European Union Accuses Apple of Violating New Digital Competition Laws – KNfins

European Union Accuses Apple of Violating New Digital Competition Laws

This accusation arises from the company’s prevention of app developers from directing consumers to cheaper services offered outside the App Store.

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The allegation is the result of an investigation launched in March, with preliminary findings published by the European Commission.

If found guilty, Apple could face a significant penalty of up to 10% of its global annual revenue, which amounts to $383 billion, as stated by the EU’s executive arm on Monday (24th). In the event of repeated violations, this fine could be increased to 20% of the company’s global revenue.

This action marks the first time the Commission has accused a company of violating the Digital Markets Act (DMA), a comprehensive regulation that came into effect in March to limit the power of large tech companies.

In March of the same year, the Commission announced that it had opened investigations into Apple, Google parent company Alphabet, and Facebook parent company Meta, suspecting them of non-compliance with DMA regulations. These three companies have been identified by the Commission as key “gatekeepers” in the digital ecosystem, responsible for essential connections between businesses and consumers through key platform services like digital marketplaces and app stores.

The Commission has one year from the opening of the investigation on March 25 to make a final decision regarding Apple’s alleged violation of the DMA.

In a response, Apple stated on Monday that it had made several changes in recent months to comply with the DMA, in reaction to feedback from developers and the European Commission. The company expressed confidence that its plan aligns with the law.

The Commission’s preliminary findings indicated that Apple’s App Store rules prohibit developers from providing pricing information within apps or otherwise communicating with customers to direct them to offers on alternative platforms. Apple only allows developers to redirect customers through links to websites, but this process is subject to various restrictions, according to the Commission.

Margrethe Vestager, responsible for the digital sector and competition in the EU, emphasized the importance of this moment for the effective enforcement of the DMA, stating that redirection is crucial to reducing developers’ reliance on the “gatekeepers'” app stores and ensuring that consumers have access to the best deals.

In its statement, Apple mentioned that all developers operating through the App Store in the EU would have access to newly introduced features, including the ability to redirect app users to competitive pricing on websites for purchases. Additionally, the company highlighted its ongoing commitment to listen to and collaborate with the European Commission, as it routinely does.

At the same time, the European Commission announced the opening of a new investigation to determine whether Apple’s new contractual requirements for app developers comply with the DMA. These requirements include the introduction of a “basic technology fee” of €0.50 per installation of third-party apps.

The European Commission’s initial findings against Apple come just months after the company was fined €1.84 billion ($1.97 billion) for hindering competing music streaming services like Spotify from informing iPhone users about cheaper signup options outside the App Store. This was the first antitrust fine the bloc imposed on the US tech giant.

At that time, Apple stated that app developers compete “on equal footing” in its App Store and that it planned to appeal the fine.

In January, anticipating the DMA’s implementation, Apple announced significant changes to its handling of apps in the EU. These included plans to allow third-party app stores on iPhones and iPads for the first time in the company’s history, as well as substantial reductions in fees charged in the App Store. Apple emphasized that these changes were made to comply with new regulations and to continue fostering a competitive and fair environment for all developers.

However, the European Commission continues to investigate Apple’s practices and has launched a new inquiry to examine whether the new contractual requirements imposed by the company on app developers are compliant with the DMA. These requirements include the controversial “basic technology fee” of €0.50 charged for each installation of a third-party app.

Margrethe Vestager underscored the importance of these investigations to ensure that developers are less dependent on major tech platforms and that consumers have access to the best available offers. She highlighted that the effective enforcement of the DMA is crucial to maintaining a fair and competitive digital market.

These recent actions by the European Commission mark a significant chapter in the regulation of large tech companies, particularly concerning Apple and its App Store. As the company faces fines and investigations for alleged anti-competitive practices, its subsequent decisions to adjust policies and fees reflect a response to increasing regulatory pressure in Europe.

The outcome of these investigations will not only shape the future relationships between tech companies and European regulators but could also influence global competition and digital market policies. As the European Commission continues to strictly enforce the DMA and other regulations, the impact on business strategies and consumer behavior in the digital ecosystem will be closely monitored.

Apple, for its part, has reaffirmed its commitment to working with regulators and adjusting its practices as needed to comply with European laws. The promise to allow third-party app stores and reduce fees in the EU represents a significant shift in corporate strategy aimed at aligning innovation with regulatory compliance. Nonetheless, the challenge of balancing the promotion of competition while maintaining the integrity of its ecosystem remains a priority as the company faces new legal challenges and global market expectations.

Picture of Ella Bailey
Ella Bailey

an editor at KNfins since 2024.

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