When Fortnite maker Epic launched a war against the “Apple tax” in 2020, it began by throwing a cartoon hammer at Apple’s face. Epic’s main goal was launching an antitrust lawsuit against the iOS App Store, aiming to shut down its 30 percent fee on in-app purchases. But as it forced Apple’s hand by adding its own payment system for Fortnite, it invoked a moral attack. It debuted a #FreeFortnite campaign that parodied Apple’s famous “1984” ad and positioned the iPhone maker as a stodgy, overbearing monopolist — as IGN would later write, in a play that “weaponized Fortnite fans against Apple.”
Now, Elon Musk is throwing his own hammer at Apple. And its name is Ron DeSantis.
Several years into a bruising fight over Apple’s power in the app market, Musk is suddenly jumping into the ring. The newly minted Twitter owner claimed this week that Apple has “mostly” dropped its Twitter marketing and is threatening to “withhold” the app from iOS, implicitly thanks to Musk’s new laissez-faire approach to moderation. (Apple, for the record, has not confirmed it’s doing this.) In response, he’s taken aim at Apple’s mobile market dominance, particularly the much-criticized in-app purchase fees. Musk called the fees a “hidden 30 percent tax on the internet,” and he tweeted a since-deleted meme indicating he’d rather “go to war” than pay the cost.
Along the way, Musk has gotten a bevy of Republican politicians and pundits suddenly very concerned about monopolies. Musk’s Twitter takeover was initially pitched as a boon for free speech online, garnering admiration from the GOP’s right flank still embedded in an anti-censorship war spurred by former President Donald Trump. Following Musk’s lead, Republicans are threatening a scorched-earth campaign that pulls Apple into a culture war it’s long avoided — but it’s not yet clear whether the effort will evolve into more than political bluster.
Some lawmakers offered Musk solutions to his Apple tax woes, using the Chief Twit’s outrage to rally support for bills like the Open App Markets Act and the American Innovation and Choice Online Act. These measures could ban companies like Apple from inflicting these fees and preferencing their own software products on their app store platforms.
Responding to Musk accusing Apple of threatening to take Twitter off the App Store, Rep. Ken Buck (R-CO) said, “This is why we need to end the App Store duopoly before the end of this year. No one should have this kind of market power.”
Conservative pundits simply see treason. Pointing to Apple’s relationships with Beijing on his show Tuesday night, Fox News host Tucker Carlson said, “Apple is in no sense American. Apple’s loyalty is to the government of China.”
And Florida Governor Ron DeSantis, a leading contender for the 2024 Republican presidential nomination, pushed Congress to act if Apple made a move. “That would be a huge, huge mistake, and it would be a really raw exercise of monopolistic power that I think would merit a response from the United States Congress,” he told reporters yesterday. Throughout his time as Florida’s governor, DeSantis has grown into one of the GOP’s most fervent culture warriors, taking on beloved companies like Disney as a means of gaining national attention.
Politicians have gotten adept at working the “Big Tech” refs over the past few years, spooking companies out of enforcing moderation rules against favored conservative allies in particular. (This currently includes Musk.) For all the claims that Google, Meta, and the like are bastions of “woke” ideology, these are companies — they hate offending people, they like making money, and if the options are getting hauled in front of Congress or giving Breitbart a fact-checking reprieve, the choice is pretty clear. But this time around, Apple has an unusually strong incentive to ignore them.
Musk has a vested interest in killing the “Apple tax” whether or not Apple is threatening Twitter’s presence on iOS. He plans to make direct payments a much larger portion of Twitter’s revenue — in the short term through its Twitter Blue subscription and verification service and in the long run by turning Twitter into an “everything app” that includes payment processing. He recently delayed the relaunch of Twitter Blue and is apparently considering a version that doesn’t allow signups through iOS, evading Apple’s fees.
But Apple has an arguably far greater interest in keeping the tax alive. Apple is known as a hardware company, but for several years, it’s been shifting toward software services. That includes its own subscription plans for music and video, but in-app purchase fees were a $19 billion market as of last year, and nearly all of that money was concentrated on the most popular games and apps. A major social network that processed significant payment and subscription volumes would certainly fall into that category.
Reducing Apple’s market power and opening up the iPhone would almost certainly be good for consumers. The company’s “walled garden” approach has stifled new markets like cloud gaming. It’s the reason iMessage plays so horribly with Android. Apple’s locked-down security offers real benefits for many users, but it means people can’t enjoy the other features of iOS without dramatically restricting their app options.
It is not, however, clear that Musk’s ire has much bite behind it — even if you agree with his principles.
Apple has made concessions to developers over the years, allowing some apps to link to outside payment portals and offering special deals to Netflix if it would keep offering in-app signups on iOS. (Netflix took its ball and went home anyway.) It lowered its commission fees for small developers in 2020, a few months after Epic’s lawsuit. But it’s mostly stood its ground, and so far, it’s mostly won its battles in the US.
Musk spoke approvingly of Epic’s lawsuit even before buying Twitter, and he retweeted Epic’s “1984” parody ad on Monday, calling its depiction of Apple as a dystopian overlord “accurate.” But Epic has largely failed to #FreeFortnite so far. Its lawsuit asked courts to declare the App Store an unlawful monopoly and allow app makers to offer their own payment methods and third-party stores on iOS. A district court judge rejected those requests, determining that Apple had reasonable cause to keep its ecosystem locked down.
