Fortnite maker Epic Games has been at war with Apple since 2020, protesting the 30 per cent cut of revenue that Apple demands for all in-app transactions on the iOS platform. Epic argues that because it has its own app store, users should have the freedom to choose where they buy Epic’s products no matter what platform they decide to game on.Dado Ruvic/Reuters
Keldon Bester is the executive director of the Canadian Anti-Monopoly Project and a fellow at the Centre for International Governance Innovation. He has worked as a special adviser at the Competition Bureau.
Last week, Apple AAPL-Q decided it had had enough. Reversing an earlier decision, Apple deleted the developer account of Epic Games, maker of the ultrapopular Fortnite video game franchise.
It’s reason for doing so? Disparaging tweets from Epic’s chief executive officer, Tim Sweeney.
Under pressure, Apple later reinstated Epic Games’s account. But the whole episode speaks to something disturbing: the nature of the bully-based economy, where a single company can shut off access to a multimillion-dollar sales channel because one CEO was rude to another.
Epic was using its developer account to create a version of its own app store, the Epic Games Store, within Apple’s iOS operating system environment. That it was able to do so at all was the result of the European Union’s Digital Markets Act (DMA), a sweeping piece of legislation designed to break down the walls that have been built around facets of digital life, such as search engines, e-commerce platforms and app stores.
Apple now cannot boot Epic Games for running an app store. So, it found another reason. In correspondence between executives of the two companies, Apple leadership specifically referenced Epic’s “colorful criticism” of the company’s compliance with the DMA as evidence that Epic would not be playing fair within the gates recently opened by regulatory action.
Epic’s conflict with Apple is emblematic of the monopoly problem in digital markets. Epic has effectively been at war with Apple since 2020, protesting the 30 per cent cut of revenue that Apple demands for all in-app transactions on the iOS platform. Epic argues that because it has its own app store, users should have the freedom to choose where they buy Epic’s products no matter what platform they decide to game on. This runs counter to Apple’s walled-garden approach that has to date forced developers to use its app store and associated payments infrastructure.
Epic is no mom-and-pop small business. Creator of the massively popular Fortnite franchise, Epic is a multi-billion-dollar business and one of the largest game developers on the planet. If Apple can push a company like Epic around, what chance do any other players have for fair treatment? Beeper, an upstart company aiming to break down walls between messaging apps, found this out the hard way when it was repeatedly kicked off Apple’s app store for threatening Apple’s control of the iMessage platform.
This is the endpoint of the bully-based economy where a few vaunted gatekeepers set the rules and only the select few with enough countervailing economic clout can get a fair deal. Companies that have installed themselves at the chokepoints of markets old and new are extracting the value of those chokepoints at the expense of consumers, workers and entrepreneurs.
It’s this kind of phenomenon that has sparked the rebirth of interest in competition and anti-trust law and led to the introduction of laws such as the DMA in Europe.
Meanwhile, in Canada, the Competition Bureau has announced an expanded investigation into Google’s GOOGL-Q advertising technology business making use of a newly reformed Competition Act. Last year the U.S. Federal Trade Commission sued e-commerce giant Amazon for illegally maintaining a monopoly among a flurry of anti-trust activity in concert with the U.S. Department of Justice.
The intensity of this moment has also made unlikely allies of Silicon Valley and European regulators. Calling out Apple’s conduct, legendary technology investor Paul Graham tweeted that he “sees ever more signs that power has corrupted them.” In February, influential startup incubator Y Combinator hosted a conference bringing together startup founders and anti-trust regulators. As yesterday’s disruptors become today’s gatekeepers, the people building the future are searching for ways out from under the thumb of Big Tech.
Thankfully, these anti-monopoly legislative efforts are beginning to pay off. Days after Apple’s decision to revoke Epic’s access, European Union regulators responded quickly and Apple reinstated Epic’s developer account.
But this is just one particularly high-profile example of the systemic power being used to maintain monopoly moats in some of the most dynamic markets in the economy, and not everyone has Epic’s PR firepower. The same kind of regulatory protections are even more important for startups looking to build new challenges to the power of digital gatekeepers, and the real test of the DMA will be its ability to protect not just the already powerful.
The global issue of economic coercion necessitates a global response. While different countries will pursue different paths, they must maintain the common goal of increasing economic freedom from monopoly power so that the days of the bully-based economy are numbered.