For the public register

1 April 2022
Digital Platform Services Inquiry
Australian Competition and Consumer Commission
Via email: digitalmonitoring@accc.gov.au
Dear DPSI team1.

Introduction

Epic Games, Inc. (Epic) appreciates the opportunity to provide this public submission to
outline a number of key issues including how Apple and Google’s position as ‘gatekeepers’
has resulted in consumers experiencing less choice and paying more for apps and services,while Australian developers are prevented from innovating and benefiting from a competitivemarketplace.
Epic filed proceedings against Apple and Google in the Federal Court of Australia in late 2020and early 2021, respectively, for alleged contraventions of the Competition and Consumer Act
2010 (Cth) (CCA), arising from restrictions they impose on app developers, including use of
their respective mobile app distribution and in-app payment systems.
This submission provides background and insights informed by Epic’s experience with Google
and Apple in Australia on several key issues raised in the ACCC’s discussion paper including:●Harms to competition and consumers arising from digital platform services;●

The effectiveness of competition and consumer law in Australia;●

Potential regulatory options, rules and measures.

1

For the public register
The submission is not intended to restate any legal claims that are the subject of Epic’s
proceedings against Apple or Google.
The discussion paper for interim report no.5: updating competition and consumer law for digitalplatform services (“Discussion Paper)”1 and the Digital platform services inquiry interim reportno.2 (March 2021 “Interim Report”)2 contain compelling evidence that Apple and Google havesignificant market power in Australia through their respective app stores and that more canbe done by the two companies in this area to promote fair access and competition.
Mobile ecosystems are a critical part of the modern economy, with millions of developers andbillions of consumers relying on those ecosystems to make a living and conduct important
daily tasks. As some of the consultation areas fall outside of Epic’s purview, this submission
is confined to addressing the ACCC’s questions regarding consumer competition andconsumer harms, competition and consumer protections law enforcement in Australia andpotential regulatory solutions relating to app marketplaces.
2. Background to EpicFounded in 1991, Epic Games is a leading interactive entertainment company and provider of
3D engine technology. Headquartered in Cary, North Carolina, Epic has more than 50 offices
worldwide, including in Australia.
Epic develops software applications (apps) for several devices. Epic is the creator of Fortnite,a massive virtual world where hundreds of millions of people from across the world connect,meet, play, talk, compete, dance, or attend concerts and cultural events.

Epic also develops

Unreal Engine, which powers the world’s leading games and is also adopted across industries
such as film and television, architecture, automotive, manufacturing, and simulation. Through
Unreal Engine, Epic Games Store, and Epic Online Services, Epic provides an end‐to‐end digital
ecosystem for developers and creators to build, distribute, and operate games and othercontent.

1

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No. 5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf.
2Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – March 2021 Interim
Report No.2 – app marketplaces’ (28 April 2021) available athttps://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry%20%20March%202021%20interim%20report.pdf.

2

For the public register

3. Harms to competition and consumers
Epic agrees with the ACCC’s assertion that Google and Apple have significant market power
in relation to a number of digital platform services and that the market power of these digitalplatforms is increasingly entrenched.3 The ACCC observes that Apple and Google “performgatekeeper roles by controlling app developers’ access to their respective app marketplaces”
and that they can “unilaterally set, amend, interpret and enforce the terms and conditions thatapp developers must follow to reach consumers”4. The consequences of this entrenchedmarket power include:
1. “Allows the relevant digital platform to unilaterally set the ‘rules of the game’ for large
swathes of economic activity”.
2. “Provides the opportunity to impose terms of use and access for consumers andbusinesses that can be unfavourable, opaque and subject to change without input or
notice”.
3. “Gatekeeper digital platforms who are vertically integrated may have the ability andincentive to engage in anti-competitive conduct”.5
Apple and Google’s market power and their resulting ‘gatekeeper’ positions has harmed
competition, consumers, and developers.
3.1 Consumer harmsa. Increased costs for Australian consumers
Apple and Google’s market power enables them to impose an exorbitant 30% commission on
in-app purchases of digital goods and services. Consumers must bear some or all of thatcommission in the form of higher in-app content prices and/or reduced quantity or quality of
in-app content. The Discussion Paper expresses concern about Apple and Google’s ability to
set and enforce terms and conditions for access to app marketplaces including the mandatory
and exclusive use of proprietary billing systems for in-app payments and the imposition of a3

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No. 5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf, page 16.
4
Ibid. p.24.
5Ibid. p24.

