European Commission Accuses Apple of Violating Digital Market Regulations

The European Commission has found that Apple’s App Store rules violate the European Union’s Digital Market Act (DMA) by preventing developers from “freely steering” consumers to alternative channels, following an investigation.

Under DMA rules, developers who distribute their apps through Apple’s App Store should be allowed to inform their customers about “alternative cheaper purchasing possibilities,” direct them toward such offers, and enable them to make purchases. This should be done free of charge.

The commission said in a June 24 statement that Apple wasn’t following these requirements.

The company has three sets of business terms that govern its relationship with app developers, none of which allow developers to “freely steer their customers,” the agency said.

For instance, Apple prohibited developers from providing pricing information within the app. The company also restricted developers from communicating in any manner with their customers to promote offers available through other sales channels, the commission stated.

Apple allegedly only allows steering via “link-outs,” which enables developers to include a link in their app. However, these “link-outs” are subject to tight restrictions from Apple.

In a statement provided to media outlets, Apple said the company has made “a number of changes” over the past several months to comply with the DMA regulations after considering feedback from the commission and developers.

“All developers doing business in the EU on the App Store have the opportunity to utilize the capabilities that we have introduced, including the ability to direct app users to the web to complete purchases at a very competitive rate,” the Apple spokesperson said.

“As we have done routinely, we will continue to listen and engage with the European Commission.”

Apple takes a fee when a developer acquires a new customer through the App Store, which the commission determined as going beyond “what is strictly necessary for such remuneration.”

For instance, Apple charges a fee on every purchase a user makes within seven days after clicking a “link-out” from the app.

“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,” Margrethe Vestager, executive vice president in charge of the EU’s competition policy, said in a statement.

Under the DMA, online gatekeepers are defined as businesses with a large user base, active in multiple EU countries, economically significant, and that have a considerable impact on the market.

In September 2023, the commission designated Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft as six gatekeepers. The companies had until March 7 to fully comply with the DMA rules.

Large Fines

If the commission decides that an infringement has occurred, it can impose fines of up to 10 percent of Apple’s global turnover. In case of repeated infringements, the fines can increase to 20 percent. For systemic infringements, other measures may also be taken, including forcing the company to sell parts of its business.

The commission has sent Apple the preliminary findings, and the company has the right to defend itself by sending a written response on the matter. If the commission’s findings are to be eventually confirmed, Apple’s business terms would be deemed noncompliant with the DMA regulations.

“The Commission would then adopt a non-compliance decision within 12 months from the opening of proceedings on 25 March 2024,” the agency said.

On March 25, the commission opened anti-competitive investigations against Apple, Alphabet, and Meta for potential breaches of DMA rules.

Earlier that month, the commission fined Apple more than 1.8 billion euros (about $1.95 billion) for engaging in “unfair trading” practices that harmed iOS users’ choices.

“The Commission’s investigation found that Apple bans music streaming app developers from fully informing iOS users about alternative and cheaper music subscription services available outside of the app and from providing any instructions about how to subscribe to such offers,” the agency said at the time.

These practices allegedly led customers to pay “significantly higher” prices for their music subscriptions. The Commission decided the fine was necessary because Apple’s actions led to nonmonetary harm that couldn’t be adequately quantified.

Apple criticized the EU judgment at the time.

“The decision was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast,” the firm said in a statement.

Apple didn’t respond by press time to a request by The Epoch Times for comment.

From The Epoch Times