• Thu. Jul 25th, 2024

Apple’s App Store breaches EU’s Digital Markets Act

People walk past an Apple Store on March 25, 2024 in Berlin, Germany.

A few months after opening a non-compliance case on Apple and the Digital Markets Act (DMA), the European Commission has shared its preliminary findings with Apple. And the bottom line is that the current App Store rules are in breach of the DMA. Confirmed violations of the DMA can lead to fines of up to 10% of global annual turnover.

“‘Act different’ should be their new slogan,” the EU’s internal market commissioner, Thierry Breton, wrote on X. “For too long, Apple has been squeezing out innovative companies — denying consumers new opportunities & choices.”

In this particular case, the European Commission believes third-party developers should be able to inform customers of alternative purchasing possibilities — free of charge.

For instance, developers who have released apps on the App Store can’t advertise different prices or alternative distribution channels in their apps. While Apple now allows developers to include a link to their site, the European Commission believes there are too many restrictions with this link-out mechanism.

Even if developers redirect users to their websites and handle transactions on their websites, they have to report transactions to Apple and pay a commission. Apple only waives a 3% payment processing fee for web purchases.

“Apple has made a number of changes to comply with the DMA in response to feedback from developers and the European Commission,” the company said in a statement. “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.”

In addition to these preliminary findings, the European Commission is opening a third non-compliance investigation into Apple’s new contractual terms for EU developers. This time, the Commission is going to focus on Apple’s controversial Core Technology Fee (CTF) and alternative app marketplaces.

European developers can remain on the standard business terms or choose new business terms that allow them to distribute their apps outside of the App Store. However, these new terms lead to a €0.50 fee per installed app after one million downloads.

The company has already adjusted the CTF so that it doesn’t apply to free non-commercial apps. There’s also a three-year transition period for small developers that release a hit app and get more than one million downloads for the first time. But that doesn’t change much in the long term. With this new formal investigation, the EC will determine whether the CTF effectively complies with the DMA.

If you’ve tried to install a third-party app store in the EU, such as the AltStore, Setapp Mobile or Aptoide, you may have noticed that it requires quite a few taps. You first get an error in your web browser. You have to open the Settings app, accept app installations from this site, go back to your web browser, download the alternative store again, and accept popups about the risks involved with a third-party app store. The EC will examine this “multi-step user journey” and its compliance with the DMA rules.

“We are concerned that Apple designed its new business model to discourage app developers and end users from taking advantage of the opportunities afforded to them by the DMA,” Margrethe Vestager, the Commission EVP in charge of competition policy, said in a speech.

“The letter of the DMA is clear: Gatekeepers have to allow for alternative app stores to establish themselves on their platform, and for consumers to be fully informed about the offers available to them so that they can freely choose where they want to source their apps, and at what conditions,” she added.

As for today’s preliminary findings, Apple can now respond to the European Commission in writing. The final decision is due one year after the opening of the formal investigation, which means that Apple can negotiate with the EU and adjust its business terms once again to avoid a hefty fine.

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