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EU says Apple violated the DMA and faces a $38 billion fine

Published Jun 24th, 2024 7:41AM EDT
iPhone 15 Plus
Image: Christian de Looper for BGR

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Rumors said the European Union (EU) would investigate Apple for Digital Markets Act (DMA) violations, and the European Commission (EC) made it all official on Monday. The EU is indeed going after Apple, saying the iPhone maker’s various iOS and App Store changes might not be enough to adhere to DMA regulations.

Specifically, the EC informed Apple that it believes the new App Store rules for the European block are in breach of the DMA. “They prevent app developers from freely steering consumers to alternative channels for offers and content,” the EC wrote.

In addition to these preliminary findings, the EC is also opening a new non-compliance procedure against Apple over the new contract terms for developers, with a focus on the Core Technology Fee (CTF) that Apple introduced last year. The CTF is part of Apple’s new deal for developers who want to distribute apps from their websites or third-party app stores.

Preliminary findings

The EC believes that Apple still fails to allow developers that sell their apps via the App Store to inform potential customers about cheaper purchasing options outside the App Store. Apple also apparently makes it difficult for developers to steer customers to those offers and make purchases.

The EC says Apple doesn’t let developers mention pricing information or communicate with users to promote offers elsewhere. Moreover, Apple only allows “link-outs.” That means developers can place links in apps that redirect to a web page where the customer can conclude a contract. Notably, Apple charges a fee for link-out purchases as well.

The Commission’s preliminary findings give Apple 12 months to comply with the DMA. In this case, Apple should make changes to the way steering works on the iPhone or risk a non-compliance decision. Apple has until March 25th, 2025, to fix the issues. Otherwise, Apple risks a penalty of 10% of the previous year’s global revenue, or $38 billion.

“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,” said Executive Vice-President in charge of competition policy Margrethe Vestager.

As a European directly affected by the EC’s audacity to regulate technology in such a manner, my preliminary finding is that the EU might ruin the iPhone for millions of people who never asked the EC to come up with the DMA changes. But let’s move on.

The CTF fee

I explained time and again what the CTF is and why it’s needed. Apple will charge developers who sell apps via third-party marketplaces or their websites a fee of €0.50 for each sale after the first million downloads. Apple has various exceptions in place to ensure it won’t hurt small businesses and apps that might go viral.

The EC doesn’t like the CTF and has opened a third non-compliance investigation into the new contractual terms Apple offered to European developers.

The EC will investigate more than the implementation of the CTF. It’ll also examine the difficulty of downloading and installing third-party app stores on the iPhone. Furthermore, the EC will look at Apple’s eligibility requirements for developers who want to sell apps via alternative app stores or their websites.

“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 same Vestager said. “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.”

As a longtime iPhone user who will not download apps from third-party app stores or directly from app developers, I’ll remind the EU why it’s in a position to think it can regulate competition and innovation. Without Apple or the iPhone, the EU wouldn’t be able to protect the rights of developers even if it wanted to.

Developers wouldn’t have had the opportunity to create apps for a thriving ecosystem without Apple. There would be no competition, innovation, or jobs. The Google Play store would not exist without Apple launching the App Store first. Remember that mobile app development was a big joke compared to what’s been possible since the introduction of the iPhone.

The EU is threatening that by seemingly catering to some developers who might think the iPhone is their god-given right. They believe that they should be able to do whatever they want on the platform Apple built from the ground up, including paying no fees for access to all of Apple’s customers.

Chris Smith Senior Writer

Chris Smith has been covering consumer electronics ever since the iPhone revolutionized the industry in 2008. When he’s not writing about the most recent tech news for BGR, he brings his entertainment expertise to Marvel’s Cinematic Universe and other blockbuster franchises.

Outside of work, you’ll catch him streaming almost every new movie and TV show release as soon as it's available.