Bismarck in North Dakota (population 128,949) and Brussels in Belgium (population 1.2 million) couldn’t be more different. Except for one thing. Both cities are venues where Apple’s App Store governance policies have faced, or are facing, intense scrutiny from lawmakers.
Let’s start with Bismarck, seat of the North Dakota state government. Earlier this week, legislators rejected S.B 2333 [PDF], a landmark piece of legislation that would force Google and Apple to loosen control over their app ecosystems, permitting developers more choice in how they distribute software, and how they charge for it.
The bill, which would apply to any marketplace that processes more than $10m worth of revenue from North Dakota residents, had three parts. Firstly, it prohibited marketplace exclusivity. This would allow developers to sell software for iOS and iPadOS beyond the walled garden of the App Store.
Secondly, platform providers would be prohibited from requiring developers to use a particular payment method. Right now, Apple mandates that all iOS software and in-app purchase (IAP) sales are routed through its own infrastructure, allowing it to take a 30 per cent cut. If this bill was passed, developers would theoretically be able to use an alternative method (like Stripe or PayPal), thereby keeping more of their revenue.
Finally, it prevented platform providers from retaliating against developers who take advantage of these benefits. Apple couldn’t, for example, block a developer that decided to distribute their code through the App Store as well as through an alternative app store.
The bill was introduced by State Senators Kyle Davison and David Clemons, as well as State House Representatives Michael Howe and Glenn Bosch, all of the Republican Party. Although North Dakota is a firmly red state, the bill was rejected on largely bipartisan lines, with a majority of Democrat and Republican senators voting nay.
Per the New York Times, the legislation itself was written by Lacee Bjork Anderson, a lobbyist hired by Epic Games, as well as the Coalition for App Fairness – a rainbow group of developers unhappy with existing app store policies, which includes the likes of Spotify and Basecamp.
Epic Games is currently embroiled in a legal spat with Apple over the terms in which it operates the App Store. Last year, the Fortnite developer was booted from the App Store after it attempted to circumvent Apple’s payment systems. The move, which was largely regarded as a symbolic protest against Cupertino’s revenue-sharing policies, has since made its way into the courts, where Apple’s status as gatekeeper for the iOS platform is being closely examined.
In addition to legal and legislative avenues, Epic is also attempting to shift public opinion against the iPhone maker, most notably releasing an advert that parodies Apple’s iconic 1984 Macintosh advert – albeit with Apple portrayed as the nefarious Big Brother figure, and a Fortnite character smashing the telescreen.
North Dakota is the fourth least populous US state. It is, relatively speaking, a place of little significance. There’s no real tech industry there and its main economic activities are oil extraction and agriculture. Forget semiconductors; they’re all about soybeans and shale.
And yet Apple fought hard against S.B. 2333, sending its chief privacy engineer, Eric Neuenschwander, to testify before a senate committee, where he described the bill as an existential threat to the iPhone.
According to his testimony [PDF] earlier this month, Neuenschwander said the bill “threatens to destroy iPhone as you know it” and would “undermine the privacy, security, safety, and performance that’s built into iPhone by design.” He added that the App Store was “curated… to keep out apps that would steal your banking information, or break your phone, or spy on your kids.”
Obviously Apple has a dog in this fight. It makes a lot of money from the App Store – an estimated $64bn in 2020 alone, according to a CNBC analysis. But the safety argument does have some validity. Malware for iOS is rare compared to Android, which permits the use of third-party marketplaces, as well as direct downloads of applications. Although frustrating and costly for developers, this approach does spare iOS users some of the headaches compared to rival platforms. Moreover, this privacy and security edge plays a recurring role in Apple’s marketing.
More pressingly, the passage of S.B. 2333 would set a dangerous precedent for Apple, opening the floodgates to similar legislation in other states – and potentially other countries too. We’ve seen this happen with the right-to-repair movement.
Closer to home
Not content to merely fight Apple in California Federal Court and Australia, Epic Games has opened a new front in Europe, filing an antitrust complaint with the European Commission’s Directorate-General for Competition.
Epic Games, which is partially owned by China’s Tencent, claims Apple has “completely eliminated competition in app distribution and payment processes.” Epic also argues that Apple uses its all-encompassing control of the iOS ecosystem to disadvantage developers competing against its own apps.
It has given two examples. The first is the most obvious: Fortnite, the shooter game favoured by tweens, which was unceremoniously booted from the App Store after Epic added an alternative payment system. It also cited Apple’s refusal to allow Epic to launch its own iOS games marketplace, which would compete directly with Apple Arcade.
Epic founder Tim Sweeney, who holds a majority stake in the company, said in a statement: “What’s at stake here is the very future of mobile platforms. Consumers have the right to install apps from sources of their choosing and developers have the right to compete in a fair marketplace.
“We will not stand idly by and allow Apple to use its platform dominance to control what should be a level digital playing field. It’s bad for consumers, who are paying inflated prices due to the complete lack of competition among stores and in-app payment processing. And it’s bad for developers, whose very livelihoods often hinge on Apple’s complete discretion as to who to allow on the iOS platform, and on which terms.”
This complaint is yet to be accepted by the commission. It’s but one of many antitrust complaints targeting Apple, overlapping with an earlier complaint made by Spotify and Rakuten, which offer alternatives to Apple Music and iBooks respectively. Both firms argue that by charging 30 per cent for in-app purchases, Apple disadvantages any company that tries to compete against its homegrown services, with competitors forced to either raise consumer prices or begrudgingly accept a smaller slice of the pie.
The commission is also examining whether Apple Pay’s exclusive status on the iPhone breaks antitrust rules. Apple Pay is a quiet money-spinner for Cupertino, where it takes 0.15 per cent of all transactions. Unlike Google, there’s no competition to worry about, with rival third-party services excluded. The commission fears this may deny consumers choice and technological innovation, while limiting competition on price, which would have a downstream impact on both retailers and customers, who ultimately absorb the costs.
For developers frustrated with Apple’s iron grip, Epic Games (and, to a similar extent, its founder, Sweeney) has emerged as an unlikely champion, taking the fight to courts and state houses throughout the world. This is a role it’s happy to assume, and Sweeney’s Twitter feed is regularly updated with critiques of Apple, Google, and, to a lesser extent, Microsoft and Valve.
It’s also one of the few businesses that can afford to do so. Unlike smaller developers, it’s not beholden to Apple. It owns the Unreal Engine, which forms the basis of hundreds of indie and AAA titles. Meanwhile, the free-to-play Fortnite remains a money-spinner across consoles and PC, bringing in $1.8bn in 2019 alone. Even without a presence on mobile, it remains a formidable foe.
Epic Games’ crusade isn’t really about a particular app store or mobile platform. It’s about broader questions of customer choice and freedom, and how smaller firms compete with the titans that operate the mobile platforms we all rely on. The outcome of this battle will have massive ramifications. For Fortnite, certainly. But more substantially for anyone who wants to make an app, or start their own software business.
An Apple spokesperson told The Reg: “Epic has been one of the most successful developers on the App Store, growing into a multibillion dollar business that reaches millions of iOS customers around the world, including in the EU.
“In ways a judge has described as deceptive and clandestine, Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines that apply equally to every developer and protect customers.
“Their reckless behavior made pawns of customers, and we look forward to making this clear to the European Commission.”
Epic has been asked to comment. ®