LONDON (AP) – European Union regulators on Monday issued their first charges under the bloc’s new law regulation of digital competitionaccusing Apple of preventing app creators from directing users to cheaper options outside of its App Store.
The European Commission said that according to preliminary findings of its investigation, restrictions the iPhone maker places on developers using its mobile App Store violated the 27-nation bloc’s Digital Markets Act.
Regulation, also known as DMA, is a a comprehensive set of rules aimed at preventing technology “gatekeepers” from flooding digital markets under the threat of severe financial penalties. The commission opened one the initial round of investigations after it took effect in March, including a separate ongoing investigation into whether Apple is doing enough to let iPhone users easily switch web browsers and other cases involving Google and Meta.
Apple has faced pressure on both sides of the Atlantic to break down some of the competitive barriers surrounding its lucrative iPhone franchise.
The US Department of Justice filed a comprehensive antitrust lawsuit ANTI Apple this year, accusing it of illegally monopolizing the smartphone market and boxing out competitors, stifling innovation and keeping prices artificially high. By the time that case arose, Apple had already begun to comply with a US court order that allowed links to alternative payment systems within iPhone apps, but a judge expressed his disappointment with the company’s approach and has indicated that changes may be required.
App makers like Spotify had complained for years about Apple’s requirement that subscriptions be purchased only through iOS apps, allowing the company to take a commission of up to 30%. These complaints culminated in slaps from European regulators Apple fined $2 billion for unfairly favoring its music streaming service over Spotify and other rivals.
Under the provisions of the DMA, app developers must be allowed to inform customers of cheaper purchase options and direct them to those offers.
The commission, the bloc’s executive arm, said the App Store rules “prevent app developers from freely directing consumers to alternative channels for offers and content.”
Apple now has a chance to respond to the findings. The Commission must make a final decision on Apple’s compliance by March 2025. The company could face fines of up to 10% of its global revenue, which could run into billions of euros, or daily fines.
Regulatory tensions prompted Apple to recently raise the specter of excluding the European market from a suite of new artificial intelligence features comes to iPhone because the company believes that the new rules within the region are too difficult.
But the European Commission is keeping the pressure on Apple, while opening a new investigation into the contractual terms it offers app developers.
Zero to one regulators “Basic Technology Fee” of the 50 euro cents (54 cents) that Apple is now paying developers every time their apps are downloaded and installed from outside Apple’s App Store. The provisions of the DMA pave the way for alternative app stores to give consumers more choice.
The commission said the new terms are a “condition to access some of the new features enabled by the DMA.” Rivals had criticized the fee, saying it would prevent many existing free apps, which pay no fees, from jumping ship.
“We are concerned that Apple’s new business model makes it very difficult for app developers to operate as alternative markets and reach their end users on iOS,” European Competition Commissioner Margrethe Vestager told media social.
Apple Inc said over the past few months, “it has made a number of changes to comply with DMA in response to feedback from developers and the European Commission”.
“We are confident that our plan complies with the law and estimate that more than 99% of developers would pay the same or less fees to Apple under the new business terms we created,” the company said in a statement. “All developers doing business in the EU on the App Store have the opportunity to use the capabilities we’ve introduced, including the ability to direct web app users to make purchases at a very competitive rate.”
The company said it would “continue to listen and engage” with the commission.
The EU had carried out a similar one investigation since 2020 whether Apple’s in-app purchase system and restrictions violated Brussels antitrust rules. But “to avoid multiple investigations into the same conduct,” that investigation is being closed to focus on the investigation under the DMA, which clearly defines what Apple cannot do, the commission said Monday.
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