‘A serious violation’: Why Apple just killed off Epic’s EU app store, and why the Fortnite maker will probably prevail

The Digital Markets Act (DMA) introduces many new obligations for so-called gatekeeper services that link businesses and consumers, and the iPhone operating system iOS and its App Store have both been classified as such.

So, as of Thursday, Apple is obliged to allow third-party app stores on iPhones—a shift that will allow developers to distribute apps without having to give Apple a fat cut of transactions conducted within them.

Epic was planning to become one of the first big players to launch an iOS app store, but on Wednesday the Fortnite maker revealed that Apple had blocked the move by terminating the developer account that Epic’s Swedish affiliate had set up to launch the store, and that provides Epic games on Apple’s own App Store.

“This is a serious violation of the DMA and shows Apple has no intention of allowing true competition on iOS devices,” Epic wrote in a blog post. “In terminating Epic’s developer account, Apple is taking out one of the largest potential competitors to the Apple App Store.”

The revelation quickly drew a response from the European Commission, which will be directly enforcing the DMA, and which said it had asked Apple for “further explanations” under the new law.

Long-running feud

To understand what just happened, one needs to rewind to the start of the decade when Epic and Apple began their feud over the issue of in-app payments, which have traditionally earned Apple a 30% cut on the iOS platform.

Epic, which had long protested this cut, deliberately made changes in the iOS version of Fortnite in August 2020 so that in-app purchases could bypass Apple’s payment system in favor of Epic’s own.

This broke Apple’s policy, but Epic claimed it was doing so to pass on savings to its users.

Apple 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 Epic-affiliated developer account at its “sole discretion.”

Epic had to pay Apple $3.65 million in breach-of-contract damages. (Apple also recently launched an attempt to claim over $73 million in legal fees stemming from the case, which Epic is furiously resisting.)

Fast-forward to late January of this year.

With the DMA’s debut little more than a month away, Apple announced it would allow third-party iOS app stores, but that any developer distributing an app through the new channels would have to pay a new €0.50 ($0.54) “core technology fee” for every first installation of that app, whether that installation takes place via the third-party store or Apple’s own App Store.

Downloads of the alternative app stores themselves would also trigger the fee, to be paid by the developers of the app stores.

Apple’s move earned an apoplectic reaction from many companies that were planning to launch their own iOS app stores—Meta and Microsoft are heavily lobbying Brussels to decide it is not compliant with the DMA—but Epic CEO Sweeney was the first to voice loud criticism.

“They are forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under [the] DMA, or accept a new also-illegal anticompetitive scheme rife with new junk fees on downloads,” Sweeney wrote on X on Jan. 25.

‘Undercut’ assurances

Despite its protests about Apple’s “malicious compliance” with the DMA, Epic said it would take up Apple’s terms and launch an iOS app store in Europe.

However, on Feb. 23, Apple executive Phil Schiller wrote to Sweeney—Epic yesterday published the email exchange—to point out that Epic had previously “entered into agreements with Apple and then broken them.”

Schiller highlighted Sweeney’s “colorful criticism of our DMA compliance plan” and said it “strongly” suggested Epic was going to again break its developer contract with Apple.

Schiller asked Sweeney for “written assurance that you are also acting in good faith, and that Epic Games Sweden will, despite your public actions and rhetoric, honor all of its commitments.”

Sweeney quickly responded: “Epic and its subsidiaries are acting in good faith and will comply with all terms of current and future agreements with Apple, and we’ll be glad to provide Apple with any specific further assurances on the topic that you’d like.”

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 present policies,” adding that his rival was “a few bold and visionary decisions away from being the company they once were and that they still advertise themselves to be: beloved brand to consumers, partner to developers, and overlord to none.”

In a March 2 legal letter that Epic published yesterday, Apple referenced this post as partial justification for its decision to cancel the developer account of Epic Games Sweden, which was 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 “undercut” his “minimal assurances” to Schiller. Citing the 2021 California ruling that gave Apple the right to unilaterally cancel any Epic developer agreements, they announced Apple was doing just that.

“Epic’s egregious breach of its contractual obligations to Apple led courts to determine that Apple has the right to terminate ‘any or all of Epic Games’ wholly owned subsidiaries, affiliates, and/or other entities under Epic Games’ control at any time and at Apple’s sole discretion.’ In light of Epic’s past and ongoing behavior, Apple chose to exercise that right,” Apple said in a statement.

In its post yesterday, Epic said Apple was “undermining our ability to be a viable competitor, and they are showing other developers what happens when you try to compete with Apple or are critical of their unfair practices.”

Testing the Commission

Apple will probably have a tough time convincing the Commission that an American court ruling gives it the right to undermine a key plank of the DMA just as the new law comes into force.

For a start, Apple’s whole approach to DMA compliance—the very thing Sweeney was loudly protesting—has been downright petulant.

When it announced the changes it was making to comply, Apple did so while complaining they “bring greater risks to users and developers.”

Then, in February, Apple used another new demand of the DMA—that it allows the developers of third-party browsers such as Chrome to avoid using Apple’s WebKit browser engine—as an excuse to kill off home-screen web apps on iOS, again in the name of security.

This would have removed another avenue for developers who want to avoid Apple’s in-app payments cut, and the Commission swiftly threatened an investigation, forcing Apple to reverse its plan.

Then, wrapping up a pre-DMA case in which Spotify was the complainant, the Commission on Monday hit Apple with a $2 billion fine for stopping streaming-app developers from telling their iOS users that they can get cheaper subscriptions outside Apple’s platform—which is possible because, yet again, it’s a way to avoid Apple taking a huge cut of the subscription fee.

Apple has to drop these “anti-steering” tactics anyway under the DMA and, as it announced its appeal, it accused the Commission of trying to “enforce the DMA before the DMA becomes law.” It also accused Spotify and the Commission of “coordinating” in the case.

So Apple and the Commission were already at war before this latest Epic episode.

Reacting to Epic’s revelation, the Commission didn’t just say it was looking into the matter under the DMA—it also said it was “evaluating whether Apple’s actions raise doubts on their compliance” with two other laws, the Digital Services Act (DSA) and the Platform-to-Business (P2B) Regulation.

The still-quite-new DSA is a sister law to the DMA, covering platforms’ content rather than their competitive practices—it’s the law under which the Commission recently started investigating X (regarding disinformation) and TikTok (regarding child protection and ad transparency).

In this case, the Commission wants to know whether Apple shutting down Epic Games Sweden’s developer account was a violation.

“The DSA sets a requirement for clear, transparent terms and conditions, no arbitrary application of these terms and conditions, provision of statements of reasons in case a decision is taken, and the possibility for complaints and redress,” a Commission spokesperson said in an email. “If content is moderated and accounts are temporarily suspended or permanently terminated, this needs to be proportionate and in due regard to fundamental rights.”

As for the P2B Regulation, the issue is that a platform has to “notify a business user … before an account is terminated,” the spokesperson said. It’s not hard to see how Apple may have failed this test when its lawyers sent Epic that letter telling it that its Swedish developer account had been terminated “effective immediately.”

But perhaps the biggest problem with Apple’s justification for nixing Epic’s app store is the fact that Sweeney’s criticism of Apple’s rules is something that the Commission effectively solicited.

It has been clear throughout the past few months that the changes companies make to comply with the DMA will be evaluated while taking account of “market feedback”—it wants affected companies to say their piece, and now Apple is punishing Epic for doing just that.

The Commission still hasn’t said what it thinks of Apple’s new “core technology fee,” but it was never going to do that before Thursday anyway. With the way Apple has conducted itself in recent weeks, it’s hard to see how the company isn’t cruising for a bruising.