Topline
Apple’s App Store rules illegally stifle competition, the European Commission said on Monday, escalating a years-long spat between the U.S. giant and the powerful trading bloc after the company vowed to withhold its anticipated Apple Intelligence AI products over concerns antitrust regulation would force compromises on privacy and security features.
The European Commission alleges Apple's App Store policies breached the DMA.
Key Facts
The European Commission, the European Union’s executive arm and also its tech and competition watchdog, said Apple’s App Store policies appear to breach the bloc’s Digital Markets Act rules designed to foster competition in the tech sector and protect smaller companies from big platforms.
The preliminary findings follow an investigation the bloc launched in March, and claim the App Store rules don’t allow developers to to freely direct customers to alternative payment methods or content outside of Apple’s ecosystem.
The Commission also said the fees Apple charges developers for helping them acquire new customers “go beyond what is strictly necessary for such remuneration.”
The findings have been sent to Apple, and the company has a year to defend itself before a final ruling is issued by March 25, 2025, the Commission said.
“The developers’ community and consumers are eager to offer alternatives to the App Store,” said EU antitrust chief Margrethe Vestager in a statement, adding that the bloc will work “to ensure Apple does not undermine these efforts.”
Apple, which in January announced changes to the App Store to comply with the DMA and allowed developers to point customers to payment options outside the Apple ecosystem, told Forbes it is “confident our plan complies with the law, and (we) estimate more than 99% of developers would pay the same or less in fees to Apple under the new business terms we created.”
Key Background
The EU claims Apple’s policies prevent developers from engaging directly with users to communicate or promote deals directly. Vestager said this ability, known as steering, “is key to ensure that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers” and regulators argue anti-steering efforts hinder the ability of smaller companies to compete inside large platforms like the App Store. The bloc’s preliminary finding adds to Apple’s mounting antitrust woes around the world. The tech giant’s digital store is also facing scrutiny in Japan, the U.K. and notably the U.S., where it is engaged in a protracted legal battle with Fortnite maker Epic Games. The U.S. has also sued the company for allegedly maintaining an illegal monopoly over the smartphone market. In June, Apple said it would withhold its latest AI updates from EU devices due to issues with DMA compliance, upping tensions with regulators who could find themselves under pressure from users. The company did not explain how the features, which include a partnership with ChatGPT maker OpenAI and screen sharing, would breach the bloc’s rules and it is not immediately obvious from the outside where the apparent conflicts may arise.
What To Watch For
While the EU has opened DMA probes into the likes of Meta, X and TikTok for possible violations, Monday’s notice marks the first time Brussels has found a company to have breached the landmark tech law. Breaches carry hefty financial penalties and if found guilty in the final ruling, Apple will face a fine of up to 10% of its annual global revenue and fines can rise as high as 20% for repeat offenses. Under different rules, the EU in March fined Apple more than €1.8 billion (or around $1.9 billion) for “abusing its dominant position on the market for the distribution of music streaming apps to iPhone and iPad users through its App Store.”
Big Number
$383 billion. That’s how much Apple reported in revenue last year. A fine of 10%, the maximum allowed under the DMA for a first time infringement, would be $38.3 billion.
Tangent
In addition to serving notice on its preliminary findings, the European Commission said it is also opening another investigation into Apple’s compliance with the DMA. The Commission said it is concerned Apple’s contract terms for developers — which include charges of 50 cents per download if the app is used by more than 1 million people — are potentially excessive and unnecessary.
Crucial Quote
“Apple’s new slogan should be ‘act different’,” said Thierry Breton, the EU Commissioner for Internal Market. “We have reason to believe that the AppStore rules not allowing app developers to communicate freely with their own users is in breach of the DMA,” he said, adding that the bloc is “determined” to use the powerful tools it has under the regulations “to finally open real opportunities for innovators and for consumers.”
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