Epic Games CEO calls out Apple's DMA rules as 'malicious compliance' and full of 'junk fees'

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Epic Games Inc. Fortnite App As Gamers Flock

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Epic Games CEO Tim Sweeney is none too pleased with Apple’s new App Store rules, dubbing them once again a case of “malicious compliance” and filled with “junk fees.” As reported earlier this week, Apple today announced it will charge additional fees on apps in the EU, including apps and games downloaded from outside its own App Store, like those Epic plans to offer. Apple’s new rules, which go into effect in the EU as part of the tech giant’s compliance with the bloc’s Digital Markets Act (DMA), target larger developers, like Epic, who have to pay €0.50 for each install per year over a 1 million threshold as part of a new “core technology fee.”

This fee could help Apple to make up for the losses that came from no longer hosting the apps directly on its App Store, where today it enjoys a 15% to 30% commission, depending on the developer size and type.

In the EU, Apple said it will lower its App Store commissions to either 17% for digital goods and services or as low as 10% for subscriptions in their second year and small business developers who qualify. If the apps choose to use Apple’s payment processing technology, they’ll be charged an additional 3% fee, as well. Or, developers can opt to stay on Apple’s existing terms — the standard 30% commission, or 15% for small businesses and subscription in their second year, if they choose. The company is providing a fee calculator tool that will help them to decide.

In response to the new rules, Epic Games CEO Tim Sweeney calls out Apple’s terms as “anti-competitive.”

In a post on X, Sweeney writes, that Apple is “forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under DMA, or accept a new also-illegal anticompetitive scheme rife with new Junk Fees on downloads and new Apple taxes on payments they don’t process.”

The “junk fees” are a reference to the new “core technology fee” that covers apps that are downloaded to users’ devices outside the App Store and Apple’s own payment processing systems.

It seems that Apple’s stance is that it’s entitled to a commission, no matter 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 is. Arguably, iOS offers a sizable platform for developers, thanks to Apple’s ability to continually ship new iPhones in response to consumer demand. However, claiming that Apple is entitled to anything installed on its proprietary hardware/software combination is pushing up against the regulation’s purpose. The DMA was meant to encourage more competition by lessening the App Store’s grip on the app ecosystem. Apple responded by widening its grip to include the entirety of the iPhone and iOS more broadly.

This surely puts a dent in Sweeney’s plans to run a profitable games store in the market, as Epic Games would still have to pay Apple for sideloaded app installs over the first million. At €0.50 per install, the number could add up for larger apps with millions of users. (Nevertheless, Epic said Fortnite will return to iOS in Europe this year, details to come.)

Sweeney also rails against the idea that Apple can choose which stores are allowed to compete with its App Store, a seeming reference to Apple’s new “Notarization” requirements, which Apple claims are necessary to protect its users from malware and other security checks. Though Sweeney says Epic has supported the idea of Notarization, the company rejects Apple’s use of this process “to undermine competition and continue imposing Apple taxes on transactions they’re not involved in.”

Notarization requirements put Apple in control of apps that end up on users’ iPhones and iPads by way of third-party marketplaces. Apple says it plans to encrypt and sign all iOS apps intended for alternative distribution so users can trust they’re getting apps from known parties.

Another surprising requirement related to alternative app stores is Apple’s rule that providers must show the company a stand-by letter of credit of €1,000,000 from an “A-rated” financial institution before developers can receive the entitlement (an exception to its normal rules), to open up their third-party app marketplace. This won’t likely stand in Epic’s way but could prevent smaller developers from innovating in this space.

Sweeney’s comments come fresh off 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 declared it was not a monopolist, but said that Apple had to allow app developers to link to their own websites, if they chose. Oddly, Epic won the Google case, even though Google today already permits sideloading, likely because the latter was a jury trial, which meant regular people, not judges, got to make the decisions.

Apple responded to that ruling much as it did with the DMA, by “legally” complying with the guidelines while also imposing its own system of rules, fees, and caveats, as it deemed necessary.

