Apple Set to be Charged by EU for Violating Digital Markets Act

Apple could be the first tech giant to be formally charged by the European Commission for violating the Digital Markets Act.

The Cupertino firm enforces rules on “steering,” which charge app developers for directing their users towards third-party purchase options, according to the Financial Times. Apple takes a 30% commission from the revenue of any in-app purchases, so when users make app-related payments on their phone browser, for example, it eats into profits.

In March 2024, the European Commission announced it was opening investigations into Alphabet, Apple and Meta for alleged gatekeeping — i.e., promoting their own services above competitors’ — on apps and in browsers. According to Reuters, Apple and Meta are both priority cases, but regulators are still investigating whether Alphabet, Google’s parent company, disproportionately favours its own app store and services within Google results.

Along with the rules on steering, the European Commission could penalise Apple for the new fees it levies on E.U. app developers that were added in response to the DMA in January. Meta’s charges, on the other hand, relate to its ad-free subscription tiers for Facebook and Instagram, according to three sources who spoke to Reuters. These options create a so-called “pay or consent model” and “may not provide a real alternative in case users do not consent,” the Commission stated.

What is the DMA?

The DMA, established in 2022, is an E.U. regulation that intends to promote fairness and competition among digital products and services. It established obligations for certain influential tech firms, dubbed “gatekeepers,” that must comply within their daily operations.

These cover:

• Providing users access to the data gatekeepers collect about them.
• Tracking users outside their platforms.
• Allowing third-parties to inter-operate within their platforms.
• Allowing users to uninstall any pre-installed software or app.
• Deprioritising services and products offered by third parties on the gatekeeper’s platform.

In September 2023, the European Commission labelled Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft gatekeepers, or providers of certain “core platform services” like Google Maps, Apple App Store and Amazon Marketplace.

Fines for noncompliance with the DMA can be up to 10% of the company’s total worldwide turnover, going up to 20% in cases of repeated infringement. In more extreme instances, the Commission may order an organisation to sell all or parts of its business or ban the organisation from acquiring related services.

The DMA has been in effect since May 2023, but the deadline for gatekeepers to submit DMA compliance reports to the European Commission was March 7, 2024. A few weeks later, the Commission announced it was opening non-compliance investigations into Alphabet, Apple and Meta.

How has Apple responded to the DMA?

Apple responded to the DMA’s requirements in January, saying accessing third-party apps on Apple devices presents security risks, including “malware, fraud and scams, illicit and harmful content.” However, it did make a number of changes, including to its pricing structure.

The maximum commission Apple claims on subscriptions and in-app purchases for apps listed on the App Store was reduced from 30% to 17%, and the company takes no cut for those distributed by a third-party app. However, it also added the controversial Core Technology Fee for developers of applications with more than one million instals every year; this costs €0.50 per first install over one million in the past 12 months.

Some developers, including Tim Sweeney of Epic Games, have argued the introduction of the Core Technology Fee means they will be charged more than before and has been dubbed “a devious new instance of malicious compliance.”

After the Commission’s gatekeeping investigation was announced in March, an Apple spokesperson told The Verge that they are “confident” the company’s plan complies with the DMA, and it will “continue to constructively engage with the European Commission as they conduct their investigations.”

SEE: Deadline for EU DMA Compliance Reports Arrives for ‘Gatekeeper’ Orgs

When will we know if Apple will be charged?

E.U. regulators are expected to make a decision on charging Apple within the next few weeks, according to the two Financial Times sources. Reuters says an announcement will be made before the European Parliament’s summer break in August.

The expectation is that the firm will be charged and will be the first of the tech giants to be penalised, the Reuters sources added, while a decision regarding Meta will follow.

A second investigation focusing on Apple’s web browser choice screen, which “may be preventing users from truly exercising their choice of services within the Apple ecosystem,” according to the European Commission, is likely to take longer.

Even though the timings can shift, any charges are expected to be announced before Margrethe Vestager, the European Commissioner for Competition, leaves office in November.

So far, the Commission has only made preliminary findings, so Apple and Meta still have the opportunity to take actions that alleviate the concerns before a decision is made.