By Erika Koutroumpa,
The European Union’s new regulation –the Digital Markets Act (DMA)– has set the stage for a showdown with major tech corporations. Apple, with its synonymous App Store, finds itself as the subject of the EU’s first formal application of the DMA. This significant move highlights the EU’s commitment to fostering a more competitive and fairer digital marketplace, setting a precedent that could reshape the landscape for tech giants and app developers alike.
The EU made a formal accusation, using the DMA for the first time ever in June, this time around targeting the mechanism of Apple’s App Store. The Commission claims that given the current situation, developers cannot lead consumers to alternative platforms for offers and content. Currently, the service includes contractual requirements for third party app developers and app stores. This includes an average of a 30% commission and a “core technology fee”, where 50 cents must be paid every time a third party is used, for an app to be installed. According to the preliminary findings, steering customers away from the App Store is achievable only via “link-outs”, meaning including a link within the app, redirecting the user to a separate webpage.
The Commission, hence, claims that Apple is in violation of article 5(A) of the DMA, where gatekeepers should let app developers steer customers to offers out of the ecosystem’s app stores without financial charge. To avoid further consequences, the tech giant must make several changes in their software until March 2025. According to Apple, ensuring that the EU’s requirements are fulfilled has led to the delay of making new AI features available in the region. Apple, on the other hand, defends its practices by claiming that opening their software up for third party downloads would pose non-negotiable risks for the privacy and safety of iOS, MacOS and iPadOS users.
What is going to happen if Apple (or any other company, for that matter) remains non-compliant with the new regulations? The DMA predicts a penalty of up to 10% of the company’s global revenue. If found to be a repeat offender, the penalty for the culprit rises to 20% of the revenue, with the last resort being dissolution. This worst-case scenario would be the tip of the iceberg, since Apple is already facing another 1.8 billion euro fine, after a 2020 investigation launched after a complaint by popular music streaming service Spotify.
The DMA comes as no surprise, given the recent worldwide legal trend of widening the competition field in the tech sphere and letting smaller developers claim a larger piece of the market. A similar example is the recent Epic Games v. Google case in the US, where the court found that Google was guilty on all accounts of antitrust violations.
The DMA’s implications for tech giants signal a pivotal moment in the regulation of digital markets. The broader tech industry is becoming increasingly aware that compliance could redefine operational norms and market strategies. The stakes are undeniably high, with potential penalties reaching billions of euros for non-compliance. This unfolding scenario underscores the growing tension between regulatory bodies and key players in the tech sphere, emphasizing the need for a delicate balance between innovation, market fairness, and consumer protection. The outcome of this regulatory push will undoubtedly influence the future of digital market governance and the global tech industry’s approach to compliance and competition.
References
- EU says Apple’s App Store breaches digital rules. Le Monde. Available here
- Apple breaches DMA with App Store rules, European Commission says. Euronews. Available here
- Apple in breach of law on App Store, says EU. BBC. Available here