Sweeney said he planned to contest Apple’s “bad-faith” compliance with the U.S. District Court’s ruling.

As for the DMA, the statement reads as follows:

Apple’s plan to thwart Europe’s new Digital Markets Act law is a devious new instance of Malicious Compliance.

They are forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under DMA, or accept a new also-illegal anticompetitive scheme rife with new Junk Fees on downloads and new Apple taxes on payments they don’t process.

Apple proposes that it can 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 the 3 console stores, 2 mobile stores, and Steam on PC). We’re determined to launch on iOS and Android and enter the competition to become the #1 multi-platform software store, on the foundation of payment competition, 0%-12% fees, and exclusive games like Fortnite.

Epic has always supported the notion of Apple notarization and malware scanning for apps, but we strongly reject Apple’s twisting this process to undermine competition and continue imposing Apple taxes on transactions they’re not involved in.

There’s a lot more hot garbage in Apple’s announcement. It will take more time to parse both the written and unwritten parts of this new horror show, so stay tuned.

Apple’s answer to EU’s gatekeeper rules is new ‘core tech’ fee for apps

Spotify icon displayed on a phone screen

Spotify calls Apple's DMA compliance plan 'extortion' and a 'complete and total farce'

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Spotify icon displayed on a phone screen

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Count Spotify among those not thrilled with how Apple has chosen to comply with the EU’s Digital Markets Act (DMA), which sets the stage for sideloading apps, alternative app stores, browser choice, and more. On Friday, the streaming music company issued its response to Apple’s new DMA rules, calling the new fees imposed on developers “extortion” and Apple’s compliance plan “a complete and total farce,” that demonstrated the tech giant believes that the rules don’t apply to them.

Apple earlier this week announced a host of changes that comply with the letter of the EU law, if not the spirit. The company said that app developers in the EU will receive reduced commissions, but it also introduced a new “core technology fee” that requires developers to pay €0.50 for each first annual install per year over a 1 million threshold, regardless of their distribution channel. It will also charge a 3% payment processing fee when developers use Apple’s in-app payments instead of their own.

Epic Games’ CEO Tim Sweeney, whose company sued Apple over antitrust concerns, already condemned Apple’s plan, saying it was a case of “malicious compliance” and full of “junk fees,” and now Spotify is essentially saying the same.

The streamer, along with Epic, Match, and others, has been a longtime critic of the tech giant and one that has pushed for increased regulation, including through the DMA.

In a company blog post and a series of posts on X (formerly Twitter), Spotify CEO Daniel Ek shared his thoughts on Apple’s DMA announcement, after a review by Spotify’s lawyers. He begins by calling the announcement “at best vague and misleading” and a “new low for the company.”

Ek says Apple’s solution is a “masterclass in distortion” as it presents app developers with a choice of sticking to the current terms or having to switch to a “convoluted new model” that initially may look attractive, but actually may come with higher fees. He points out that any app with tens or hundreds of millions of EU users would now face a new tax on every new download and update annually — something that would impact a number of larger apps like WhatsApp, Duolingo, X, and Pinterest, as well as Spotify’s own.

The system is clearly designed to keep apps from opting for alternative means of distribution like sideloading or alternative app stores. However, without the big apps available through these alternative channels, they’ll lose their appeal to consumers. Apple’s App Store will maintain its power, Ek believes.

Plus, because of the increased fees, Spotify doesn’t even have a choice, Ek explains — it’s forced to stick with the current system.

“Spotify itself faces an untenable situation,” he writes. “With our EU Apple install base in the 100 million range, this new tax on downloads and updates could skyrocket our customer acquisition costs, potentially increasing them tenfold. This as we have to pay on every install or update to our free or paid app, even for those who no longer use the service. So where does that leave us? Under the new terms, we cannot afford these fees if we want to be a profitable company, so our only option is to stick with the status quo. The very thing we’ve been fighting against for five years,” Ek says.