3

For the public register
15% or 30% commission on in-app payments6. Further, the March 2021 Interim Reportconcluded that “it is highly likely that the commission rates charged by Apple and Google are
inflated by the market power they have in their dealings with app developers. It is also highly
likely that this market power enables Apple and Google to unilaterally set and enforce the rulesthat app developers must satisfy, including the requirement that prevents them using
alternative payment systems in-app”7.
Requiring Apple and Google to allow alternative app stores on mobile devices would result ina more open ecosystem that gives consumers and developers better choice and value. For
example, Epic Games charges a substantially lower commission (12%) for games distributed
via the Epic Games Store (available on PCs, Macs, and Chromebooks) than the 30% charged
by Apple’s App Store and Google’s Play Store and also permits alternative payment
processing.
b. The lack of interoperability between digital platform services raises consumer
switching costs and hampers competition
The Discussion Paper raises concern about the lack of interoperability between digitalplatform services, referencing statements from Apple executives which acknowledge thecosts that users face in switching between services inside and outside of Apple’s ecosystem8.
In relation to Apple’s media and app stores Apple executives admitted that:“The more people use our stores the more likely they are to buy additional Apple
products and upgrade to the latest versions. Who’s going to buy a Samsung phone ifthey have apps, movies, etc. already purchased? They now need to spend hundreds
more to get to where they are today”9.

6Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No. 5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf, page 42. The
report references statements released in Epic Games v. Apple case in the Northern District of California.
7
Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – March 2021 Interim
Report No.2 – app marketplaces’ (28 April 2021) available athttps://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry%20%20March%202021%20interim%20report.pdf, page 63.
8Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No. 5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf, page 53.
9United States District Court, Epic Games Inc v Apple Inc, Findings of fact and conclusions of law proposed by
Epic Games, Inc., p 19.

4

For the public register
Apple and Google have argued that a closed ecosystem, which limits or bans direct downloads
or competing App Stores while limiting interoperability, is the only guarantee of safety andprivacy. Contrary to Apple and Google’s claims, the choice between competition and security
is not binary. Rather, greater competition in the distribution of applications on mobile devices
will not only open the market to greater price competition, it will also spur innovation andimprovements in security and privacy offerings. Many competition authorities around theworld are grappling with these issues, including how to encourage meaningful competition in
mobile ecosystems.
c. Consumers are denied innovation and choices which could be provided by would-becompeting in-app payment processors.
To have an app in the App Store, app developers must agree to a 30% fee to Apple for every
in-app purchase of digital in-app content. Consumers may not access any other payment
protocols. Apple gags developers from telling consumers about other options outside of the
In-App Purchase (IAP) system. This limits user choice and locks them into a set fee structure.
As a smartphone user, you should have the choice to use a different payment system where
it is available.
The ACCC observed that “significant market power can also be leveraged across different
services, leaving consumers with less choice, higher process and/or lower quality products
and services across many interrelated markets. Ultimately, this can lead to reduced
productivity and innovation, while increasing costs in the supply of digital platform and related
services.”10
Epic’s own experience bears-out this out. In 2020, for the first time, Epic added a direct
payment processing option for in-app purchases made by users of Fortnite on iOS and Android
devices. This alternative avoided Apple and Google’s standard 30% levy for in-app purchasesof digital goods. As a consequence, Epic was able process payments in a more cost-effective
way and was able to pass an ~18% price reduction to consumers opting for Epic’s payment
option. Unfortunately for developers and consumers, offering alternative payment options
breaches Apple’s and Google’s app store policies, and Fortnite was removed from the App
and Play Stores.

10

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No.5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf, page 5.

5For the public registerd.

App Store Gatekeepers pretextual security justifications undermine user choice,competition, and innovation that could lead to better consumer outcomes for privacy
and security.

Apple and Google claim that they make decisions on behalf of consumers to protect themfrom bad actors or harmful consequences online. It is far from clear if these choices are madefully in the interests of consumers or merely as a pretext to justify decisions that harmcompetition and limit consumer choice.
For example, Apple argues that “if third-party app stores were able to operate on iOS devices,
the level of protection against malware would move from Apple’s high standard of review tothe lowest standard offered by a third-party app store, creating a risk for the individual device
and the overall ecosystem.”11 Apple self-servingly mischaracterises the risk and the functionof the App Store app review process and its impact on device security. It also makes thebaseless assertion that competition in app distribution would be a security “race to thebottom,” rather than a “race to the top'' where rivals with more innovative and secure appstores challenge Apple to do better. To the contrary, Apple’s app review protections could be
replicated—and even improved—by third parties. Anticompetitive app store policies should not
get a free pass from scrutiny just because Apple or Google invoke privacy and security
justifications.
As the Electronic Frontier Foundation explains in its brief in support of Epic in the U.S. Courtof Appeals for the Ninth Circuit, “Apple’s security rationale is weak and does not overcome theharm its policies cause to innovation, including innovation that would enhance consumers’
security and privacy….Apple’s policies actively thwart developers’ attempts to meet other userneeds relating to privacy, security, trustworthiness, and access to information.”12 The choice
between promoting competition and promoting security is not a binary one. Competition is
likely to drive innovation and improvement in security and consumer privacy.

