Apple Explains Why It Terminated Epic's Latest Developer Account

[svish]

The fight between Epic and Apple seems to never end. We will be hearing a lot more about this in the coming days.

 

[rkuo]

Not the person you asked but I can elaborate a bit on this. Will probably be a long comment as I'll probably expand the scope a bit, but we'll see where we land.

In the US most antitrust-related cases mainly are ex post (or at least heavily rely on ex post considerations). This kind of inherent to the underlying procedural laws.

The US, and most other countries wiht a common law system, don't have a seperate branch of adminstrative law. So there's no set of administrative laws and underlying administrative procedure, nor are there administrative courts.

Instead these cases are tried according to civil law in civil courts under civil procedure. This doesn't just apply to cases between two private parties such as Epic v Apple, but also when the government is involved (e.g., the FTC). Since civil law mainly tries to remedy a wrong, there needs to be a wrong to be remedied in the first place (which essentially means it's going to be ex post). There are of course exceptions, such as injuctions to prevent irreparable harm and hte like, but that's a bit beyond the scope of this.

Things like abuse of market power, harm to the market, and other negative effects almost always need to be proven.

In countries with a civil law system, like most countries in the EU, administrative law is it's own branch, with it's own procedures and laws and it's own courts and/or chambers. Most notable however is that most of these countries' legislators, in their infinite wisdom, have decided to make things easier for the government by stacking the deck in favor of the government. Perhaps due to a belief that the government will be benevolvent, who knows.

This stacking of the deck is most visible in how in a lot of administrative law sections a presumption of guilt has been built in, sometimes combined with a "heads you lose, tails I win" philosophy.

A good example of this at the EU level is the Treaty on the Functioning of the European Union (TFEU), the EU's constitution in all but name (this detail will come back later) and more specifically Article 102 of TFEU. Article 102 TFEU and some adjacent statutes are essentially the EU's antitrust act. The DMA, by contrast, technically isn't. The DMA is more a less a bandaid because the already existing antitrust laws didn't produce a market to the EU's liking.

In any case, article 102 TFEU combined with the standing case law produced by CJEU, are a true example of how a deck can be stacked in favor of the government and of this "heads you lose, tails I win" philosophy". And, to circle back to the original topic, it's a great example of ex ante.

In a nutshell:

• The EC uses this guidance in their application of article 102 TFEU (the guidance refers to an article 82, which was the old article number in an older treaty that this is lifted out of)
• Almost everything has the presupposition in favor of the EC and almost everything has a “heads you lose, tails I win” caveat
• The EC doesn’t have to use market share to establish a dominant market position, if the involved company has a a significant market share then it helps the EC’s case, but absence of significant market share doesn’t help the involved company (this has lead to some curious case law where pretty much every company that has more than 10% market share can be deemed to have a dominant market position)
• The EC doesn’t have to establish abuse of the dominant market position, merely proving that the company is capable of adversely affecting a competition structure is sufficient, existence of abuse helps the EC’s case, absence of abuse does nothing for the company involved
• The EC doesn’t have to establish that hypothetical abusive conduct has a restrictive effect, merely that a hypothetical abusive conduct could have restrictive effects, again, if it exists it helps the EC, absence doesn’t help the company
• The EC doesn’t have to establish harm by the company, merely proving that the company is capable of causing harm is sufficient, again, existence of harm helps the EC’s case, absence of harm does nothing for the company involved
• The EC doesn’t have to establish intent, again, if intent can be proven it helps the EC, absence of any evidence of intent doesn’t help the company
• Behavior (or capability to act) that was initiated and fine prior to being in a dominant market position, can be used against a company once they achieve a dominant market position
• The only two limits on all of this are:
  • The EC can’t hypothesize different market conditions than the current one (e.g., “they could do abusive behavior X, if the market would be Y”)
  • The EC needs to take into account potential benefits outweighing potential downsides, see Intel v Commission

Pretty much all of the above is ex ante.

Almost all of it is also discussed in Enel if you want to verify. Not really a landmark case beyond the context of liberalization, but in answering the Italian court, CJEU does a good job of discussing much of the list above (starting at pt. 40).

Another good source that touches on this is Competition Law by Richard Whish and David Bailey. This wiki, while not greatly written and quite a bit technical, sourced a bunch of stuff on an older edition of that book.

