Epic Games Accuses Apple of Charging 'Unjustified Fees' for Required Non-App Store Purchase Link

[Sophisticatednut]

Lolllll

These fees are a business expense and therefore tax deductible. Meaning, they can take the deduction and still pass on part (or all) of the fee to the customer.

It ain’t about the consumer, not even a little bit.

Hahahaha. You think a 10-20% fine on their global revenue will be easy to tax deduct?

In 2023 their revenue was 383 billion dollars and their gross profit was 170 billion dollar

Making it potentially 38-76 billion dollar fines per infraction. Every infraction can wipe out 1-2 quarters of profits

 

[hans1972]

And Apple isn’t aware of (or rather don’t acknowledge and reward) the contributions third-party developers have made and are making in making their platform popular.

Of course, they do. That's why most developers only pay $99. Some have to pay 15% of revenue, and only a tiny minority need to pay 30%.

 

[gregmancuso]

It's not unheard of for developers to try to bypass Nintendo's cut:

Wisdom Tree - Wikipedia

en.wikipedia.org

Many adults purchase the iPhone to be their primary or even only personal computer. That isn't the case with the Switch. Video game consoles could be general purpose computers, but nobody buys them for the purpose of being a general purpose computer.

You may not think that is a relevant distinction, but it is a distinction. I can't judge for you whether that is a good enough reason to have different rules. That's your own opinion. But I think that should factor into the regulations.

I think there are many reasons that when taken in aggregate are enough to warrant regulation, even if each individual reason alone wouldn't be enough to justify a regulation. Like in the Spotify case, I didn't see as much of a problem with Apple taking a cut before Apple had a service of their own that competed directly with Spotify.

By your own admission, game consoles "could be" general purpose computers. Which is exactly why the distinction is irrelevant. And the term general purpose computer is kind of silly. Most any device nowadays is technically a general purpose computer. All that really means is that it is a device with a CPU, memory, storage, user interface, and can run software. My watch is a general purpose computer.

If I can run streaming, browser, office, Blu-ray, etc apps on my XBOX then it is a general purpose computers. You say nobody buys a game console for the purpose of being a general purpose computer. I disagree. I am sure many bought one because it could stream and play Blue-ray discs.

The original iPhone sold out in hours with no third-party apps. Was it a general purpose computer? Or was it a new and novel phone platform that struck a chord? Did the original buyers buy it as a computer or as a phone (and internet communicator and iPod ).

 

[hans1972]

Yea did you not follow the U.S. case?

Judge Rogers ruled that Apple did violate the California Unfair Competition Law through the anti-competitive behavior of disallowing any mention of other payment systems within apps.
January 16, 2024, the Supreme Court declined to hear the appeals from Apple and Epic in the case ended with all charges dismissed exception for the anti-steering charge.

I just find it strange that Apple can punish Epic for breaking a clause in their contract that was judged to be illegal.

If a small part of an agreement is deemed illegal, it doesn't necessarily make the whole contract invalid.

The (original) court explicitly ruled Apple could terminate Epic's contract.

 

[hans1972]

Can't believe we have that much patience dealing with apple's abusive practices...

Apple:
- Every app for their phone, let's charge them 30%.
- If dev complain, we them delete their app store account
- OK, Epic won... let's search for flaws in the law's text to make it harder for them to implement

Epic lost all their claims, except one. The court imposed an injunction on Apple and Epic believes they broke the injunction.

 

[gregmancuso]

If you reread the article, it is clearly also about commissions - because that’s Epic’s argument:

“Epic Games claims that the fees make the links "commercially unusable," thereby subverting the injunction“

Who cares what Epic said? The fact is that they can steer now. The fact that they don't like the rules does not mean thy cannot steer. Nowhere in the ruling does it say that Apple is now allowed to charge fees while allowing user to be guided to external processing options.

As has been said many times one this thread - Epic just wants to steer and have all fees automatically removed from their Balance Sheet.

 

[gregmancuso]

Of course, not all the profit disappears covering the cost of retail stores and employees, R&D, advertising, etc... There's plenty of profit left over...

