European Commission may be about to put the squeeze on Apple for its App Store rules

iBiz potentially facing hefty penalties under the Digital Markets Act

The European Commission is said to be preparing to file charges against Apple alleging that its "steering" rules, imposed on third-party developers distributing software through the App Store, violate Europe's Digital Markets Act (DMA).

The DMA, which took effect in March, is a European competition law that requires large gatekeepers – Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft – to take steps to promote competition on certain platforms. Apple has been designated a gatekeeper for iOS, iPadOS, Safari, and the App Store by the EU.

According to the Financial Times, three people familiar with the commission's investigation of Apple have confirmed that the competition cops have preliminarily found that the iPhone maker has failed to meet the requirements of the DMA.

If Apple cannot convince the commission otherwise and the preliminary findings are deemed valid, the tech giant could face daily penalties on the order of five percent of its average 24-hour turnover of a little under $1 billion [PDF] – so about $50 million per day. But Apple, if charged, will have the opportunity to defend itself. The iBiz did not respond to a request for comment.

Shortly before Europe's DMA came into force in early March, the commission fined Apple $2 billion for applying its steering rules to music apps, specifically Spotify. What's more, there's been speculation that Apple's unenthusiastic response to the DMA might prompt the commission to make an example of Cook & Co.

Apple in its App Store Guidelines requires that apps use Cupertino's own purchase system for in-app transactions, apart from an exception for "Reader" apps that display previously purchased content.

Apple imposed this rule to ensure that it can collect its 30 percent cut of in-app transactions, or 15 percent for smaller businesses.

This arrangement has been challenged around the globe, prompting various concessions, including the recent introduction of "entitlements" that let developers link to external payment systems for stores and music streaming apps, in certain geographic areas – though the sales commission due to the iGiant is only three percentage points less.

In the US, Epic Games sued Apple in 2020 over its App Store rules. While the game company mostly lost, it did manage to convince Judge Yvonne Gonzalez Rogers to rule that Apple's steering rules are anti-competitive.

Following unsuccessful appeals by Apple and Epic to the US Supreme Court, the US Ninth Circuit Court of Appeals left the lower court judgment intact.

Apple responded by offering developers entitlements that allow them to direct users to external payment mechanisms, subject to the requirement that those doing so pay Apple 27 percent (or 12 percent for small businesses) of the external transaction.

Epic Games is presently challenging Apple's compliance, saying it falls short of the judge's order. Spotify too is unsatisfied with the system Apple has set up.

Apple has been forced to make concessions in the Netherlands and in South Korea. Last year it briefly implemented support for a third-party payment entitlement in Russia, though that page is no longer accessible. Earlier this year, the Russian government fined Apple, based on a decision dating back to July 2022. Though Apple exited Russia in March 2022 just after the illegal invasion of Ukraine, its devices are still used there.

In Japan, where Apple's steering rules were dialed back in 2021, the national parliament this week passed a law requiring Apple and Google, the other large app store operator, to accommodate third-party app stores and other payment mechanisms.

And in the US this week, four more states joined the government's antitrust lawsuit against Apple.

Either Apple will be forced to come up with a consistent set of global rules that addresses competition concerns and legal obligations, or those creating apps for Cupertino's platforms will have to navigate an increasingly complex set of rules that differ based on country, app genre, revenue, and corporate whimsy. ®

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