Apple is being accused of breaking the European Union’s Digital Marketing Act (DMA) rules on digital competition via its app store by inhibiting app makers from promoting cheaper alternatives.
The European Commission claimed in a preliminary review that the app store “prevent[s] app developers from freely steering consumers to alternative channels for offers and content.”
The commission cited a “core technology fee” on the App Store as cause for a potential DMA violation. The fee charges 54 cents to app developers every time their app is downloaded from somewhere outside the Apple-owned digital marketplace. There is concern that the fee will dissuade developers from using other apps.
It opens a new front in the increasingly bitter fight between Apple and Brussels over the EU’s new Digital Markets Act (DMA).
On Friday, Apple said it would delay rolling out recently announced AI features in Europe because of “regulatory uncertainties” linked to the DMA.
The sweeping law seeks to rein in the world’s biggest tech firms, including Apple, by forcing them to open up to competition in the 27-country EU.
But for Apple, the new rules are a significant challenge to its walled garden and it has openly accused the DMA of creating greater privacy and security risks for users.
This is the first time the commission has leveled a formal accusation against a tech firm under the new rules, after opening the first DMA probes into Apple, Google and Meta in March.
Apple said Monday that it has made “a number of changes” to comply with the rules in response to feedback from developers and the EU regulator over the past months, and would “continue to listen and engage with the European Commission.”
Apple can now access the commission’s investigation file and reply to the findings.
If the commission’s view is confirmed, it would adopt a “non-compliance decision” by late March 2025 — opening the way to fines.
Under the new law, the commission has the power to impose fines of up to 10 percent of a company’s total global turnover. This can rise to up to 20 percent for repeat offenders.
Apple’s total revenue in the year to September 2023 stood at $383 billion (358 billion euros).
The EU also has the right to break up companies, but only as a last resort.
“We are concerned that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security,” Apple said in a statement.
DMA Rules
DMA rules mean Apple must allow developers distributing apps via the App Store to be able to inform users, free of charge, of “alternative cheaper purchasing possibilities, steer them to those offers and allow them to make purchases”, the commission said.
This was not the case, according to the findings of the commission, the EU’s powerful competition regulator.
The App Store has been at the centre of a long-running dispute with the EU, even before the DMA entered into force this year.
The commission in March hit Apple with a 1.8-billion-euro fine after reaching similar conclusions in a probe launched in 2020 following a complaint from Swedish music streaming giant Spotify.
Apple has rejected the findings and it appealed the fine in the EU courts last month.
Margrethe Vestager, the European Commission’s executive vice-president in charge of competition policy, said:
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. Steering is key to ensure that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers.
We have also opened proceedings against Apple in relation to its so-called core technology fee and various rules for allowing third party app stores and sideloading. 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.
The company is also under investigation over whether it allows users to easily uninstall apps on its iOS operating system, and the design of the web browser choice screen.
The DMA forces the biggest digital companies to offer choice screens for web browsers and search engines to give users more options.
EU Preliminary findings on Apple’s steering rules for the App Store
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 preliminarily 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.
Parallel Investigation
On Monday, the commission also opened a parallel investigation into Apple over changes already made to comply with the DMA, since it must now allow third-party app stores.
The Commission has also opened a third non-compliance investigation into Apple’s new contractual terms for developers as a condition to access some of the new features enabled by the DMA, notably the provision of alternative app stores or the possibility to offer an app via an alternative distribution channel. ‘
According to the EU, Apple has so far kept the option to subscribe to the previous conditions, which do not allow alternative distribution channels at all.
The Commission will investigate whether these new contractual requirements for third-party app developers and app stores breach Article 6(4) of the DMA and notably the necessity and proportionality requirements provided therein. This includes:
- Apple’s Core Technology Fee, under which developers of third-party app stores and third-party apps must pay a €0.50 fee per installed app. The Commission will investigate whether Apple has demonstrated that the fee structure that it has imposed, as part of the new business terms, and in particular the Core Technology Fee, effectively complies with the DMA.
- Apple’s multi-step user journey to download and install alternative app stores or apps on iPhones. The Commission will investigate whether the steps that a user has to undertake to successfully 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.
- The eligibility requirements for developers related to the ability to offer alternative app stores or directly distribute apps from the web on iPhones. The Commission will investigate whether 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 provided for in the DMA comply with the DMA.
In parallel, the Commission will continue undertaking preliminary investigative steps outside of the scope of the present investigation, in particular with respect to the checks and reviews put in place by Apple to validate apps and alternative app stores to be sideloaded.