In any case, this shows a stark contrast with the US. Where in the US ex post is the main focus with two parties on relatively equal footing (the Federal Government has given itself a few exceptions, but mainly in the sense of limitations on cause of action) v. the EU where it's mainly ex ante, with the government is given quite a head start.

While much of this has to the do with legal procedure (civil law v. administrative law) it's also along the lines of the respective philosophies. The US prefers to be reactive with the main fear being false positives, whereas the EU likes being proactive with the main fear being false negatives.
There are some other philisophical considerations, such as the EU's embrace of ordoliberalism wheres the US leans more towards laissez-faire.

Lastly the EU doesn't just love protectionism, it needs protectionism.

It's a feature of the EU, or rather the reason for its existence.
People like to think that the EU was founded to maintain peace and while true, the means by which this was achieved is by creating a single market. The idea was that countries that depend on eachother for their economy won't attack eachother. I'm leaving out a lot of nuance here, but that's the gist of it. To the EU their existence is in danger of they don't protect their single market. Which is why antitrust regulation was placed in it's de facto constitution: the Treaty on the Functioning of the European Union.

Thanks, this is interesting and thorough. To me, this reads as if different legal systems favor different approaches to antitrust ... that makes sense.

However, I don't see anything suggesting that an "ex ante" approach ... aka regulations ... in an "ex post" jurisdiction means that those regulations aren't antitrust laws, which is what visualseed was arguing. What am I missing?

 

[rkuo]

Monopoly power has no bearing on these basic principles. Only specialized antitrust laws such as the DMA or TFUE, that would directly contradict parts would change anything on the principle of lex specialis derogat legi.

But I’ve covered the part of the DMA that limits forum choice, I’ve briefly mentioned consumer protection laws, and that’s it, there’s nothing else. Especially nothing that would affect such fundamental principles of contract law. That would be like a law prescribing that left is right and right is left.

If you’ve got something substantial in mind however, I’d be more than happy to take a look.

OK, here's an example. NLRB does not allow certain provisions to be enforced in a severance agreement. Essentially, you cannot sign your rights away. You can sign the agreement fully intending to violate any unenforceable provisions precisely because they are not legal. Asserting one party can "take it or leave it" or apply any number of the doctrines you mentioned would not apply in that case, would it?

Doesn't the same apply in a case where one party has market dominance or monopoly power? By definition there cannot be a fair and competitive agreement. How would allowing a market dominant company to enforce its contracts in the way you describe even make sense? If that is permissible, then what would it take in your mind for a dominant company to actually cross the line?

 

[Beautyspin]

The EU DMA has no authority to force a business entity to continue business relations with third parties it has deemed detrimental to the well being of its ongoing existence; has been proven through the courts several times violating contract laws it willingly signed on.

No Developer license no legal right to sell your software on our platform, period.

DMA does not want the gatekeeper to put any barriers to alt Appstores. Apple's demand for developer's account will enable Apple to terminate any alt Appstore at any time for whatever reason. If an alt Appstore becomes too successful, Apple could show some flimsy reason and terminate the account. Apple has done it now so the EU will be aware of it now. So, maybe that requirement might go for Apple to be compliant with DMA? If Apple had not jumped the gun, maybe the EU might have let the rule slide. Apple seems to be falling into EPICs trap.

 

[Sarafay]

So what’s the difference to the Mac? Sideloading no problem there. For free!

 

[mrochester]

DMA does not want the gatekeeper to put any barriers to alt Appstores. Apple's demand for developer's account will enable Apple to terminate any alt Appstore at any time for whatever reason. If an alt Appstore becomes too successful, Apple could show some flimsy reason and terminate the account. Apple has done it now so the EU will be aware of it now. So, maybe that requirement might go for Apple to be compliant with DMA? If Apple had not jumped the gun, maybe the EU might have let the rule slide. Apple seems to be falling into EPICs trap.

The DMA also allows the platform owner to take measures to ensure the security of the platform. This is why Apple are requiring a developer account and notarisation precisely so they can terminate developers who release malicious/dangerous software.

If Apple doesn’t have that control they can’t secure the platform and it’s users.