Judge Yvonne Gonzalez Rogers handed Epic a meaningful but far more modest victory: Apple must allow all developers to link out to web portals for payments and tell users about the option to pay elsewhere. Apple tweaked its rules to make the latter easier, but it’s strongly resisted the former, arguing that it would fatally compromise app security. Both companies have appealed their losses, and the case remains ongoing in a circuit court.
Plenty of lawmakers were already worried about Apple’s market power. Congressional antitrust hearings in 2020 focused on Apple’s penchant for “Sherlocking” and self-preferencing that kneecapped smaller app and accessory developers.
While these investigations prompted a handful of bipartisan legislative solutions, Congress has yet to move any across the finish line and onto President Joe Biden’s desk. The lawmakers behind these reforms, like Sen. Amy Klobuchar (D-MN), claim that the measures have the votes needed, but Senate Majority Leader Chuck Schumer (D-NY) hasn’t brought them to the floor, despite multiple promises to find time before the end of the year.
With only a few weeks left in this Congress, supporters hope to force a vote by attaching the bills to other pieces of must-pass legislation, like the National Defense Authorization Act or a government funding bill. Musk’s attacks against Apple’s App Store fees this week have given Republicans a new opportunity to gain the support of their colleagues, especially as House Minority Leader Kevin McCarthy (R-CA) is actively whipping votes to elect him as speaker next year.
Congress has several antitrust bills on the table but none that have moved past the finish line
The Republicans won back the House in this year’s midterm elections but only by a slim majority. McCarthy needs every vote possible to gain the speaker’s gavel, and several GOP tech critics have already vowed to withhold their support for him. Rep. Ken Buck (R-CO), a major figure behind the tech competition bills, has threatened to vote against McCarthy, possibly as leverage for approving the measures.
The most consequential pieces of legislation — the American Innovation and Choice Online Act (AICO) and the Open App Markets Act — could radically change how large tech companies like Apple operate. The AICO would restrict dominant platforms from self-preferencing their services over those of competitors while providing federal antitrust regulators more funding to go after anticompetitive companies. But it’s the Open App Markets bill that Republicans believe could solve Musk’s beef with Apple. In theory, the bill would force companies like Apple and Google to open up their app stores to more competition, allowing developers to use outside payment processors and users to download software from third-party app stores.
Even if these bills pass, Apple has one last card to play. The company has argued that opening up iOS wouldn’t stop it from charging developers money separately, without any pretense of a link to payment processing or even necessarily the App Store. Banning self-preferencing and allowing third-party app stores would offer consumers more choice under this rationale, but it wouldn’t necessarily save app makers much money.
Judge Gonzalez Rogers, who has provided the most in-depth “Apple tax” court ruling to date, was sympathetic to that argument. “Even in the absence of [in-app purchases], Apple could still charge a commission on developers. It would simply be more difficult for Apple to collect that commission,” she wrote. “Apple is entitled to license its intellectual property for a fee.”
Apple has deployed this strategy already in Europe, where it’s faced much tougher antitrust enforcement. After a bitter fight with Dutch regulators over dating apps, Apple reluctantly let some developers direct users to alternate payment processors. But it added a host of conditions that included an alert screen and reliability requirements. And it required developers to still pay a commission for purchases made through other processors, knocking a measly 3 percent off the cost of simply using Apple’s system.
Apple has opened up App Store payments in other countries... with a measly 3 percent discount for developers
If Apple pulled the same move in the US, Musk could try deliberately withholding his commission. But then Apple could simply kick Twitter off the App Store — or in the unlikely scenario Apple is forced to allow sideloading, use iOS security options to quarantine it — for reasons that have nothing to do with moderation. If Musk sues in retaliation, he’ll have to either hope the judge reaches a different logical conclusion than Gonzalez Rogers or seek out a court that’s more motivated by scoring political points than legal reasoning. (This is, granted, not out of the question.)
Musk has floated ideas that might completely bypass iOS, like launching his own phone. This has excited some Republican partisans. But even if we assume Musk has a piece of hardware ready to drop and he can succeed where Microsoft, Meta, Palm, BlackBerry, and numerous other companies have failed, building a user base takes time that Twitter — currently sunk in billions of dollars of debt — is awfully short on. Many people celebrate deleting Twitter from their phones, not buying a device built around using it. And sheer Republican culture-war energy underperformed even at the ballot box this year, so relying on tens of millions of consumers throwing out their iPhones to support conservative politics is a dubious prospect.
This also isn’t the first time politicians have tried to whip up a rage against Apple with little lasting impact. In 2016, Trump (then a Republican frontrunner) called for a boycott over the company’s refusal to grant the FBI backdoor access to an iPhone. Not only did Apple win its legal fight against the government but it also set a new record for iPhone sales in the first quarter of Trump’s presidency.
And, well… Musk isn’t wrong about Apple’s outsize market dominance, and that’s bad for him. Ubiquitous subscription services like Netflix have gotten away with removing payment options from iOS, in part because many people use them on other devices like TVs. Epic could afford to fall off the iPhone entirely because that’s not actually where Fortnite makes its money. But mobile is the lifeblood of social apps, and Apple wields incredible power there — it can make even services like Facebook and Instagram, which are vastly bigger than Twitter, scramble.
Depending on Epic v. Apple’s final outcome, Twitter might find it easier to guide people toward the web to buy Twitter Blue subscriptions. During last year’s trial, though, Epic emphasized over and over that people don’t like dipping outside apps to make payments. That would erode appetite for a service whose appeal to many users is already unclear.
But while Apple seems likely to refuse to grant Twitter any special treatment, Musk has successfully painted a target on its back. With Republicans gearing up for the 2024 election, that could cause real headaches for Apple — even if it doesn’t solve many problems for Musk.