11

Competitions & Markets Authority, ‘Mobile ecosystems – Market Study Interim Report’ (14 December 2021)
available athttps://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment data/file/1048746/Mobil
eEcosystems InterimReport.pdf, para. 7.56.
12
See Brief of The Electronic Frontier Foundation as Amicus Curiae Supporting Appellant, Cross-Appellee
Epic Games and Reversal at 12, 17, Epic Games, Inc. v. Apple, Inc., (Nos. 21-16506 and 21-26695), (9th Cir.
Jan. 27, 2022).

6

For the public register
3.2 Developer harms
a. Apple and Google’s anti-competitive conduct denies app developers the choice of how
best to distribute their apps.
Developers are barred from reaching billions of iOS and Android users unless they go throughthe Apple and Google app stores and submit towhatever terms they impose. Opening

mobile devices to alternate means of downloading applications and software is foundational
to the creation of a more open ecosystem, whether it be alternative app stores or direct
downloading of applications from the web. These solutions already exist and are regularly andsafely used by consumers every day when they use their laptop or desktop computers,
including PCs, macs and Chromebooks. It is only when consumers shift from the computeron their desk to the computer in their pocket that they are limited to software installation
through the App Store and Play Store. These limits are the product of commercial decisions
by Apple and Google – not of safety or technical necessity.
Consumers are not the only ones who would benefit from competition-induced pricediscipline. In Epic v. Apple, a U.S. district court found that “Apple’s restrictions on iOS game
distribution have increased prices for developers. In light of Apple’s high profit margins on the
App Store, a third-party store could likely provide game distribution at a lower commission
and thereby either drive down prices or increase developer profits.”13
The foreclosure of meaningful competition in respect of iOS and Android app distribution
reduces the competitive pressure for Apple and Google to innovate and improve their own app
stores. Price is not the only element that would be improved by app store competition. Thatsame U.S. district court determined that “a third-party app store could put pressure on Apple
to innovate by providing features that Apple has neglected.”14 The court specifically foundthat:“The parties agree that the App Store provides features besides distribution, including
search and discoverability to help users discover games, in-app payment processing,developer tools, and security. Competition could improve each of these features: a

13

Epic Games, Inc. v. Apple Inc., 4:20-cv-05640-YGR (N.D. Cal.), Rule 52 Order after Trial on the Merits (Dkt.
No. 812), at 99.
14
Ibid. at 102.

7

For the public register
third-party app store could provide better “matchmaking” between users anddevelopers, could have simpler in-app payments, and could impose a higher standard
for app review to create more security. . . . Notably, Apple conducted developer surveys
in 2010 and 2017. Comparing the two indicates that Apple is not moving quickly toaddress developer concerns or dedicating sufficient resources to their issues.
Innovators do not rest on laurels. . . . Apple’s slow innovation stems in part from its
low investment in the App Store.”15
b. The restrictions prevent developers from experimenting with alternative app
distribution models.
There are several alternative, effective and safe ways of avoiding dominant app store
gatekeepers’ anticompetitive terms and rates. For example, “sideloading'' should be allowed
on iOS and made easier on Android OS. Indeed, “side loading” is just direct downloading of
applications on mobile devices outside of the Apple App Store or Google Play Store. Contrary
to Apple and Google’s claims, there is nothing illicit or risky about it. Application “sideloading”
is identical to the application “downloading” that consumers safely perform every day on theirmacs, Chromebooks and PCs.
While Apple outright forbids direct downloading on iOS devices (but not macOS devices),
Google highlights that it allows direct downloading on Android devices. Google technicallydoes not prohibit direct downloads, but it restricts the distribution of Android apps byconfiguring the Android OS to make it unreasonably difficult to download apps via analternative app store or a web browser. In sum, Google erects unnecessary barriers that make“technically possible” downloading practically impossible for most consumers.
c. Apple and Google’s conduct increases developers’ costs.
Apple and Google extract an exorbitant 30% commission on in‐app purchases of digitalcontent. Developers require a reasonable return on their investment to dedicate thesubstantial time and financial resources it takes to develop an app. By imposing a 30%
commission, Apple and Google necessarily force developers to (i) suffer lower profits

15

Ibid. at 100-102.