 

[Beautyspin]

I guess Epic should invest in creating their own mobile device & App Store instead of relying on the R&D of others to profit from

Maybe Apple should invest in creating all the apps for its ecosystem so that it can stop relying on the creativity and labor of third-party app developers. Remove the app store and develop all the apps. Let us see how long Apple ecosystem survives.

 

[Beautyspin]

The DMA also allows the platform owner to take measures to ensure the security of the platform. This is why Apple are requiring a developer account and notarisation precisely so they can terminate developers who release malicious/dangerous software.

If Apple doesn’t have that control they can’t secure the platform and it’s users.

The EU might stipulate that developer accounts are not a requirement but if a store hosts malicious software, then they can be subject to monetary fines or something like that. The requirement for development accounts gives too much power to Apple over its rivals. Apple has proved it here.

 

[Beautyspin]

They have been constantly breaching agreements and name calling. If you haven't already, read the linked article in the story.

Excerpt from Phil Schiller to Epic:

If the EU thinks/rules that Apple's compliance and CTF are not acceptable/malicious, half the reason for terminating Epics account is gone. Nobody, except Apple, has said that their DMA compliance and CTF are right.

 

[AppZ.Zero]

Good job Apple. Some more of these News and the next legislation from the EU will force you to open your platform without your wild assumptions regarding DMA.

Dig your own grave.

 

[DeepWebinar]

this is so pathetic apple is so corny for this. like who cares about epic but apple is a trillion dollar company run by such loser crybabies.

 

[Boeingfan]

This is getting tiresome. I guess epic feel they must pursue it because they don’t have their own devices. Perhaps they should.

 

[Abazigal]

DMA does not want the gatekeeper to put any barriers to alt Appstores. Apple's demand for developer's account will enable Apple to terminate any alt Appstore at any time for whatever reason. If an alt Appstore becomes too successful, Apple could show some flimsy reason and terminate the account. Apple has done it now so the EU will be aware of it now. So, maybe that requirement might go for Apple to be compliant with DMA? If Apple had not jumped the gun, maybe the EU might have let the rule slide. Apple seems to be falling into EPICs trap.

Well, the counterpoint then is that Apple then has no power to block any App Store however egregious their conduct, or however problematic their content is. Is this really what the E.U. wants?

I feel that now is as good a time to test just how much power Apple in enforcing this rule under the DMA. Trap or no trap, Apple is obligated to enforce the rules of their own platform, whatever the optics (or be accused of showing preferential treatment to a party just to avoid bad press).

Continue to do what you feel is right, Apple, see where the dice may land, and deal with the issues as they arise.

 

[JapanApple]

Good ridden, the end is near.🧐

 

[Lone Deranger]

Epic Games has indeed proven to be "verifiably untrustworthy." They also own ArtStation. A site that used to be a bastion of digital (and analog) art, globally. Offering artists a place to showcase their work. It is now a cess-pit of gAI content, drowning out real human artist work. They categorically refuse to do anything about it. Despicable site, despicable owner. It is no surprise Tim Sweeney's connected.

 

[mrochester]

The EU might stipulate that developer accounts are not a requirement but if a store hosts malicious software, then they can be subject to monetary fines or something like that. The requirement for development accounts gives too much power to Apple over its rivals. Apple has proved it here.

When it comes to malicious software you need someone who can act quickly. The threat of a fine further down the line is not remotely helpful to consumers.

 

[MacFarmer]

Well done Apple 👏 Hope this ends here, but knowing EU, they might side with Epic bastards..

 

[mielie]

I don’t think this is a smart move by Apple. Of course an Apple Developer Account is a product and companies should retain the right to decide who they will sell their products to. Also, in general, I have been on Apples side with this whole saga, I hate the idea of opening up the closed wall ecosystem I decided to invest so much of my time and money in. Epic talk about wanting to give users more choice but then when it looked like they might get their way they announced that Fortnite would only be coming to an alternative store in the EU. Why not release it with a markup on the Apple Store as well, then users can decide if they want to use the Epic store or stay inside the Apple system.

But back to the matter at hand. Apple are just pouring fuel onto the fire by instigating a total ban on Epic developing for iOS. It shouldn’t be difficult for them to spot future rule breaking and ban accordingly. Instead, the approach they are taking is going to encourage even more litigation and prompt more organisations and regulatory bodies to investigate the monopoly Apple has on iOS app distribution.