He signs off with a challenge to lawmakers, saying he hopes they recognize what Apple is doing and stands firm, and “doesn’t let their work over the years all be for nothing. The world is watching,” Ek writes.

Ek’s missive follows condemnation from both Epic Games and Coalition for App Fairness (CAF), a lobbying group whose members include Epic, Spotify, Tile, Basecamp, Match, Deezer, and dozens of smaller developers. The organization on Thursday declared that Apple’s new fees on direct downloads and payments they do nothing to process violate the law, and does not actually increase either competition or fairness in the digital market.

“Apple’s proposal forces developers to choose between two anticompetitive and illegal options,” Rick VanMeter, Executive Director of CAF said, in a statement. “Either stick with the terrible status quo or opt into a new convoluted set of terms that are bad for developers and consumers alike. This is yet another attempt to circumvent regulation, the likes of which we’ve seen in the United States, the Netherlands, and South Korea. Apple’s ‘plan’ is a shameless insult to the European Commission and the millions of European consumers they represent – it must not stand and should be rejected by the Commission.”

Mozilla has also come out against Apple’s new browser rules, calling them “as painful as possible.”

Apple shared the following statement after Spotify’s posting:

“We’re happy to support the success of all developers — including Spotify, which has the most successful music streaming app in the world. The changes we’re sharing for apps in the European Union give developers choice — with new options to distribute iOS apps and process payments. Every developer can choose to stay on the same terms in place today. And under the new terms, more than 99% of developers would pay the same or less to Apple.”

Apple’s answer to EU’s gatekeeper rules is new ‘core tech’ fee for apps

Epic Games CEO calls out Apple’s DMA rules as ‘malicious compliance’ and full of ‘junk fees’

A closer look at Apple’s browser-related changes to iOS in EU

updated, 2/28/24, 2 PM ET with Apple’s statement

Apple app store icon

Reading the fine print of Apple's DMA rules: 25 things app developers need to know

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Apple app store icon

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Apple last week announced new rules for EU app developers to comply with the Digital Markets Act (DMA). After being designated as a “gatekeeper,” the EU required Apple to make changes to increase competition in the app industry, including by offering new ways to download apps from outside the App Store, new frameworks and API, a revised commission and fee structure, and more. Developer responses to the changes have been mixed, as several larger companies, including Epic Games, Spotify and more recently Microsoft, have come out against Apple’s changes, which seemed designed to ensure that Apple’s ability to profit from iPhone apps continues, regardless of how they’re discovered and installed.

While developers are being presented with a reduced commission in the EU — either 17% for digital transactions and services or 10% for those who qualify for a small business discount (or subscriptions in year two), the company will continue to charge an additional 3% if the company uses Apple’s payment processing service.

In addition, under the new terms, the company is implementing a Core Technology Fee that Apple says pays for their access to Apple’s proprietary technologies and tools, developer services and support, and platform integrity. This fee applies to apps both distributed on the App Store and through alternative marketplaces and is €0.50 for each first annual install per year over a 1 million threshold.

Apple is also introducing more options, like the ability to choose your default web browser and, for developers, the ability to tap into NFC payment technology (which powers Apple Pay) for their own apps.

After digging through the documents Apple provided and speaking to the company, there are a few caveats and details to these rules that developers should know. We’re compiling them below as a starting point and will add to this list over time as we learn more.

