EU regulators charge Apple with breaching DMA rules

The European Commission, the EU’s primary antitrust and technology regulatory body, has charged Apple with breaching the bloc’s technology rules, a move that could lead to substantial fines for the US-based tech giant.

Apple iPhone with AI features

The European Commission issued its preliminary findings to Apple following an investigation initiated in March.

Commission will investigate

# 1

As per Apple’s Core Technology Fee structure, developers of third-party app stores and third-party apps must pay a €0.50 fee per installed app. Does Apple’s fee structure, as part of the new business terms, effectively comply with the DMA?

# 2

Apple’s multi-step user journey to download and install alternative app stores or apps on iPhones. Are these steps that a user has to undertake to complete the download and installation of alternative app stores or apps, as well as the various information screens displayed by Apple to the user, comply with the DMA?

# 3

The eligibility requirements for developers related to the ability to offer alternative app stores or directly distribute apps from the web on iPhones.

Are these requirements, such as the ‘membership of good standing’ in the Apple Developer Program, that app developers have to meet in order to be able to benefit from alternative distribution comply with the DMA?

This charge is the first under the Digital Markets Act (DMA), a legislative framework aimed at curbing the dominance of Big Tech firms and promoting fair competition. The Commission has until March next year to render a final decision, with potential penalties reaching up to 10-20 percent of Apple’s global annual turnover for DMA violations or sale of its business divisions.

Key Issues and Responses

EU antitrust chief Margrethe Vestager highlighted concerns with Apple’s new business terms, which she claims fall short of DMA compliance.

“We think that these terms do not allow app developers to communicate freely with their end users and to conclude contracts with them,” Margrethe Vestager stated at a recent news conference. She emphasized that while it is Apple’s responsibility to decide how to comply with the DMA, the current terms do not meet the necessary standards.

Apple has asserted its commitment to compliance, citing recent changes based on feedback from both app developers and the Commission. The company maintains that under its revised terms, more than 99 percent of developers would pay the same or less in fees, Reuters news report said.

The Commission criticized Apple’s practice of permitting developers to steer users to external websites for contract completion (referred to as ‘link-outs’) while imposing steep fees for transactions initiated via the App Store. These fees, the Commission argues, exceed what is necessary for remuneration.

European Commission has launched a separate investigation into Apple’s new contractual requirements for third-party app developers and app stores. This includes scrutiny of the core technology fee and the steps required for users to download and install alternative app stores on iPhones. Epic Games, the creator of Fortnite, and other developers have voiced opposition to these fees, which apply even if developers do not use Apple’s payment services.

European Commission said that its App Store rules are in breach of the Digital Markets Act (DMA), as they prevent app developers from freely steering consumers to alternative channels for offers and content.

In addition, the Commission opened a new non-compliance procedure against Apple over concerns that its new contractual requirements for third-party app developers and app stores, including Apple’s new “Core Technology Fee”, fall short of ensuring effective compliance with Apple’s obligations under the DMA.

The preliminary position of EC is that Apple does not fully allow steering. Steering is key to ensure that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers.

“Apple’s slogan should be ‘act different’. We believe that the AppStore rules not allowing app developers to communicate freely with their own users is in breach of the DMA. We are also opening a new case in relation to Apple’s new business terms for iOS,” Thierry Breton, Commissioner for the Internal Market, said.

Baburajan Kizhakedath

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