In a first that Apple would perhaps not want to be remembered for, the European Union (EU) is intensifying its antitrust scrutiny of the Cupertino giant, this time taking aim at the company’s App Store practices. This also makes Apple the first company to be officially charged under EU’s newly introduced Digital Markets Act, with a potential to be charged with $38Bn.
The move comes amidst growing concerns that Apple leverages its dominant market position to stifle competition and limit consumer choice. This time, the iPhone-maker has been accused Apple of breaking the new digital competition rules by preventing app developers from freely directing consumers to cheaper services.
At the heart of the current dispute lies the concept of anti-steering. Apple’s current policies do not allow developers to provide pricing information or promote offers within their apps. Instead, developers can only provide a link to an external webpage, which is subject to several Apple-imposed restrictions. Furthermore, the company charges developers fees for purchases made within seven days of a link-out from an app. Apple charges developers a €0.50 per-install fee when users download apps through alternative marketplaces. The Commission deems these fees excessive and beyond what is necessary. The EU’s recently enacted Digital Markets Act (DMA) specifically prohibits such anti-steering behavior by large online platforms.
The DMA mandates that app developers using the App Store must be empowered to inform customers about the existence of alternative purchasing options for apps, subscriptions, or in-app purchases. These alternatives could potentially be cheaper for users if offered directly by the developer or through other app marketplaces. They should also be allowed to direct users to these alternative channels outside the App Store. This could involve providing links to the developer’s website or other authorized app stores where users can complete purchases at potentially lower prices. Finally, users must be allowed to complete purchases through these alternative channels without facing any restrictions or additional fees imposed by Apple.
The EU contends that Apple’s current App Store policies violate all three aspects of this fair competition principle. Developers are restricted from advertising pricing information or alternative distribution channels within their apps. While Apple does offer a link-out option, it comes with several limitations. Developers cannot freely promote alternative offers through these links, and Apple imposes hefty commissions on any purchases made through them, even if the purchase occurs days after a user clicks on the link. This effectively discourages developers from actively promoting cheaper alternatives outside the App Store.
Margrethe Vestager, who heads up competition policy in Europe, stressed the importance of the DMA’s anti-steering rules. “Steering is key to ensuring that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers,” Vestager explained. Under the DMA, Apple and other designated gatekeepers must allow app developers to direct consumers to offers outside their app stores free of charge.
The potential consequences for Apple are significant. If the EU finds Apple to be in breach of the DMA, the company could face hefty fines of up to 10% of its global annual revenue. The EU Commission is expected to reach a final decision by March 2025. For its part, the Cupertino-headquartered tech titan maintains that its App Store policies comply with the DMA. They claim that their new business terms ensure that over 99% of developers would pay the same or even less in fees compared to the previous system.