 

[GrayFlannel]

Not giving a thumbs up is not the same as suggesting that was the motivation for terminating their license.

That would only be true if Schiller, in his own words, hadn’t used it as a contributing factor in determining the termination.

Again, Schiller’s words:

You also testified that Epic deliberately violated Apple's rules, to make a point and for financial gain. More recently, you have described our DMA compliance plan as "hot garbage," a "horror show," and a "devious new instance of Malicious Compliance." And you have complained about what you called "Junk Fees" and "Apple taxes."

Your colorful criticism of our DMA compliance plan, coupled with Epic's past practice of intentionally violating contractual provisions with which it disagrees, strongly suggest that Epic Sweden does not intend to follow the rules.

 

[Realityck]

I don’t think this is a smart move by Apple. Of course an Apple Developer Account is a product and companies should retain the right to decide who they will sell their products to. Also, in general, I have been on Apples side with this whole saga, I hate the idea of opening up the closed wall ecosystem I decided to invest so much of my time and money in. Epic talk about wanting to give users more choice but then when it looked like they might get their way they announced that Fortnite would only be coming to an alternative store in the EU. Why not release it with a markup on the Apple Store as well, then users can decide if they want to use the Epic store or stay inside the Apple system.

But back to the matter at hand. Apple are just pouring fuel onto the fire by instigating a total ban on Epic developing for iOS. It shouldn’t be difficult for them to spot future rule breaking and ban accordingly. Instead, the approach they are taking is going to encourage even more litigation and prompt more organizations and regulatory bodies to investigate the monopoly Apple has on iOS app distribution.

Publicly its a well know fact how Epic went around stirring up government types in several countries just to try to leverage ways to get back at Apple for not getting their way especially after losing the court battle and its appeal in the states. They absolutely didn't care about consumers when they yanked apple support of their games, yep not only did they yank iOS/IPadOS they also yanked macOS support when that had nothing to do with their iOS App Store argument.

 

[mielie]

Publicly its a well know fact how Epic went around stirring up government types in several countries just to try to leverage ways to get back at Apple for not getting their way especially after losing the court battle and its appeal in the states. They absolutely didn't care about consumers when they yanked apple support of their games, yep not only did they yank iOS/IPadOS they also yanked macOS support when that had nothing to do with their iOS App Store argument.

They had to yank macOS because they didn’t have an Apple Developer account, Apple terminated their account because of the violation. I don’t believe Epic pulled games from any of the Apple Stores. But I agree with Apple for doing this, their rules are clear and they have invested billions into creating the ecosystem.

Consumers have choice, they can buy Android if they want more control over their mobile device. Or, they can buy iOS if they want a closed system that is more secure.

Remove the closed system and the consumer no longer has this choice.

 

[pesc]

So what’s the difference to the Mac? Sideloading no problem there. For free!

The difference is that Apple, who owns the IP around MacOS and iOS, decided to use different business models for their different platforms. Which of course is legal.

 

[Janichsan]

Apple cited court opinions that gave them the leeway to terminate Epic's accounts.

Obviously, as that's mentioned in the article.

However, such termination requires a reason, which - and here we circle back to my original statement - Apple does not properly explain.

 

[neilpmas]

Maybe don't badmouth the place where you want to sell your items? If I was selling something at Target I certainly wouldn't go out of my way to bad mouth them and have a shocked pikachu face when they remove my products from their stores.

On the other hand, maybe Apple should stop breaking EU rules and avoiding EU tax and all these fines would stop happening. 🤷‍♂️

 

[Beautyspin]

Well, the counterpoint then is that Apple then has no power to block any App Store however egregious their conduct, or however problematic their content is. Is this really what the E.U. wants?

I feel that now is as good a time to test just how much power Apple in enforcing this rule under the DMA. Trap or no trap, Apple is obligated to enforce the rules of their own platform, whatever the optics (or be accused of showing preferential treatment to a party just to avoid bad press).

Continue to do what you feel is right, Apple, see where the dice may land, and deal with the issues as they arise.

I am not saying Apple has no power to block any App Store. I am saying the requirement for developer account may not fly. If there is an issue with the App Store, then state the issue and ban/terminate/fine the app store. They can go to court on that issue. Instead of that, terminating a dev account to stop somebody from starting an App store is not going to fly, I am guessing.