8

For the public register(rendering some apps financially unviable altogether), (ii) reduce the quantity or quality of theirapps, (iii) raise prices for consumers, or some combination of the three.
The role of apps is already of essential importance to many millions of Australians and will
become even more so in the years ahead. While Epic Games has taken the initiative in bringing
legal action against Apple and Google, it is not just Epic or game developers that are impacted
by Apple and Google's exorbitant fees. Apps provide a host of capabilities beyond gaming
including banking, health and fitness, social interactions, video chatting and movie/television
streaming.
Mobile gatekeepers’ ability to set terms and prices, as well as control the availability of mobile
apps to consumers, is shaping the development of products and services, companies,
emerging business models and industries. Opening the mobile ecosystem to the same levelof competition and openness that consumers and developers experience on desktop
computers will help ensure that self-determination and market forces – rather than theunilateral preferences of two companies – set the terms by which these products, services
and industries evolve to meet consumer needs and demands.
4. Competition and consumer protections law enforcement in Australia
Epic Games considers that, in line with overseas jurisdictions, regulatory reform should be
implemented to complement existing competition and consumer laws. This is discussed
further in Section 5.
5. Potential Regulatory Solutions
The ACCC should prioritise remedies that would generate competition within existing
ecosystems to alleviate the most severe impacts that consumers and developers currently
suffer. Opening mobile devices to alternative app distribution would have a meaningful andexpeditious impact on opening the mobile ecosystem to competition. Prohibiting the tying ofproprietary in-app payment systems to app distribution would be a significant complementary
remedy. Implemented together, these solutions would open-up existing mobile app
distribution ecosystems, unlocking competition and innovation from additional entrants andexpand choice for consumers.

9For the public register
Opening mobile devices to alternate means of downloading applications and software isfoundational to the creation of a more open ecosystem, whether it be alternative app storesor direct downloading of applications from the web. These solutions already exist and are
regularly and safely used by consumers every day when they use their laptop or desktop
computers, including PCs, macs and Chromebooks, and as discussed above it is only when
consumers shift from the computer to phone, they are limited to software installation throughthe App Store and Play Store.
The ACCC has expressed the view in the Interim Report that Apple and Google face limitedcompetitive constraints in mobile app distribution and have market power in their dealings
with app developers, which is likely to be significant16. App developers wishing to access iOS
and Android have few, if any, viable alternatives for app distribution. This market power
enables them to unilaterally set and enforce the rules that app developers must satisfy,
including requirements that prevent app developers from distributing their apps on competingor alternative distribution platforms and from offering alternative payment systems for in-app
purchases of digital content. Given this power, and lack of meaningful competitive
alternatives, it is highly likely that commission rates associated with the in-app payment
systems offered by Apple and Google for the purchase of digital in-app content are inflated.
The contractual restrictions imposed by Apple and Google prevent app developers from
distributing their apps on other distribution platforms and choosing among competitively
priced alternative in-app payment systems, such as those from FinTechs. Notably, the 30%
charge imposed by Apple and Google on purchases for in‐app content is around 10 times
higher than fees charged by analogous electronic payment processors in competitive
contexts, such as PayPal, Stripe, Square or Braintree, which typically charge payment
processing rates of around 3%. Such restrictions also mean that developers cannot either
offer or even alert consumers to cheaper alternative payment methods outside an app (e.g.
on a developer's website).
The contractual restrictions imposed by each of Apple and Google prevent would-becompeting app distributors from developing viable and compatible app marketplaces thatprovide consumers and app developers with choice beyond the Apple App Store and Google
16

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – March 2021 Interim
Report No.2 – app marketplaces’ (28 April 2021) available athttps://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry%20%20March%202021%20interim%20report.pdf, page 78.

10For the public register
Play Store. These restrictions have also resulted in ‘super profits’ being collected by eachcompany at the expense of Australian consumers and prevented the establishment ofotherwise viable in-app payment systems that could compete with each of the payment
processors offered by Apple and Google. Notably, the systems offered by Apple and Google
do not provide any unique benefits over other in-app payment services or existing alternative(and lower-cost) options that offer similar functionality. They are arbitrarily applied to what
Apple and Google deem to be ‘digital apps’, while other apps offering similar (physical)
services to consumers are exempted. There are no legitimate security concerns or
justifications for the imposition of these restrictions.
5.1 Direct Prohibitions and a Mandatory Code of Conduct
The ACCC recognised the competition, consumer and developer harms discussed above in
its March 2021 interim report and the discussion paper indicating that Apple's and Google’scontrol over their respective app marketplaces enables each of them to bundle developer
access to the app marketplace with a requirement to use their respective in-app payment
systems, and to take commissions on transactions using those systems 17. The ACCC went
on to further state:Apple and Google’s respective terms which prevent app developers from using
alternative payment systems for payments made in-app affects the ability ofalternative payment systems to operate in the app marketplaces. This in turnleads to a loss of consumer choice, as consumers are unable to use any otherpayment option when making payments in-app…deters developers fromoffering products to consumers or charging customers more to cover thecommission.
…
Removing these requirements would allow app developers to offer consumers
alternative methods to pay for goods and services, including potentiallycheaper prices.
…