Not saying you are right or wrong in your assumption. But that is not how business works. Let's assume that there is plenty of profit left over to cover all the costs associated with OS / tools development, App Store operations, customer support, legal, billing, G&A, corporate overhead, etc. And you say that Apple should not be able to monetize anything but the hardware. That would make Apple a non-profit. Not really sure that is a viable business model.

 

[smulji]

And to this end Epic has check-mated themselves with all three points.

The entire history of software development on OS platforms has required large fees for Libraries, Frameworks, compiler tools, etc.

Millennials and Gen Z have no clue the investments accrued in the past to develop applications. iOS made the cost of entry extremely cheap yet they want it all FOR FREE.

My answer: Go develop the Hardware, Operating System, Developer Toolkits and Tools to create your own platform and then go give it away. See how many investors you get to cover your costs accrued in development.

Well said.

 

[jlc1978]

Apples app store literally made the indie dev viable. People left their full time jobs and because devs on their own because apple did this. Before the App Store it was very hard to compete and get an indie game distributed on other platforms. And that’s not even mentioning piracy issues.

When people have eaten their dinner they often forget who made it for them…

Exactly, and many on MR forget most indies only pay 15%, not 30%. I suspect many would love the revenue associated with the 30% cut and gladly pay it.

Not sure if you're accurately referring to Apple here, or unironically trying to accuse Epic of freeloading.

Apple is charging something for nothing here. A developer writing code that handles payment themselves costs Apple nothing.

As long as they do not use the App Store or Apple ID, etc. and do at all by themselves then, sure. You want access to Apple's ecosystem it is not unreasonable to expect payment beyond the developer fee if you charge for the app.

When Apple complies with the injunction and permits third parties to process transactions, do you know what'll happen? Apple will slash their fees. Because Apple's fees are currently non-competitive because Apple operates (several) monopolies. Probably the fee will settle in the 5-10% range - it's more than competitors will charge, but the appeal of "it just works" can actually justify pricing it that high. It doesn't justify the 15-30% range.

Competitors will need to charge less because they will lack the reach of Apple's App Store. Apple's fees are in sign with what other stores charge so it's not like they are way out of line.

Developers will win. They can pass on savings to customers, who will also win.

Chances of that approach zero based on pricing in the Mac world. Developers will likely simply pocket any windfall, as happened when Apple lowered the cut to 15% for most developers; we didn't see a sudden drop in prices by 15% or so. Even for subscription apps subscribing outside of an IAP isn't generally cheaper, except for Spotify that had a hissy fit.

And we'll see higher quality apps for iOS that lead to Apple winning, too. That's the most infuriating part here - Apple is so blinded by greed that they really want to strangle their golden goose.

No, the operate a very lucrative market for developers and expect a return on it; and developers are getting far more in revenue than they ever did under the old software model where getting 30% of retail would be big. Just as companies don't like WalMart's terms and don't sell there, developers are free to go to Android.

Yea did you not follow the U.S. case?

Judge Rogers ruled that Apple did violate the California Unfair Competition Law through the anti-competitive behavior of disallowing any mention of other payment systems within apps.
January 16, 2024, the Supreme Court declined to hear the appeals from Apple and Epic in the case ended with all charges dismissed exception for the anti-steering charge.

I just find it strange that Apple can punish Epic for breaking a clause in their contract that was judged to be illegal.

Epic claims they broke it, but Apple is allowing developers to link to other payment methods, Epic just doesn't like how the have to do it.

And is that bad somehow? If The developer gets a better profit margin they can use to develop a better product is good for the market.

If I earn 1 million and apple takes 300.000$ from me, that’s bad for business, I could do a lot of development with extra 300k

And if you couldn't reach the market that you do via the App Store you'd probably never see $1million; or pay more than $300,000 the first year and $150,000 afterward for subscription renewals going it alone.

People on MR often demonstrate the economic concept of loss aversion.

Frankly, if someone offered me the deal - "I'll bring you the business and take a 15% cut until you hit a million, then 30% cut the first year and 15% for any ongoing work after that" and deliver on that I'd jump at the offer.

One company I work with gives me 15% of the revenue for any work I bring them just for bringing them the work.

