitive practices—it’s the law under which the Commission recently opened investigations into X (related to misinformation) and TikTok (related to child protection and transparency advertisement). )
In this case, the Commission wants to know whether Apple’s termination of the account of developer Epic Games Sweden constituted an infringement.
“DSA sets requirements for clear, transparent terms and conditions, without arbitrary application of these terms and conditions, giving statements about the reasons in case of decision-making and the possibility of complaints and legal protection,” said the spokesperson of the Commission in an email. “If content is moderated and accounts are temporarily suspended or permanently terminated, it must be proportionate and in accordance with fundamental rights.”
As for the P2B regulation, the problem is that the platform must “notify the business user … before the account is terminated,” the spokesperson said. It’s not hard to see how Apple might have failed this test when its lawyers sent Epic that letter telling it that its developer account in Sweden had been terminated “effective immediately.”
But perhaps the biggest problem with Apple’s justification for ending Epic’s app store is the fact that Sweeney’s criticism of Apple’s rules is something the Commission effectively sought.
Over the past few months, it has been clear that changes that companies make to comply with the DMA will be evaluated by taking into account “market feedback”—that wants affected companies to have their say, and now Apple is punishing Epic for it.
The commission still hasn’t said what it thinks about Apple’s new “core technology fee,” but it won’t do so before Thursday anyway. Given the way Apple has behaved in recent weeks, it’s hard to see how the company isn’t looking for bruises.
This story was originally published on Fortune.com