17

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No.5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf.

11For the public register
It is highly likely that the commission rates are inflated by the market powerthat Apple and Google have18.
These restrictions effectively remove all choice and competition in respect of in-app payment
services, enable the charging of anticompetitive commissions and, ultimately, precipitate
higher prices for consumers.
The ACCC is considering in the discussion paper whether a new regulatory framework isneeded to supplement the CCA and the ACL with respect to digital platform services. Appleand Google’s restrictions (and the subsequent concerns raised in respect of) present clear
competition and consumer harms that can be addressed through legislative and regulatoryintervention without the need to await the outcome of private or ACCC legal proceedings
instated against each of Apple and Google, with direct benefit to consumers.
The discussion paper proposes several regulatory options which Epic supports. Notably,themost effective and appropriate regulatory outcome would be to amend the CCA providing forthe introduction of a suite of prohibitions and obligations addressing the multiple harms
discussed above. This is in line with the Code of Conduct proposed by the ACCC in thediscussion paper. The legislative amendment to the CCA would insert:(a)a direct prohibition against requiring the use of a specific app store or
distribution platform as the exclusive mode of distribution for an app used on
any platform, device, or operating system owned or sold by the owner of theapp store or distribution platform; and(b)a direct prohibition against app marketplaces requiring the use of a particular
in-app payment system; and/or(c)a code of conduct which includes prohibitions against app marketplaces
requiring a particular in-app payment system be used by app developers (as acondition of access to the app marketplace), forcing app developers to agree
to a "most favoured nations" clause preventing app developers from engaging
in price competition, and requiring app developers to pay revenue

18

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – March 2021 Interim
Report No.2 – app marketplaces’ (28 April 2021) available athttps://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry%20%20March%202021%20interim%20report.pdf, page 79.

12For the public register
proportionate fees to the store provider for revenue earned using an In- App
Payment System into the CCA; and(d)an obligation on marketplaces to allow developers to provide users withinformation about alternative payment options.

In order to bring about effective outcomes for Australian businesses and consumers, any
regulatory solution will need to unbundle developer access to app marketplaces from adeveloper’s exclusive use of in-app payment systems, which would allow other businesses tooffer users and developers alternative payment processing options.
There is precedent for such intervention in South Korea and other jurisdictions, which is
discussed in greater detail in section 5.3. Such regulatory reform would also be consistent
with the type of regulatory form introduced by the Treasury Laws Amendment (News Mediaand Digital Platforms Mandatory Bargaining Code) Act 2021, which amended the CCA toestablish a mandatory code of conduct that applies to news media businesses and digitalplatforms when bargaining in relation to news content made available by digital platform
services.
By addressing the competition concerns identified above, the proposed regulatory solution
would directly benefit Australian consumers by ensuring that Apple and Google do not:(a) unjustifiably increase costs to consumers. Consumers must bear some or all of the
30% commission in the form of higher in‐app content prices and/or reduced quantity
or quality of in‐app content.
(b) deny consumers and app developers from the benefits of increased innovation, which
could be provided by would‐be competing in‐app payment processors and app
distribution platforms / marketplaces.
(c) deny consumers choice, as they are forced to make in‐app purchases of digital content
solely through Apple’s In‐App Purchase and through Google Play Billing for apps
downloaded via the Play Store.
(d) undermine the quality of services that consumers receive because they stand as a
middleman in every in‐app purchase of in‐app content. Currently, developers areunable to resolve customer complaints arising from in‐app purchases directly.

