EU declares Apple in breach of competition laws

The European Commission informed Apple today of its preliminary view that its App Store rules are in breach of the DMA as they prevent app developers from ‘freely steering consumers to alternative channels for offers and content.’

The DMA stipulates that developers distributing their apps via Apple's App Store should be able to inform their customers of alternative cheaper purchasing possibilities, steer them to those offers and allow them to make purchases free of charge.

The complaint firms like Spotify and Epic have made is that in order to make their apps available to the IoS ecosystem they have to go through the App Store and pay 30% commission on every commercial interaction that takes place via the app. This applies equally to the Android Play Store.

The commission found that Apple has three sets of business terms governing its relationship with app developers and that none of them allow developers to freely steer their customers – giving the example that 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.

It also found that under most of the business terms available to app developers, Apple allows steering only through ‘link-outs’ which is subject to several restrictions, and that while the firm 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.’

Apple is now invited to reply in writing to the Commission's preliminary findings after examining the documents. The announcement says If the preliminary views are in the end confirmed, none of Apple's three sets of business terms would comply with Article 5(4) of the DMA, and The Commission would then adopt a non-compliance decision within 12 months from the opening of proceedings on 25 March 2024.

The EU has simultaneously opened a new non-compliance procedure against the tech giant over concerns that its new contractual requirements for third-party app developers and app stores, including Apple's new Core Technology Fee, ‘fall short of ensuring effective compliance with Apple's obligations under the DMA.’

“Today is a very important day for the effective enforcement of the DMA: we have sent preliminary findings to Apple,” said Margrethe Vestager, Executive Vice-President in charge of competition policy. “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.”

Thierry Breton, Commissioner for Internal Market added the zinger: “Apple’s new slogan should be “act different”. Today we take further steps to ensure Apple complies with the DMA rules. 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. We are also opening a new case in relation to Apple’s new business terms for iOS. Without prejudice to Apple’s right of defence, we are determined to use the clear and effective DMA toolbox to finally open real opportunities for innovators and for consumers.”

In essence the DMA was created to combat what the EU sees as US tech giants not playing fair when it comes to competition. The Commission opened up investigations into Apple, as well as other big tech firms, in March this year, due to concerns that they are not fully complying with the legislation, which came into force last May.

In terms of consequences if Apple, Google, Facebook or any of the other ‘gatekeepers’ the DMA has in its sights are found to be non-compliant, ultimately the EU could levy a fine of up to 10% of a company’s global turnover and 20% for repeat offenders, as well as a number of other punitive measures. That’s huge sums of money when applied to the sorts of cash these firms rake in, if it comes to that.