Apple will permit alternative app marketplaces that compete with its own App Store, but Apple is still controlling which companies will be allowed to build such apps. Apple says that marketplace app developers will need a €1,000,000 letter of credit from an A-rated financial institution to receive the entitlement. The company says only developers who commit to protecting users will gain access to its new APIs needed to build their marketplace apps, and this is one way Apple is vetting them. It believes this limitation will ensure that malicious actors don’t open marketplaces that harm iPhone users, where they engage in scams.App marketplace apps can only be distributed from developer websites, not the App Store.Individual apps (non-marketplace apps) cannot be distributed from a website. They have to choose either App Store distribution or alternative distribution through a third-party marketplace.Marketplace apps have to pay the Core Technology Fee for each install, while apps distributed through alternative marketplaces or the App Store get their first million installs for free per calendar year. This encourages individual developers to update their apps and release security fixes, even if they’re not distributed through the App Store, but applies an upfront cost to developers running an App Store rival. Apple points out that it’s developed more than 600 new APIs as part of its effort to enable marketplaces.The Core Technology fee is waived for nonprofits, government agencies and educational institutions.The Core Technology fee is not waived for free apps, open source apps or freemium apps, which means it would not make sense for a free app developer to even distribute under the EU’s new terms because if their app goes over a million installs per year, they’d have to pay Apple anyway. Apple thinks that these apps will still be able to pay the Core Technology Fee because they likely monetize in another way, like via advertising or physical goods. (In other words, Apple found a way to tap into revenues apps make outside of in-app purchases and paid downloads!) Apple estimates the Core Technology Fee will only be paid by less than 1% of developers in the EU. However, developers don’t have to adopt it — it only applies to those who adopt the new terms for alternative distribution and payment processing. Apple will protect against “install bombing” — that is, a bad actor increasing the app install numbers of a competitor, for instance by downloading their app on multiple devices. Apple says it will offer an install verification mechanism to ensure all installs are from real Apple devices and will limit the number of first annual installs that can come from a single device. It may also terminate developer accounts that engage in suspicious behavior if warranted. A user can install multiple third-party app marketplaces on their device, but the marketplace will need to request permission from the user before they can start installing apps from those rival app stores.Users will gain new settings and controls to manage the new ways apps are installed. This includes being able to see the source of where an app was installed (e.g. which third-party app store). A permission in Settings dubbed “Allow Marketplace from Developer” will let users pick those alternative app stores they want to permit. Users can also revoke a developer’s permissions if need be, and manage their default app marketplace in the settings. Regardless of how an app is distributed, apps will be “notarized.” This process means the app gets an installation key which is used to install the app on the user’s device. Apple will also scan apps for viruses, malware and other security threats as part of this process. It will additionally ensure that certain things about the app are true, using human review — for instance, that it does what it claims to do. Notarization does not include the quality standards for app store review or allow Apple to reject apps based on their content. That means illicit content and pornography, then, could be permitted. If Apple detects an app from a third-party app store contains malware after it’s installed, it will prevent it from launching. Whether Apple will be able to reliably detect malware when an app is installed outside the App Store remains to be seen. Apple won’t be responsible for things like refunds or the risk of fraud and abuse that could occur outside its App Store through third-party app marketplaces, however. Notarization will allow Apple to show users more details about an app before they install it, including the name, developer’s description with screenshots and age rating.  Apple is heading off attempts by developers to create alternative game stores by offering the new ability for game stores that stream titles to exist on its App Store. Before, each game had to be a separate app. Developers have to submit a single binary for their app, regardless of whether it’s distributed across the App Store or an alternative app marketplace. This means apps can only be installed from one app store at a time, so if users had downloaded the App Store version, they’d have to delete it to download a new non-App Store version. While developers can choose to offer alternative payment processors in their App Store apps, they can’t offer that alongside Apple’s own in-app payments (IAP). But they can switch back to IAP at any time. Users will be prompted to choose a default browser app when they open Safari for the first time on their device after updating to iOS 17.4 and they’ll be able to manage their default app browser in iOS settings. Browser app developers will be able to choose alternative engines other than Safari’s WebKit in the EU. Apple says it’s bringing technologies from WebKit to iOS to enable “high-performance” alternative browsers. This includes just in time compilation, multi-process support, a custom web sandbox and Passkeys. Browser app developers will be required to adhere to industry standard privacy and security practices, like addressing security vulnerabilities in a timely manner. Developers will be able to offer NFC payments within their apps without using Apple Pay or Apple’s Wallet app. This software solution is similar to how Android today supports NFC payments for alternative wallets and enables apps to access “field detect,” which invokes the user’s default NFC app when an iPhone is placed near an NFC terminal. Developers will be able to integrate third-party payments either directly in their app or inform developers of the offers and promotions available when purchasing on their website. While developers could get started with the beta release of Xcode 15.3 and iOS 17.4 last week, the changes won’t become available to Apple users in the EU until March.  50 new reports in App Store Connect will include metrics around engagement (like number of users interacting with an app on the App Store or sharing it with others); commerce (downloads, sales, proceeds, preorders, transactions made with Apple’s in-app purchase system; app usage (crashes, active devices, installs, app deletions, etc.); and frameworks usage (the app’s interaction with OS process, like PhotoPicker, Widgets and CarPlay). Developers will be allowed to share their app store with alternative app marketplace developers and third parties, including by exporting the full history of their app’s engagement, commerce and usage. More details about this will come in March. Developers can choose between the existing terms available today (e.g. commission structure) or the new terms. However, those who adopt Apple’s new EU business terms at any time will never be able to switch back to Apple’s existing business terms for their EU apps.