13

For the public register
5.2 Collaboration with international regulators
Epic is pleased to note the ACCC’s participation in the international debate about how to best
approach the competition and consumer issues arising in relation to digital platform services.
The ACCC recognised that, “alignment across jurisdictions will help promote regulatory
certainty and reduce regulatory burden for affected digital platforms. Regulatory coherence
will also assist Australian consumers and businesses to benefit from law reform implemented
globally to improve competition and consumer protection”19.
The ACCC is a leading global regulator and can play a powerful role in bringing together
regulators looking at the anti-competitive effects of Google and Apple’s dominance of mobile
ecosystems. Given the size of the companies concerned, multilateralism is important tosecure lasting change in business practices and avoid Apple and Google ceding minor andnarrow carve-outs one jurisdiction at a time. Epic is engaged on these issues and would be
happy to offer support to the ACCC. The following jurisdictions are taking innovative
approaches to competition policy; we highlight their efforts so that both their successes andchallenges could provide further insight to the ACCC as it considers its own approach.
5.3.1 European Union – Digital Markets Act
In December 2020, the European Commission published a Proposal for a Digital Markets Act(the "DMA"). The European Parliament and European Council have suggested amendments to
the Commission's Proposal in 2021. A final text is expected to be adopted during 2022.
The DMA complements existing competition laws and is intended to ensure that markets
where gatekeepers are present are and remain contestable and fair. According to this
Proposal, gatekeepers such as Apple and Google are required to comply with additional
obligations set out in the DMA. While the obligations in the DMA address various types of anticompetitive conduct by gatekeepers, some are specifically aimed at addressing the concerns
regarding mobile ecosystems set out above. For example, in the Commission's Proposal, oneof the obligations imposed on gatekeepers is to allow the installation and effective use ofthird-party software applications or software application stores using, or interoperating with,
operating systems of the gatekeeper20.
19

Australian Competition and Consumer Commission, ‘Digital Platform Services Inquiry – Discussion Paper forInterim Report No.5: Updating Competition and Consumer Law for Digital Platform Services’ (28 February 2022)
available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry.pdf, page 6.
20
European Commission, Proposed Digital Markets Act (2020), Article 6(1)(c), https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:52020PC0842&from=en.

14

For the public register

Article 5(c), as amended by the European Parliament, provides that gatekeepers must allow
business users (i) to communicate and promote offers including under different purchasing
conditions to end users acquired via the core platform service or through other channels, and(ii) to conclude contracts with these end users or receive payments for services provided
regardless of whether they use for that purpose the core platform services of the gatekeeper.
Article 5(e), as amended by the European Parliament, requires gatekeepers to refrain fromrequiring business users to use, offer or interoperate with an identification service or any otherancillary service of the gatekeeper in the context of services offered by the business users
using the core platform services of that gatekeeper. Given that "in-app payment systems" arelisted as an example of an ancillary service, this provision entails an obligation on behalf ofgatekeepers not to require the use of their own in-app payment solutions.
The DMA also requires a gatekeeper to apply fair and non-discriminatory general conditionsof access for business users to its software application store21. The European Parliament hassuggested expanding the scope of this provision such that gatekeepers would be forced to"apply transparent, fair, reasonable and non-discriminatory general conditions of access andconditions that are not less favourable than the conditions applied to its own service" for anyof the core platform services in relation to which it has been identified as a gatekeeper22.
5.3.2 United Kingdom – Competition and Markets Authority ("CMA"), Mobile ecosystems
market study
On 15 June 2021, the CMA launched a market study into mobile ecosystems. It published its
preliminary report on 14 December 2021.23 Its initial findings include that "the App Store andPlay Store face a lack of competition from within and outside of their respective ecosystems
as a method of delivering native apps to users" and that Apple and Google are able to exercise
their market power through the process of reviewing which apps can be listed on its app
stores, and blocking certain types of apps, and by requiring app developers "to use their
payment systems for certain in-app transactions," the commission on which affords them"substantial and growing profits (with high margins) from their app stores, consistent withmarket power."

21
22

Ibid. at Art.6(1)(k).
Ibid. at Art.6(1)(k).
23
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/104
8746MobileEcosystems_InterimReport.pdf.

15

For the public register
The CMA has put forward various proposed interventions that it will consult on, including (i)requiring Apple to allow alternative app stores on iOS and direct downloading of native apps
on iOS, requiring Google to make direct downloading easier on Android and to remove
restrictions on accessing third-party app stores through Google’s Play Store, and requiring fair
and transparent App Store/Play Store app review; and (ii) allowing users to make in-app
payments to their app provider directly or allow greater choice of third-party payment
providers.
In addition, the CMA's preliminary view is that Apple and Google would meet the proposed
conditions for designation as platforms with a strategic market status ("SMS"). Oncedesignated as an SMS, Apple and Google would be required to follow a series of legally
enforceable codes of conduct that promote fair trading, open choices, trust and transparency
and the CMA's Digital Markets Unit should have powers to impose pro-competitive
interventions that would target the sources of Apple and Google's market power.