And nether is apple, what their motives are is completely irrelevant as long as their legal arguments are valid and they have a case. And as the court said, the anti steering provision was illegal.

And Apple complied by allowing developers to link to 3rd party payment systems, and Epic is busy whining they don't like how Apple complied. The ruling was very narrow in scope and when SCOTUS declined to accept the appeal it defined what Apple must do; which is allow developers to notify purchasers of teh amiability of 3rd part payment systems. Nothing said Apple can't still get paid for being on the App Store.

 

[macabrumorsab]

Are you not admitting here that as a developer you have to develop on iOS as your customer has already chosen an iOS device and need the software to run on the device.

surely that is tacit admission that Apple is driving iOS device growth as if you as a developer was driving the growth of a platform then apps would have determined your customers choice of platform.

what apple services am I forced to use. I could buy an android device instead and not pay apple anything or use any Apple Service.

No, I am not. It is about a specialised software which the customer had already bought. And it has no competiton, the customers would not have gone anywhere. Our customers insisted to have an App because it made their live easier having one single device. As my company does not act like Apple and does listen to customers, we did it. But we had to follow Apple rules, to pay developer account fees which we never did before. I don't need Apple to deliver it to our customers. I can never provide a patch instantly through Apple's App Store if a bug was related to the App and not to the server side. This is not what my customers have been used to.

Regarding your last remark: this is the main problem people struggle to understand: consumers just don't and should not be forced to change their smartphones or tablets (=their computers). These are essential devices. Just today we had a test alarm on our smartphones triggered by the local city authorities. People monitor their health. People organise the entire life with these devices. Changing the device is not the option. Apple has to change their behavoiur and we are getting their, slowly but steadily.

 

[redheeler]

Also they will still want to release it in the App Store. So they want to have an iOS native(resembling) app in the Apple App Store, for the lowest cost possible. And Apple gave it to them.

It depends on the particular startup’s capital and business needs. I can’t say that every startup will or won’t be able to succeed with a web app or third-party app distribution platform. What I can say is that Apple has been openly hostile to PWA developers by blocking one-click installs and limiting features in a way that doesn’t exist on Android.

Even the terminology used by Apple like “add to Home Screen” is designed to make a PWA feel as little like a native app as possible, on top of other issues like more frequent reloads compared to native apps due to the OS not keeping them in memory as long.

Yes, I’m all for making PWA development easier but the solution Epic is seeking is reasonable as long as PWAs fail to be a viable alternative due to Apple’s intentional actions.

 

[Ethosik]

On their PC store, they take a 12% cut, allow in-app purchases from third-party payment processors with no Epic cut, and don't charge for royalties on usage of the Unreal Engine. That's a significant advantage over a 30% or even 15% cut.

They also have incentives like letting developers keep 100% for the first 6 months under certain conditions.

And Epic has said their store does not make money at 12%.

 

[Sophisticatednut]

If a small part of an agreement is deemed illegal, it doesn't necessarily make the whole contract invalid.

The (original) court explicitly ruled Apple could terminate Epic's contract.

Well what other part of the agreement did they break? Considering the anti steering clause being removed I don’t see what else they broke that would warrant termination.

At least here in Eau such a ruling would mean the rule was never enforceable and any action taken based on the illegal clause would be invalid

 

[Sophisticatednut]

Epic claims they broke it, but Apple is allowing developers to link to other payment methods, Epic just doesn't like how the have to do it.

They aren’t claiming it, the court agreed that Apple broke it.

And if you couldn't reach the market that you do via the App Store you'd probably never see $1million; or pay more than $300,000 the first year and $150,000 afterward for subscription renewals going it alone.

People on MR often demonstrate the economic concept of loss aversion.

Frankly, if someone offered me the deal - "I'll bring you the business and take a 15% cut until you hit a million, then 30% cut the first year and 15% for any ongoing work after that" and deliver on that I'd jump at the offer.

One company I work with gives me 15% of the revenue for any work I bring them just for bringing them the work.

Who said anything about reaching anything? It could as well be 10 million in sales. That’s 1.5-3 million that is lost and not invested in the company, any sane company would try and shrink that number as much as possible.a deal being good doesn’t mean it can’t be even better.
How things was in the past isn’t an argument for the things today can’t be made better.

