Thursday, July 25, 2024

Apple the First Company Charged Under EU’s Digital Marketplace Rules

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Apple is used to making history for its many achievements, but it has earned the unfortunate notoriety of becoming the first company charged under the European Union’s new Digital Markets Act (DMA), designed to encourage competition and provide consumers with more choices.

“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,” writes the European Commission in a press release.

The European Commission has also opened an additional non-compliance investigation into Apple concerning Apple’s “new contractual requirements for third-party app developers and app stores,” including Apple’s “Core Technology Fee.” The EU believes Apple’s contractual requirements fail to comply with the EU’s DMA.

Under the DMA, developers should be able to freely inform users of alternative “app store” platforms and steer them toward cheaper alternatives without obstruction. The European Commission claims Apple’s current business terms and contracts with app developers fail to allow developers to freely steer their customers, excessively restrict linking, and that Apple’s fees “go beyond what is strictly necessary.”

“Today is a very important day for the effective enforcement of the DMA: we have sent preliminary findings to Apple. Our preliminary position is that Apple does not fully allow steering,” says Margrethe Vestager, executive vice president in charge of competition policy.

Vestager explains that steering is vital because it ensures developers are less reliant on first-party app stores and provides customers with accessible options to save money and find better offers.

“The developers’ community and consumers are eager to offer alternatives to the App Store. We will investigate to ensure Apple does not undermine these efforts,” Vestager continues.

“Apple’s new slogan should be ‘act different.’ Today we take further steps to ensure Apple complies with the DMA rules,” quips Thierry Breton, Commissioner for Internal Market. “We have reason to believe that the App Store 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.”

While Apple is the first company to be served with a non-compliance report, it is far from the only tech giant under a microscope in Europe. Alphabet, Amazon, ByteDance, Meta, and Microsoft are also subject to compliance under the DMA as of March 2024.

“Throughout the past several months, Apple has made a number of changes to comply with the DMA in response to feedback from developers and the European Commission,” Apple spokesperson Peter Ajemian told The Verge in a statement. “All developers doing business in the EU on the App Store have the opportunity to utilize the capabilities that we have introduced, including the ability to direct app users to the web to complete purchases at a very competitive rate. As we have done routinely, we will continue to listen and engage with the European Commission.”

This is just a preliminary charge, and Apple has until March 2025 to respond and adjust its business practices in Europe. If Apple is ultimately found to be in violation of the DMA, it could be subject to a fine of up to 10 percent of its annual global revenue. This punishment could be nearly $40 billion. Repeat offenses come with even higher penalties.

It’s not Apple’s first rodeo with EU regulators. The company was fined nearly $2 billion earlier this year for antitrust violations.

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