5.3.3 U. S Open App Markets Act
The Open App Markets Act (OAMA) is proposed legislation that takes a comprehensive
approach to app store competition by addressing the underlying cause of gatekeeper power(i.e. monopoly of app distribution on mobile devices) as well as some of its most pernicious
symptoms (e.g., tying IAP mandates for digital goods to App Store and Play Store access onmobile devices). The OAMA specifies that:i. App store operators that control the operating system must allow and provide readily
accessible means for users of that operating system to (i) choose third-party apps orapp stores as defaults, (ii) install third-party apps or app stores through means otherthan its app store, and (iii) hide or delete apps or app stores provided or pre-installedby the app store owner24; and,ii. App store operators must not (i) require app developers to use the app store
operator's own in-app payment system as a condition for being distributed on the appstore or accessible on the relevant operating system, or (ii) impose restrictions oncommunications of developers with the users of the app through an app or direct
outreach to a user concerning legitimate business offers, such as pricing terms andproduct or service offerings25.

24
25

Open App Markets Act, S. 2710, Manager’s Amendment, at Sec. 3(d)(1)(2).
Ibid. at Sec.3(A)(1)-(3).

16For the public register
The OAMA has been introduced on a bi-cameral and bi-partisan basis in the U.S. Congressand recently passed with overwhelming support out of its Senate committee of jurisdiction.26
The most recent version of that legislation is appended to this submission.
5.3.4 South Korea In-App Payment Law
South Korea has been on the vanguard in addressing Apple and Google’s anticompetitive
conduct with respect to mobile app store IAP mandates. In 2021, the Korean National
Assembly passed an amendment to the Telecommunications Business Act (TBA). The TBA
Amendment prohibits app stores from requiring the use of a specific payment processing
system, including an app store’s proprietary in-app payment solution. Compliance is overseenby the Korea Communication Commission. The TBA Amendment amends Article 50(1) of theTelecommunications Business Act, by inserting new subparagraphs 9, 10 and 11, prohibiting:i. in mediating a transaction for, among other things, mobile content,
conduct whereby an app market business unfairly uses its bargaining
position to require the use of a specific payment processing method for abusiness providing, among other things, mobile content;
ii. conduct whereby an app market business unfairly delays the review of,among other things, mobile content; andiii. conduct whereby an app market business unfairly deletes, among otherthings, mobile content from the app store.
This Korean legislation is a major step towards achieving fair mobile ecosystems fordevelopers and consumers. The KCC required Apple and Google to submit plansdemonstrating how they would achieve compliance with the TBA Amendment by October
2021. Apple and Google have failed to do so, instead putting forward mechanisms that seek
to perpetuate their anti-competitive conduct and violate the letter and the spirit of the TBA
Amendment.
Google has stated that it would (i) allow developers to offer third party in-app payment
solutions of their choice in addition to the Google Play Billing (GPB) system and (ii) let
consumers choose the payment method they prefer. Google also announced that it would still

26

Ashley Gold, “App store bill sails out of Senate Judiciary Committee,” Axios (3 Feb, 2022),
https://www.axios.com/app-store-bill-sails-out-of-senate-judiciary-committee-c49c22bf-c9ae-41f4-b23e55a3ce8caace.html.

17

For the public registercharge a commission on transactions processed by third-party payment solutions that would
be 4% lower than the commission on transactions processed by GPB.27 For example, where
Google would charge a 30% commission on a transaction processed by GPB, it would charge
a 26% commission if that same transaction were processed by an alternative in-app payment
solution.
Apple initially claimed that it was already in compliance and did not need to change its App
Store policy.28 Earlier this year, Apple submitted an execution plan to the KCC purporting toallow third-party payment methods in compliance with the TBA Amendment. Specifically, theplan encompasses (i) permitting third-party payment methods other than Apple’s IAP; (ii)applying a commission of less than 30% to third-party payment methods; (iii) further reviewing
specific methods, timeline, and commission to be applied for the third-party payment
methods, and consulting on them with the KCC; and (iv) limiting the application of the newpolicy to Korean App Store. While details regarding the commission Apple would charge
remain unclear, if it were to adopt an approach similar to Google, Apple's plan would be
deficient for the same reasons.
If Apple and Google can be forced to comply with the letter and the spirit of the TBA
Amendment, it will be an effective tool to halt part of their anti-competitive conduct. However,Apple and Google’s dilatory approach suggests that absent market discipline in the
distribution of apps on mobile devices, they will continue to play a “shell game” with respect
to commission charges for app store distribution.
5.3.5 Netherlands Authority for Consumers and Markets (ACM) decision re: dating app
providers
On 24 August 2021, the Dutch ACM adopted a Decision finding that Apple had abused its
dominance in the market for the distribution of dating apps on iOS. The ACM found thefollowing restrictions imposed by Apple on dating app providers to be abusive under EU and
Dutch competition rules: (i) the mandatory use of Apple’s IAP system for content transactions
within the app, and (ii) prohibiting referrals within the app to payment systems outside theapp. The ACM thus required Apple to change its developer terms to allow dating app