Or would you also argue 60 years ago that they are just compaining, it’s a great deal to keep 20-30%. In the last you could only keep 5% and should be happy and stop complaining.

And Apple complied by allowing developers to link to 3rd party payment systems, and Epic is busy whining they don't like how Apple complied. The ruling was very narrow in scope and when SCOTUS declined to accept the appeal it defined what Apple must do; which is allow developers to notify purchasers of teh amiability of 3rd part payment systems. Nothing said Apple can't still get paid for being on the App Store.

That fact you think Epic is whining shows how blind you are. Everything that Apple does in The USA will be used by Epic in EU to push further in their direction.

Epic seems to have come to understand the completely different legal philosophy of the EU and how it can much effectively push against apple abroad. While Apple is still unable to understand the legal culture they have stepped in.

 

[BaldiMac]

Well what other part of the agreement did they break? Considering the anti steering clause being removed I don’t see what else they broke that would warrant termination.

At least here in Eau such a ruling would mean the rule was never enforceable and any action taken based on the illegal clause would be invalid

The broke the part of the agreement that prevented alternate payment methods in app. That's different than anti-steering issues.

They aren’t claiming it, the court agreed that Apple broke it.

No, the court specifically said that Apple is currently in compliance.

Apple speaks out against Epic's contempt of court accusation

Following Epic Games's requesting that Apple should be held in contempt of court over what it alleges is failure to comply with an anti-steering ruling, Apple has issued a rare direct response.

appleinsider.com

 

[hans1972]

They aren’t claiming it, the court agreed that Apple broke it.

Epic claims Apple broke the injunction ordered by the court on Apple. Whether Apple did, is something the court now will have to consider.

The injunction was short and forbids Apple to refuse developers to

1. include external links, buttons and other ways to direct customers to alternate purchasing options
2. communicating with users if the user voluntary gave such contact information through account registration to the developer

That's it.

My understanding is that Epic's complaint, is mostly about the first.

 

[Sophisticatednut]

The broke the part of the agreement that prevented alternate payment methods in app. That's different than anti-steering issues.


No, the court specifically said that Apple is currently in compliance.

Apple speaks out against Epic's contempt of court accusation

Following Epic Games's requesting that Apple should be held in contempt of court over what it alleges is failure to comply with an anti-steering ruling, Apple has issued a rare direct response.

appleinsider.com

My bad. I meant the original case that was solved in January. Well isn’t it considered anti steering if you prevent alternative payment solutions? Or does the definition only talk about redirecting customers to other platforms?

 

[hans1972]

Well what other part of the agreement did they break? Considering the anti steering clause being removed I don’t see what else they broke that would warrant termination.

At least here in Eau such a ruling would mean the rule was never enforceable and any action taken based on the illegal clause would be invalid

Epic put an alternate payment method in their iOS app on purpose and hid it from Apple during review and enabled it later, thus denying Apple their legal commission. That was the most egregious violation.

 

[Samplasion]

Sideloading should bypass that, much as it does on MacOS. Setup your own ID, hosting, etc, and bypass Apple completely. iOS can sandbox Apps and require user intervention to allow access to data, much like the Mac.

I agree 100%. There are many clever ways to set up shop, none requiring any Apple services.

 

[bcortens]

Sigh, yet another thread where people continually try to peddle the idea that Apple should be able to collect a percentage of all transactions that occur on their platform as a kind of SDK/ecosystem fee. Apple doesn't bother to charge websites said fee, nor do they charge streaming apps that you pay on their website, nor do they charge apps offering physical goods and services. The fact that they don't is evidence enough for me that they care mostly about keeping their scummy in-game in-app-purchase gravy train rolling along. Some of the biggest, most successful apps that make the most comprehensive use of the SDK pay nothing for it and yet people on here want to pretend that this is about SDK access.

 

[MNGR]

I agree 100%. There are many clever ways to set up shop, none requiring any Apple services.

Sorry but you can’t run an application on a phone without accessing services running on the device.
Maybe you are not totally aware about how computers work. I have managed and used flavors on computing devices for over 50 years.

