Published on January 25, 2024, 5:20 pm
Epic Games CEO, Tim Sweeney, has expressed his dissatisfaction with Apple’s new rules for the App Store, dubbing them “malicious compliance” and filled with what he refers to as “junk fees.” These rules, which will be implemented in the European Union (EU) as part of Apple’s compliance with the bloc’s Digital Markets Act (DMA), target larger developers like Epic.
Under the new rules, Apple will charge fees on “sideloaded” apps – apps and games downloaded from outside the official App Store. This includes apps that Epic wishes to offer through its own platform. The fees include a new “core technology fee” of €0.50 per install per year for developers crossing a 1 million threshold.
Apple claims that these fees will help recover losses resulting from hosting apps directly on the App Store. Currently, Apple charges developers a commission ranging from 15% to 30% based on their size and type. In response to these changes, Apple has announced it will lower its commissions in the EU to either 17% for digital goods and services or as low as 10% for subscriptions in their second year. Developers using Apple’s payment processing technology will also face an additional 3% fee.
Tim Sweeney accuses Apple of anti-competitive behavior and argues that forcing developers to choose between App Store exclusivity or accepting the new terms violates the DMA regulations. He further criticizes what he calls “new Junk Fees on downloads and new Apple taxes on payments they don’t process.”
Sweeney specifically refers to the “junk fees” as part of a core technology fee imposed by Apple on apps downloaded from sources other than their own store or payment systems. While iOS provides a significant platform for developers due to consumer demand generated by iPhone sales, claiming entitlement over all installations pushes against the purpose of DMA regulations aimed at encouraging competition within the app ecosystem.
These changes frustrate Sweeney’s plans to run a profitable game store in the market, as Epic Games will still have to pay Apple for sideloaded app installs beyond one million downloads. With each install priced at €0.50, larger apps with millions of users could face substantial costs.
Sweeney also criticizes Apple’s ability to choose which stores can compete with their App Store, referring to the new “Notarization” requirements. While Epic supports the idea of Notarization for security purposes, the company rejects Apple’s use of this process to undermine competition and impose taxes on transactions they are not involved in.
Further requirements related to alternative app stores include Apple’s demand for a stand-by letter of credit worth €1 million from an “A-rated” financial institution before developers can open their third-party app marketplace. Although this may not impede Epic, it could hinder smaller developers from innovating in this space.
Sweeney’s comments come following two lawsuits against Apple and Google over antitrust concerns. While Apple won its case and was declared not a monopolist, it was required to allow app developers to link to their own websites. In contrast, Epic won the case against Google, possibly resulting from being a jury trial where decisions were made by regular people instead of judges.
Apple responded to both rulings by complying with the guidelines while imposing its own set of rules, fees, and caveats as it saw fit. Sweeney intends to challenge what he calls Apple’s “bad-faith” compliance with a U.S. District Court ruling.
Regarding DMA regulations, Sweeney states that Apple’s plan is a devious form of malicious compliance. He accuses the company of forcing developers into choosing between App Store exclusivity or entering an anti-competitive scheme filled with junk fees and additional taxes on payments they do not process.
Sweeney asserts that Apple believes it can determine which stores are allowed to compete with its App Store. This could potentially block Epic Games and other contenders like Microsoft, Valve, Good Old Games, and new entrants from launching their own stores or distributing their apps. Despite the challenges, Epic is determined to launch its store on iOS and Android and compete to become the number one multi-platform software store based on payment competition, low fees ranging from 0% to 12%, and exclusive games such as Fortnite.
Sweeney concludes by stating that Apple’s announcement contains many unfavorable aspects that will require further analysis. He advises interested parties to stay tuned for more information about this ongoing situation.