27“Enabling alternative billing systems for users in South Korea” Google blog (4 November 2021)
https://developers-kr.googleblog.com/2021/11/enabling-alternative-billing-in-korea-en.html.
28
South Korea lawmaker says Apple, Google not doing enough to comply with app store law,” Reuters, (17November 2021) https://www.asahi.com/ajw/articles/14483307.

18

For the public registerdevelopers on iOS to: (i) to freely choose their in-app payment solution; and (ii) to refer to outof-app payment options.
In addition, the Decision prohibited Apple from: (i) disadvantaging dating app developers whochose to implement an alternative in-app payment solution or refer to out-of-app purchase
options; (ii) implementing any changes to its developer terms that would undermine dating
app developers' free choice of in-app payment solution or ability to refer to out-of-app payment
options; and (iii) rejecting for distribution on Apple's Dutch iOS app store any newly created or
updated dating apps making use of alternative in-app payment solutions, or referring to outof-app payment options.
Apple sought a stay of the above-mentioned remedies, but the District Court of Rotterdam
denied the stay application on 24 December 2021. Following this Decision and judgment,
dating app providers must be allowed to use alternative in-app payment solutions in the Dutch
App Store and must have the ability to refer in their apps to payment options outside the app29.
Apple was required to comply with this Decision by 15 January 2022, and for two years
thereafter.
On 24 January 2022, the ACM concluded that Apple failed to comply with these requirements,
imposing a first periodic penalty payment of 5 million Euros for non-compliance30. The ACM
reached this conclusion among others because Apple: (i) Apple had not yet changed its
developer terms, instead merely providing dating app providers the ability to express an"interest" in making use of rival in-app payment systems, and (ii) Apple has raised several
barriers for dating app providers to the use of third-party payment systems, including forcing
them to make a choice between referring users to out-of-app payment options or offering
alternative payment systems in-app.
On 3 February 2022, Apple made a further statement laying out how developers could now
implement the alternative payment methods, reiterating a 27% commission on apps that opt
out of its proprietary IAP system.31 On 7 February 2022, the ACM again fined Apple for non-29

Netherlands Authority for Consumers and Markets, “ACM obliges Apple to adjust unreasonableconditions for its App Store” (24 Dec 2021).
https://www.acm.nl/en/publications/acm-obliges-apple-adjust-unreasonable-conditions-its-app-store.
30
Netherlands Authority for Consumers and Markets, “Apple fails to satisfy requirements set by ACM,” (24January 2022), https://www.acm.nl/en/publications/apple-fails-satisfy-requirements-set-acm.
31
Apple Developer Support, ”Distributing dating apps in the Netherlands”
https://developer.apple.com/support/storekit-external-entitlement.

19For the public registercompliance32. Apple continued to fail to comply for a total of 10 weeks and the ACM has levieda 50M fine.33
The ACM decision is confined to the complaint brought before it, re: Apple’s abuse of its
gatekeeper power with respect to dating apps. But, like South Korea’s IAP law, it appears that
Apple (and Google) will likely continue to exploit and delay compliance with any IAP-only
focused remedies.
Epic is hopeful that the EU and US proposals, which target competition at the app distribution
level, not just in-app payment, may succeed in creating a competitive mobile ecosystem.
Ultimately, the goal is a fair and open mobile app market that governs the dominant mobile
app store gatekeepers – rather than the other way around.
Please contact either of the undersigned if you would like any further information on thissubmission.
Yours sincerely,

Corie Wright
Bakari Middleton
Global Public Policy
Epic Games

32“Dutch watchdog fines Apple $5.7 million again in App Store dispute,” Reuters (7 Feb 2022),
https://www.reuters.com/technology/dutch-antitrust-watchdog-studying-whether-apple-has-now-complie
d-with-order-2022-02-07/.
33
Netherlands Authority for Consumers and Markets, “ACM to assess adjusted proposal of Apple regarding its
conditions for dating apps,” https://www.acm.nl/en/publications/acm-assess-adjusted-proposal-apple-regardingits-conditions-datingapps (28 Mar 2022).

20