 

[jlc1978]

Epic claims Apple broke the injunction ordered by the court on Apple. Whether Apple did, is something the court now will have to consider.

The injunction was short and forbids Apple to refuse developers to

1. include external links, buttons and other ways to direct customers to alternate purchasing options
2. communicating with users if the user voluntary gave such contact information through account registration to the developer

That's it.

My understanding is that Epic's complaint, is mostly about the first.

Except Apple is in compliance, Epic just doesn't like how Apple does it. The court specifically allowed Apple leeway in implementing it.

They aren’t claiming it, the court agreed that Apple broke it.

No, they're claiming Apple is not in compliance while Apple says they are; and the court was very specific about giving Apple leeway in how it was implemented.

Who said anything about reaching anything? It could as well be 10 million in sales. That’s 1.5-3 million that is lost and not invested in the company, any sane company would try and shrink that number as much as possible.a deal being good doesn’t mean it can’t be even better.

Sure, and the can try to negotiate a better deal or go elsewhere. And the 1.5 - 3 million is simply money Apple can use to build better products. Any sane company will try to get as much value out of teh services they provide. I do that, and charge rates based on what the market will bear.

How things was in the past isn’t an argument for the things today can’t be made better.

Except Apple has made them much better:

• Cheap or free developer tools - check
• No need to find a distributor to get your product on the shelves
• Gives you worldwide distribution
• Access to a large and lucrative customer base
• Handles all the back end stuff like tax compliance and fees
• Able to bring your product to market for the cost of a developers account so you can see if the product will sell before investing anything in getting it to market
• Provides a way to limit piracy without having to use some DMA product which just angers your customers, cost money and often doesn't stop much piracy
• Handle hosting the apps

All of that and more for 15%.

Or would you also argue 60 years ago that they are just compaining, it’s a great deal to keep 20-30%. In the last you could only keep 5% and should be happy and stop complaining.

My point was Apple has really made it easier and less risky to bring an App to market; and as they are forced to change I suspect it will cost developers more in the long run from Apple and 3rd party stores. Epic has already said thy lose money at 12%, eventually they'll tire of poking at Apple and blame Apple no doubt for having to raise their fees.

That fact you think Epic is whining shows how blind you are.

I think Epic is whining becasue it appears the won't be happy until Apple is forced to allow them free access to the App Store and not pay Apple any commission on sales. No reasonable court will allow that.

I'm waiting for the day the EU decides online games have too much market power and slap them down, Epic's response would no doubt be, wait for it, epic.

Everything that Apple does in The USA will be used by Epic in EU to push further in their direction.

Epic seems to have come to understand the completely different legal philosophy of the EU and how it can much effectively push against apple abroad. While Apple is still unable to understand the legal culture they have stepped in.

I suspect Apple has a few lawyers and others familiar with the EU regulatory environment that they are aware of what can and can't be done legally.

I suspect this whole battle will play out in EU courts for years before all is said and done.

Regarding your last remark: this is the main problem people struggle to understand: consumers just don't and should not be forced to change their smartphones or tablets (=their computers). These are essential devices. Just today we had a test alarm on our smartphones triggered by the local city authorities. People monitor their health. People organise the entire life with these devices. Changing the device is not the option.

So should developers be forced to develop an app for all tablets and smartphones? If they are essential devices how dare a developer not make their app work on Amazon's tablet. Why should I be forced to stop using it because some greedy developer refuses to lose money developing for it?

 

[Samplasion]

Sorry but you can’t run an application on a phone without accessing services running on the device.
Maybe you are not totally aware about how computers work. I have managed and used flavors on computing devices for over 50 years.

I'm a developer, I know what I'm talking about. An entirely offline application cannot access online services. If you're talking about local, on-device services, then guess what? They're free to use, since they're bound to the license of the operating system, a copy of which is owned by every iPhone user (in the EU, in the US it's still a perpetual use license, but my point still stands). Instead of rudely barging in and telling people they "are not totally aware of how computers work", try to understand the context of the post you're replying to.

Besides, that's not even what I was talking about. I was referring to, literally, "setting up a shop", as in, place to download apps.

