Apple faces gigantic EU fine over App Store rules

The European Commission has informed Apple that its App Store practices, specifically those that make it difficult for developers and users to use any other app marketplace, are in breach of the EU’s new digital rules. The preliminary findings are the first to emerge from an investigation the European Commission launched in March 2024 into Apple, Meta and Google over uncompetitive practices.

If Apple is found to be operating outside the bound of the EU’s new Digital Markets Act, it can be fined up to 10 per cent of its total worldwide turnover.

Such a fine would likely be the largest-ever imposed on any firm, but it can even go up to 20 per cent in case of repeated infringements.

In its investigation, the Commission found that Apple’s App Store does not allow developers to freely “steer” their customers to other distribution channel, as they are prohibited from providing pricing information or promoting offers available through alternative channels.

Apple also only permits steering through “link-outs,” where a link redirects users to an external webpage to complete a purchase. These links are subject to numerous Apple-imposed restrictions, limiting developers’ ability to communicate and finalise transactions outside the App Store.

Finally, the fees charged by Apple for facilitating the initial acquisition of a new customer, said the Commission, “go beyond what is strictly necessary.” As an example, it highlighted that Apple charges developers a fee for every purchase of digital goods or services a user makes within seven days after a link-out from the app.

Apart from these three alleged contraventions of the DMA, the Commission also announced that it would be opening a new investigation into the contractual terms introduced by Apple to comply with the DMA’s requirements.

Apple’s new rules stipulate a “core technology fee” under which developers of third-party app stores and third-party apps must pay a €0.50 fee per installed app.

“The Commission will investigate whether Apple has demonstrated that the fee structure that it has imposed, as part of the new business terms, and in particular the Core Technology Fee, effectively complies with the DMA.”

The Commission will also investigate the “multi-step user journey to download and install alternative app stores or apps on iPhones,” to see whether the steps that a user has to undertake to successfully complete the download and installation of alternative app stores or apps, as well as the various information screens displayed by Apple to the user, comply with the DMA.

Margrethe Vestager, executive vice-president in charge of competition policy, said: “Today is a very important day for the effective enforcement of the DMA: we have sent preliminary findings to Apple.

“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.

“We have also opened proceedings against Apple in relation to its so-called core technology fee and various rules for allowing third party app stores and sideloading. The developers’ community and consumers are eager to offer alternatives to the App Store. We will investigate to ensure Apple does not undermine these efforts.”

Commissioner for Internal Market Thierry Breton added: “Apple’s new slogan should be ‘act different’. Today we take further steps to ensure Apple complies with the DMA rules. We have reason to believe that the AppStore rules not allowing app developers to communicate freely with their own users is in breach of the DMA. We are also opening a new case in relation to Apple’s new business terms for iOS.

“Without prejudice to Apple’s right of defence, we are determined to use the clear and effective DMA toolbox to finally open real opportunities for innovators and for consumers.”

What’s next?

By sending preliminary findings, the Commission has informed Apple of its preliminary view that the company is in breach of the DMA.

Apple now has the possibility to exercise its rights of defence by examining the documents in the Commission’s investigation file and replying in writing to the Commission’s preliminary findings.

If Apple’s defence is not satisfactory, the Commission would adopt a non-compliance decision within 12 months from the opening of proceedings on 25th March 2024.