Apple’s answer to EU’s gatekeeper rules is new ‘core tech’ fee for apps

Mark Zuckerberg Addresses F8 Facebook Developer Conference

Mark Zuckerberg calls Apple's DMA rules 'so onerous' he doubts any developer will opt in

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Mark Zuckerberg Addresses F8 Facebook Developer Conference

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Meta CEO Mark Zuckerberg has added his voice to those criticizing Apple’s compliance with the EU’s new Digital Markets Act (DMA) regulation, which forces Apple to open up its App Store and allow developers to use their own payment systems, among other things. During Meta’s Q4 earnings call this afternoon, Zuckerberg responded to an investor question asking for Meta’s thoughts on the DMA by saying Apple’s new rules were “so onerous” that he would be surprised if any developer adopted them.

The new regulations were meant to increase competition in the app economy by allowing other companies to run their own app stores and collect their own payments, which would, in theory, allow them to bypass Apple’s commissions and fees. But Apple’s compliance with the DMA reduced commissions but added other, new fees — including a new “Core Technology Fee” — that would apply to any developer who adopted the DMA rules, regardless of where their app was distributed, including on the App Store. Otherwise, Apple said developers could choose to remain on the same commission structure that exists today, where Apple takes a 15% to 30% cut of in-app purchase revenues, depending on the app’s reach and other factors.

Had the DMA been written to be more airtight, Meta could have used the new law to launch its own app store. It had once toyed with the idea of offering a Facebook Games store, for example, but Apple’s rules forced Facebook to remove any actual gameplay functionality in the app. Meta eventually gave up, shutting down the app in 2022, two years after its launch.

From Zuckerberg’s comments today, it doesn’t look like Meta has any intention of bringing it back.

“I don’t think that the Apple thing is going to have any difference for us because I think that the way that they’ve implemented it, I would be very surprised if any developer chose to go into the alternative app stores that they have,” Zuckerberg told investors. “They’ve made it so onerous, and I think, so at odds with the intent of what the EU regulation was that I think it’s just going to be very difficult for anyone — including ourselves — to really seriously entertain what they’re doing there.”

Meta joins other tech companies that have criticized Apple’s compliance with the DMA, including Epic Games, Spotify, Mozilla and Microsoft. Epic Games, which sued Apple over antitrust issues and largely lost, called Apple’s DMA rules “malicious compliance” and full of “junk fees.” Spotify dubbed them “extortion” and a “total farce,” and Microsoft said they were a “step in the wrong direction.” Another notable Apple critic, Match, said it hadn’t yet decided if it will opt into the new DMA rules, as it’s still examining them.

Apple’s answer to EU’s gatekeeper rules is new ‘core tech’ fee for apps

Spotify calls Apple’s DMA compliance plan ‘extortion’ and a ‘complete and total farce’

Epic Games CEO calls out Apple’s DMA rules as ‘malicious compliance’ and full of ‘junk fees’