Apple Faces Charges of Stifling Competition on Its App Store as EU Uses New Digital Rules to Target Big Tech
In a landmark move, the European Commission is set to charge Apple for allegedly stifling competition on its mobile app store. This marks the first time EU regulators have utilized new digital rules to target a Big Tech company. According to sources with close knowledge of the investigation, the European Commission has determined that Apple is not complying with obligations to allow app developers to “steer” users to offers outside its App Store without imposing fees on them.
These charges are a product of the Digital Markets Act (DMA), a legislation designed to compel powerful “online gatekeepers” to open up their businesses to competition in the European Union. In addition to Apple, the commission is also investigating Alphabet and Meta, and an announcement over charges against Apple is expected to be made in the coming weeks. However, it is important to note that the regulators have only made preliminary findings, and Apple could potentially take corrective actions to revise its practices, which may lead to a reassessment of the final decision. The timing of the announcement is also subject to change.
The European Union has the option to announce charges against other tech groups as well. Regulators are still investigating whether Google parent Alphabet favors its own app store, and whether Facebook owner Meta utilizes personal data for advertising purposes. If Apple is found to be in violation of the DMA, it could face daily penalties for non-compliance of up to 5 percent of its average daily worldwide turnover, which amounts to just over $1 billion currently.
This move by the European Commission comes as competition watchdogs worldwide intensify their scrutiny of Big Tech companies and their domination of the market. In March, the United States filed an antitrust case against Apple, alleging that the company utilized its power in the smartphone sector to suppress competitors and limit consumer choice. Epic Games, which sued Apple over the App Store in 2020, is also awaiting a decision from a California federal judge regarding whether Apple failed to comply with a US injunction prohibiting its steering rules.
In January, Apple made significant changes to its iOS mobile software, App Store, and Safari browser in the EU. These changes were an attempt to appease regulators in Brussels and included allowing users to access rival app stores and download apps from other sources. Apple also reduced the fee paid by companies using the App Store for selling digital goods and services, lowering it from 30 percent to 17 percent.
However, the EU is investigating whether these fee changes align with its new digital rules. Apple introduced new charges in Europe, such as a “core technology fee” of 50 cents on developers with apps that have over 1 million users for every first installment by a user. Additionally, Apple plans to charge an extra 3 percent fee to app developers using its payment processor. Some developers have expressed concerns about potentially facing higher charges as a result of these fee changes. There is a possibility that the EU may also announce initial charges related to these developer fees.
An analysis conducted by Sensor Tower revealed that consumer spending on Apple’s App Store during the second quarter of 2024 remained relatively stagnant, indicating that the EU rules have yet to impact the company’s bottom line.
Apple declined to comment on the matter but referred to an earlier statement asserting their confidence in their plan’s compliance with the DMA. The company expressed its willingness to engage constructively with the European Commission throughout the investigation. The EU declined to provide any comments.
Overall, these charges against Apple demonstrate the EU’s commitment to promoting competition in the digital market and holding Big Tech companies accountable for their practices. Given the ongoing scrutiny and investigations into other tech companies, it is clear that regulators are actively working to ensure a fair and competitive landscape for all players in the industry.
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