App Store critics like Spotify and Epic got mixed results in middle game—but what’s their end game against Apple?

There are striking parallels between those three ways of tackling the App Store tyranny, and by sheer coincidence, all three of them are not standing at a comparable injuncture.

Opening

The task at that stage is to convince decision makers that the App Store monopoly is not a perfect state or an inevitable setup, but that it has harmful consequences and warrants some form of intervention. Not only does the problem have to be explained and do Apple’s privacy, security and other arguments (most of them pretextual) have to be overcome, but one should not underestimate the challenge that people may ask why it is specifically a problem with mobile platforms despite similar rules existing on, for instance, some game consoles.

Those who lobbied for the DMA must have played a remarkably good opening game. They got an EU legislative process started, and it became a high-profile initiative for the EU to take. Apparently, the notion of subjecting video game consoles to the same rules never got traction.

Spotify’s opening game was successful, but slow. It took only about a year from the formal filing of a complaint to the opening of formal investigations, but prior to the formal complaint they were already campaigning for their cause, suggesting that they had a lot of work to do before the EC encouraged them to formally complain. The first disagreement between Apple and Spotify on app distribution terms, according to the timeline Spotify itself published, goes back to the year 2011. Apple’s statement on today’s decision says Spotify already started working with the EC in 2015 on a complaint, meaning it took 4 years from that effort tot he formal filing of the complaint. After the formal complaint in March 2019, it took 15 months until the EC launched formal investigations (June 2020), and then less than a year until the original Statement of Objections (SO) (April 2021).

Epic’s U.S. case against Apple already struggled during the opening game. Judge Yvonne Gonzalez Rogers granted only narrow emergency relief after Fortnite was kicked out of the App store: she didn’t put Fortnite back on the App Store, but ensured that development of the Unreal Engine (used by third parties) would not be affected. She never saw why Epic would not go after, say, Sony (a shareholder in Epic, even if not a very large one) over its 30% cut and other rules, and made that clear in her ruling. But during the spring 2021 trial, Judge Gonzalez Rogers did identify signs of potential issues. She made a very good point about competition potentially resulting in innovation that increases security. And she elicited statements from Apple CEO Tim Cook that showed Apple doesn’t care about developer satisfaction with their treatment.

Middle game

Chess players want to use the middle game to occupy strategic positions (i.e., control as much of the board as possible) and to capture pieces. In the App Store context, the middle game can be defined as the part where you get from an initial realization of the existence of an issue to not only a win on the merits but also an initial set of remedies. Ideally, you’d want the remedies at that stage to already solve all the problems for you, but that did not happen in any of those three contexts.

The DMA did not do what the EU did in connection with roaming charges (surcharges when a mobile phone user makes calls or transfers data in another EU member state), where the EU simply ensured by means of legislation that there would be no charges for certain types of roaming and only limited charges for others. If that had happened here, the end game would have been child’s play, but one can’t blame the pro-DMA movement for not having achieved (and possibly not even having asked for) that. Let’s focus here on the single most important effect of the DMA in the app store context: Apple must allow rival app stores (and it does recognize that fact, though this doesn’t solve all the problems yet). A more successful middle game in that context would have resulted in clearer rules (again, not going all the way to governmental price-setting, but greater specificity). Among various other things, that would have included the gatekeeper definition (where Apple is now disputing that the iPad version of the App Store is included, which means that for the DMA the middle game is not even complete yet).

The DMA is a historic achievement if it works. If. It. Works.

Spotify’s middle game was not overly successful. The problem was that the EC took the unusual step of replacing the original SO with a narrower one. At that point it was only about anti-steering (Apple rules that limit communications with end users), no longer about Apple’s in-app purchasing rules. And it also took way too long. Finally, today, about five years after the complaint, Spotify got the EC’s decision, and it’s of a narrow scope. Spotify’s CEO, while diplomatically thanking the EC that actually gave him much less than he originally wanted, expressed skepticism of what Apple will do now. Indeed, there are signs that Apple will apply its new EU app rules to Spotify as well, meaning that Spotify would have to pay Apple certain fees in order to link out from its app to alternative payment options and special offers.

