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In a significant move, European Union antitrust regulators have charged Apple with violating the bloc's technology rules. This charge, announced on Monday, could result in a substantial fine for the iPhone maker, which is also under investigation for new fees imposed on app developers.
Details of the Investigation
The European Commission, the EU's antitrust and technology regulator, has sent its preliminary findings to Apple following an investigation launched in March. This charge is the first under the Commission's landmark Digital Markets Act (DMA), aimed at curbing the power of Big Tech and ensuring a level playing field for smaller rivals. The Commission has until March next year to issue a final decision. Violations of the DMA could result in a fine of up to 10% of a company's global annual turnover.
EU antitrust chief Margrethe Vestager highlighted issues with Apple's new terms, stating they did not comply with the DMA. "As they stand, we think that these new terms do not allow app developers to communicate freely with their end users and to conclude contracts with them," she said at a conference. Vestager emphasized that it is up to Apple to decide how to comply with the DMA.
Apple's Response and Compliance Efforts
Apple has responded by making several changes in recent months to comply with the DMA, following feedback from app developers and the Commission. "As we have done routinely, we will continue to listen and engage with the European Commission," Apple stated in an email. Under most of the business terms, Apple allows steering only through 'link-outs,' meaning app developers can include a link in their app that redirects the customer to a web page where the contract can be concluded.
The Commission criticized the fees Apple charges for facilitating the initial acquisition of a new customer via the App Store, stating they went beyond what was strictly necessary for such remuneration. Apple defended its plan, asserting, "We are confident our plan complies with the law, and estimate more than 99% of developers would pay the same or less in fees to Apple under the new business terms we created."
New Contractual Requirements and Further Investigations
The EU executive has also opened an investigation into Apple's new contractual requirements for third-party app developers and app stores. This investigation will assess whether these requirements are necessary and proportionate. At issue are Apple's core technology fee, the multi-step user journey to download and install alternative app stores on iPhones, and the eligibility requirements for developers to offer alternative app stores or directly distribute apps from the web on iPhones.
Apple's rollout of new fees in March in the EU, which includes the core technology fee to major app developers even if they do not use any of its payment services, has prompted criticism from "Fortnite" creator Epic Games and others. Vestager also criticized Apple's recent announcement to delay the launch of its AI-powered features in the EU, blaming it on the DMA. She noted that it seemed Apple suggested its AI integration might be anti-competitive.
As the investigation continues, the outcome could have far-reaching implications for Apple's business practices and its relationship with app developers. The DMA's enforcement and Apple's response will be closely watched by industry stakeholders and financial analysts, impacting investment planning and strategies for companies operating within the EU's regulatory framework.
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