 

[ksj1]

Well what other part of the agreement did they break? Considering the anti steering clause being removed I don’t see what else they broke that would warrant termination.

At least here in Eau such a ruling would mean the rule was never enforceable and any action taken based on the illegal clause would be invalid

Here in the US if you think a contract term is illegal you take it to court. You do not purposefully break the contract for the PR value.

 

[Sophisticatednut]

Epic put an alternate payment method in their iOS app on purpose and hid it from Apple during review and enabled it later, thus denying Apple their legal commission. That was the most egregious violation.

Well that wasn’t obvious, multiple apps have alternative payment methods that don’t pay a commission. But it’s nether here nor there as I’m not an expert in US law.

Sure, and the can try to negotiate a better deal or go elsewhere. And the 1.5 - 3 million is simply money Apple can use to build better products. Any sane company will try to get as much value out of teh services they provide. I do that, and charge rates based on what the market will bear.

Then why use the critique that epic won’t pass on the savings? It’s completely fine if they keep the savings to themselves if the customer doesn’t want to pay Apple that fee.

Except Apple has made them much better:

• Cheap or free developer tools - check
• No need to find a distributor to get your product on the shelves
• Gives you worldwide distribution
• Access to a large and lucrative customer base
• Handles all the back end stuff like tax compliance and fees
• Able to bring your product to market for the cost of a developers account so you can see if the product will sell before investing anything in getting it to market
• Provides a way to limit piracy without having to use some DMA product which just angers your customers, cost money and often doesn't stop much piracy
• Handle hosting the apps

All of that and more for 15%.

Yea… none of that did Apple provide. That already existed at the time and was moving from computers to the mobile phone devices. There no evidence Apple did do anything unique here.

My point was Apple has really made it easier and less risky to bring an App to market; and as they are forced to change I suspect it will cost developers more in the long run from Apple and 3rd party stores. Epic has already said thy lose money at 12%, eventually they'll tire of poking at Apple and blame Apple no doubt for having to raise their fees.

Perhaps, but they will have the option to pick what they think is best for them or innovate in the space. All these battles have resulted in windows AppStore allowing everything but games to pay a 0% fee and halt rival stores in the store. M

Epic said they lost money because they constantly payed for exclusives, not for having a small fee.

I think Epic is whining becasue it appears the won't be happy until Apple is forced to allow them free access to the App Store and not pay Apple any commission on sales. No reasonable court will allow that.

I'm waiting for the day the EU decides online games have too much market power and slap them down, Epic's response would no doubt be, wait for it, epic.

Really? I understand they want customers to have acces to their store WITHOUT USING THE APPSTORE. So Apple can ask for whatever fee they want in their store but shouldn’t ask for anything outside of it if the developer doesn’t want to use anything of apples services.

EU will never regulate games for having to much market power, it’s only if abuse of their market power is used. Nothing else. Unless they break GDPR laws( privacy) and gambling etc as they are currently cracking down on hard.

I suspect Apple has a few lawyers and others familiar with the EU regulatory environment that they are aware of what can and can't be done legally.

I suspect this whole battle will play out in EU courts for years before all is said and done.

No, the legal battle will be over within a year. Any case related to the DMA is prioritized because it’s an ex post law that impacts behavior before the harm is committed instead of Ex post after the harm is done.

Apple is aware of the laws, but they seem to have zero clue for the philosophy, they did the exact same kind of complaint about the Spotify ruling, that is always dismissed by the courts as irrelevant to the holistic view of the case. Google did the exact same thing and Microsoft have done the same thing. Almost like they have the same legal firm.

This isn’t neoliberal market understanding envisioned by Adam smith, or the theories of the Chicago School of thought.

This is build on the foundation of ordoliberalism Walter Eucken with Franz Böhm. As the ones who developed the theory.

So should developers be forced to develop an app for all tablets and smartphones? If they are essential devices how dare a developer not make their app work on Amazon's tablet. Why should I be forced to stop using it because some greedy developer refuses to lose money developing for it?

That’s. It the meaning of free markets in EU. The issue is you must stop getting in their way actively.

Aka the freedom from