Apple App Store policies are charged under new EU competition law

Apple is imposing unfair restrictions on app developers for its App Store in defiance of a new European Union law aimed at encouraging competition in the technology industry, regulators in Brussels said on Monday.

Apple is the first company to be accused of violating the Digital Markets Act, a law passed in 2022 that gives European regulators broad authority to force the “biggest internet gatekeepers” to change their business practices.

The charges signal that the European Union, already known as an aggressive regulator of the technology industry, plans to intensify its crackdown. Amazon, Google and Meta are also facing investigations under new competition rules, while TikTok and X are facing investigations under another law aimed at forcing internet companies to more aggressively police their platforms for illegal content.

EU rules threaten to fragment the global technology market as companies delay the release of certain products and services due to regulatory concerns. Last week, Apple said it would not release a software update to iPhone users in the European Union that includes new artificial intelligence features because of “regulatory uncertainty.” Meta didn’t release Threads, its Twitter-like service, on the block until five months after it was available in the United States for similar reasons.

The charges filed on Monday further escalated a row between Apple, which says its products are designed in the best interests of customers, and EU regulators, who say the company is unfairly using its size and resources. its considerable to stifle the competition.

After launching an investigation in March, EU regulators said Apple was imposing illegal restrictions on companies that make games, music services and other apps. Under the law, also known as the DMA, Apple cannot restrict how companies communicate with customers about sales and offers and other content available outside of the App Store. The company faces a penalty of up to 10 percent of global revenue, a fine that could go up to 20 percent for repeat violations, regulators said. Apple reported $383 billion in revenue last year.

“Today is a very important day for the effective implementation of the DMA,” said Margrethe Vestager, the European Commission’s executive vice-president in charge of competition policy. She said Apple’s App Store policies make developers more dependent on the company and prevent consumers from being aware of the best deals.

EU regulators said the allegations were preliminary and gave Apple a chance to respond. The final decision will be announced next March.

Apple defended its practices, saying its rules and fees were a fair trade for providing such a large platform to reach consumers. Developers can also direct consumers to websites to make purchases outside the App Store, the company said.

“Over the past few months, Apple has made a number of DMA-compliant changes in response to feedback from developers and the European Commission,” Apple said in a statement. “We are confident that our plan complies with the law.”

Tommaso Valletti, a former senior economist for the European Commission on cases involving the technology industry, said regulators were “trying to build a reputation for being tough” but faced a challenge when it came to forcing companies to comply. like Apple to change business practices. They could be headed for a legal battle that could take years to conclude, but could set a precedent for future regulation of the tech industry and digital economy.

“The European Commission would like Apple to open up its ecosystem and Apple is saying there is no way,” said Mr. Valletti, now professor of economics at Imperial College London. “Apple is basically saying, ‘See you in court.'”

Apple’s regulatory woes show how government control of the technology industry is growing around the world. In the United States, Apple has been sued by the Department of Justice over allegations that it has an illegal monopoly in the smartphone market. It is also arguing in US federal court that it is entitled to up to 27 percent of sales of certain apps through third-party payment systems, which the developers argue violates a 2021 court ruling.

Japan and Britain, which are no longer part of the European Union, have advanced rules to curb Apple’s control over the App Store as well.

The European Union has long been at the center of regulatory efforts to crack down on the world’s biggest tech companies, but the Digital Markets Act gives officials new powers to intervene without the lengthy process of filing traditional antitrust lawsuits, which can last for years. solve.

Another new law, called the Digital Services Act, gives regulators more power to govern social media platforms and illegal online content, including material that is harmful to children. Meta, TikTok and X are under investigation for possible violations.

In January, Apple announced a list of changes to its App Store policies in an effort to comply with the Digital Marketplaces Act, including allowing users to download rival app stores for the first time. Apple also cut the service fees it charges companies for sales through the App Store to up to 17 percent, down from 30 percent.

Apple has made other changes that have upset developers, including charging them a “basic technology fee” of 50 euro cents for every download of their app after it has been downloaded a million times or more within 12 months. Spotify and Epic Games, the maker of Fortnite, were among the companies that said the changes amounted to a new anti-competitive tax and called for regulators to intervene.

The European Commission said it was launching a separate investigation into Apple’s technology charge, saying it may “fail to ensure effective compliance with Apple’s obligations under the DMA”.