It’s also worth noting that the EC’s €1.8B fine on Apple is almost entirely a base fine for the purpose of deterring such violations, and only a minuscule part of it is case-specific. That also shows Spotify didn’t make a whole lot of headway.

Epic’s middle game was largely lost. The district court threw out all of the federal antitrust claims, all of the state law antitrust claims, and awarded only a consolation prize: an anti-anti-steering injunction under California UCL. Epic wasn’t able to revive its antitrust claims on appeal. Based on how the Ninth Circuit hearing started, there would have been a chance of a remand to arrive at the correct market definition, but Judge Milan D. Smith, the most active one of the three circuit judges was persuaded by Apple’s lead counsel that Epic had failed to prove all of the essential elements of a single-brand aftermarket (particularly lock-in), and when Judge Smith gave Epic’s appellate counsel one last chance (toward the end of the hearing) to show how those requirements were satisfied, the lawyer (who had from the beginning of the hearing tried to argue that market definition wasn’t the most important part in this case) didn’t convince Judge Smith, who said to his colleague Judge Thomas that he didn’t really get an answer to his question. But even the Ninth Circuit affirmed the consolation-prize injunction under UCL.

In all three cases, it’s clear that Apple conquered strategically important positions. Against Epic and Spotify, Apple also captured some key pieces. Relatively speaking, the DMA got further than Epic’s and Spotify’s cases because the requirement to allow alternative app stores really hurts Apple. But the objective is not to hurt Apple: it’s to enable effective competition.

End game

After the opening, challengers merely stay in the game. Even the middle game, no matter how heroic an achievement may be, is just an intermediate step. And in two of those cases (Epic and Spotify), the middle game was largely not won, as evidenced by the fact that Fortnite still hasn’t returned to the App Store and Spotify won’t be able to offer in-app payments without going through Apple under the narrow EC ruling.

Apple always had the end game in mind. Looking at how Apple acted in those contexts, the arguments Apple made and the priorities it set, it’s clear that Apple always thought to itself: “First let’s see if App Store critics even get any favorable decision, but the first round of decisions won’t answer the question of what they still have to pay.”

Apple’s adversaries also knew, as they were professionally advised, that a decision to allow alternative app stores or alternative payment systems would still not be their final destination. But it’s easier for Apple than for its critics to be patient: delay favors Apple, as it retains control and makes money that way. What also helps Apple is that lawmakers, regulators and judges (unless they can delegate that task to a jury) are much more reluctant to engage in price-setting than in identifying wrongdoings on a behavioral/structural basis. It’s easier to say “don’t do this” than “this is what you may charge.”

DMA end game

The DMA’s end game started when Apple announced its new EU app rules. Those terms and conditions limit the potential for rival app stores to the extent that going through a rival app store will be a really attractive option only if Apple’s own App Store wouldn’t carry an app anyway (such as adult content) or impose insane terms (such as a 30% cut on the sale of non-fungible tokens, which if you sell them repeatedly means that at some point transaction costs completely devalue them).

The EU always foresaw the possibility of strengthening the DMA. That’s why there’s a review clause. But 2026 is still far away. In the meantime, unless the EU decides to go back to the middle game sooner rather than later, some challenges to Apple’s terms will be more and others will be less likely to succeed. Apple will play the end game with multiple “kings”: there are multiple issues with Apple’s terms where each is serious enough that its rivals must overcome them all to make alternative app stores work.

One of those “kings” is definitely FRAND. It’s arguably the king of the kings here. Based on the outcome of the middle game, however, Apple can even dispute that it has any obligation at all to offer FRAND terms to alternative app store makers (though Apple would, like any litigant in that situation, always say “but even though we don’t have that obligation, the terms are FRAND anyway”). Also, Apple will raise a wide range of arguments (even if they limit them to intellectual property considerations) for why it believes its demands are justified.

FRAND litigation with appeals takes a number of years, as do disputes over the EC’s enforcement decisions.

Spotify end game

Spotify is still in the middle game because Apple will appeal. Also, Spotify’s CEO appears to bet very much on the DMA now.

