The European Union (EU) regulators have accused tech giant Apple of violating the Digital Markets Act (DMA), a set of new tech regulations.
This decision is coming after preliminary findings revealed that Apple’s restrictive practices on its App Store prevent customers from being directed to alternative purchasing options.
The EU via a press release wrote,
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“Today, the European Commission has informed Apple of its preliminary view 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.
“Under the DMA, developers distributing their apps via Apple’s App Store should be able, free of charge, to inform their customers of alternative cheaper purchasing possibilities, steer them to those offers, and allow them to make purchases. Apple currently has three sets of Business terms governing its relationship with app developers, including the App Store’s steering rules.”
The Commission preliminary finds that;
•None of these business terms allow developers to freely steer their customers For example, developers cannot provide pricing information within the app or communicate in any other way with their customers to promote offers available on alternative distribution channels
•Under most of the business terms available to app developers, Apple allows steering only through “link-outs” i.e., app developers can include a link in their app that redirects the customer to a web page where the customer can conclude a contract. The link-out process is subject to several restrictions imposed by Apple that prevent app developers from communicating, promoting offers, and concluding contracts through the distribution channel of their choice.
• Whilst Apple can receive a fee for facilitating via the AppStore the initial acquisition of a new customer by developers, the fees charged by Apple go beyond what is strictly necessary for such remuneration. For example, Apple charges developers a fee for every purchase of digital goods or services a user makes within seven days after a link-out from the app.
It is interesting to note that if the European Union’s preliminary views were to be ultimately confirmed, none of Apple’s three sets of business terms would comply with Article 5(4) of the DMA, which requires gatekeepers to allow app developers to steer consumers to offers outside the gatekeepers’ app stores, free of charge. The Commission would then adopt a non-compliance decision within 12 months from the opening of proceedings on 25 March 2024.
Notably, the outcome of the investigation could lead to significant changes in how Apple operates its App Store, potentially leading the restrictions on app developers and providing more options for consumers. The commission’s investigation highlights ongoing concerns about monopolistic behavior in the tech industry. By addressing restrictive practices, the EU aims to foster a more competitive and open digital market.
Background Story
The tension between Apple and the EU over its App Store practices has been brewing for quite some time.
On 25 March 2024, the Commission opened non-compliance investigations into several Alphabet’s rules on steering in Google Play and self-preferencing on Google Search, Apple’s rules on steering in the App Store and the choice screen for Safari, and Meta’s “pay or consent model.
On 29 April 2024, the Commission designated Apple with respect to its iPadOS, its operating system for tablets, as a gatekeeper under the DMA.