Tech giant Apple is expected to face significant fines from the European Union for its App Store practices.
It is understood that the EU has been investigating whether Apple’s rules violated the Digital Markets Act (DMA), a new law designed to curb the power of large tech companies. The fine could be issued this month, following EU regulators charges in June that Apple had violated the DMA’s rules.
The EU’s preliminary finding in June indicated that Apple’s requirement for developers to use its in-app purchasing system, which charges a 15 to 30 percent commission, likely restricted competition. The commission had warned Apple that developers should be allowed to inform users about alternative purchasing options.
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Enacted earlier this year, the DMA mandated Apple to allow users to set their preferred web browser on iPads, permit alternative app stores on its operating system, and grant access to iPad OS features for third-party headphones and smart pens. Despite these findings, Apple had already gone ahead to introduce new fees that are reported to circumvent the DMA’s requirements.
Under the law, EU regulators have powers to fine the world’s most powerful tech firms 10 percent of their global annual sales, 20 percent in the event of repeated infringements, or periodic fines of as much as 5 percent of the average daily revenue. In the fourth quarter results posted last week, Apple reported sales of US$94.9 billion, compared with an average estimate of US$94.4 billion. Revenue from the iPhone came in at US$46.2 billion.
Apple shares rose less than 1 percent to US$223.45 at the close in New York on Nov 5. The penalty, under the tough new Digital Markets Act (DMA), is set to come just months after Apple was hit with a €1.8 billion (S$2.6 billion) fine for similar abuses under the bloc’s traditional competition rules involving music streaming service Spotify.
Also, the penalty comes shortly after Apple lost a lengthy court battle with the EU in September, requiring the company to pay 13 billion euros in back taxes to Ireland. The EU’s Court of Justice in Luxembourg backed a landmark 2016 decision that Ireland broke state-aid law by giving Apple an unfair advantage. In another victory for the EU’s antitrust chief Margrethe Vestager, the same court ruled that Google illegally leveraged its search-engine dominance to give a higher ranking to its product listings.
In a statement, the Irish government said that the Apple case “involved an issue that is now of historical relevance only,” adding that its position has always been that it “does not give preferential tax treatment to any companies or taxpayers.” Bloomberg, citing sources familiar with the case, reported that regulators are preparing to penalize Apple for failing to allow app developers to direct users to more affordable deals outside of the App Store.