The EC decision hasn’t been published yet (as they have to clarify what parts need to be redacted). That makes it difficult to understand some important details. But looking at what Apple is doing in the DMA context, the operating assumption is that Apple will simply offer those terms to Spotify. In that case, if they want to benefit from the freedom to link to external payment options, Apple will want a Core Technology Fee (CTF) of €0.50 per install per year and a commission of 17% (first year of subscription) or 12% (second year) on top.

That wouldn’t really help Spotify because they’d pay Apple more or less what they’ve consistently refused to pay for more than a decade. The incremental sales volume wouldn’t be worth it.

Other issues could include that Apple would expect Spotify to offer a separate version of its app in the jurisdictions in which it wants to link to outside payments. In that case Spotify would have to migrate a large part of its iOS user base to what is technically a new app, even though it would look and be named like the old one.

Spotify’s CEO wouldn’t have used the word “skeptic” many times in a video he recorded and published today if he didn’t anticipate these types of issues. He was being diplomatic and thanked the EC for everything, but he knows he got a lot less than he asked for and after an unusually long period.

The EC decision is based only on music streaming, which suggests that this case won’t benefit other app makers. The EC announcement says Apple would have to stop this behavior, but that doesn’t necessarily mean non-music-streaming apps are included.

The prospects for Spotify’s end game concerning its EU antitrust complaint against Apple aren’t great, and they aren’t even there yet because Apple is appealing.

Epic v. Apple end game

After today’s Spotify ruling, Epic CEO Tim Sweeney reiterated on X (formerly known as Twitter) that his company would challenge Apple’s “malicious compliance” with the California UCL injunction. That must mean a contempt motion is coming, though it’s unclear how soon. Epic wanted to work out a briefing schedule with Apple and present it to the district court.

It’s harder to be realistic when thirsting for change, and that’s why many app developers believed after the September 2021 Epic v. Apple injunction that they could soon promote purchase options without paying Apple anything, including that some even thought the injunction would be interpreted so broadly in their favor that they could show a browser control (a rectangular area that displays a web page) within their apps to offer a new purchasing mechanism, without paying Apple.

The enforcement of the injunction was stayed during the Ninth Circuit appeal and even until the Supreme Court declined to hear the case. It was stayed for well over two years in total.

There won’t be many people (if any at all) left dreaming of the most permissive interpretation of the injunction. After Apple announced its “compliance” plan (January 18, 2024 games fray article), it became clear that Epic would have to fight hard against certain restrictions, and that the single biggest issue was that Apple wants to impose a fee that renders links to external payment options counterproductive (a lot of hassle for the users without anyone saving money).

One limiting factor is that contempt proceedings are not meant to be large-scale litigations like the original merits proceedings. If Epic convinces the court (and then also the appeals court) that Apple should not be allowed to impose any charge on those links, then that binary determination would be within the scope of a contempt proceeding. But if Apple may charge something, then the question is how much Apple may charge, which could be anything from very little to what Apple is demanding now. To make that determination would be a major effort. A multi-day trial with economic experts is not what you can do in a contempt proceeding.

Conventional wisdom says Epic should take the most aggressive one of all reasonable positions it can take, and then make the most out of the (post-appeal) outcome. There is no reason here why they shouldn’t try that, but in the end it could be that links are just not going to be a workable way to leverage the injunction. (Epic itself couldn’t leverage it anyway at this stage as it was kicked out of the App Store.)

It’s going to be a complicated process with an uncertain outcome.

Conclusion

At this point, none of those three efforts have definitively failed. If this was a computer game, the players would all have collected certain achievements. But they’re all still a long way from actual market impact. Apple’s critics need patience, perseverance and also have to think again about some of their strategies. Sometimes what appears to be the fastest way to a commercially valuable solution takes too long and delivers too little. What should worry them all is that Apple, with its extensive expertise in FRAND disputes, appears to be confident of its ability to defend certain commercial terms if it has to. They’re not even there yet, but getting close. Unfortunately for Apple’s critics, they haven’t conquered any strategic position during the middle game that will give them an advantage in the FRAND fight, which is the final part of the end game here.