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Game over for Apple as the European Commission wades in against their DMA dodge

It's official. The European Commission is going to take apart Apple's half-hearted adherence to the Digital Markets Act
Game over for Apple as the European Commission wades in against their DMA dodge
  • Apple effectively introduced a system that pays lip service to the DMA, but now the EU are aiming to prove that their new law has teeth
  • “Today is a very important day for the effective enforcement of the DMA. Apple’s new slogan should be 'act different' "

After speculation pretty much sealed the deal on an upcoming EU Vs Apple DMA drama last week, it’s now official. This morning the European Commission has informed Apple that, following an investigation, Apple’s App Store rules are in breach of the Digital Markets Act as they prevent app developers from freely steering consumers to alternative channels for offers and content.

Apple famously ‘complied’ with the DMA - legislation put in place in Europe to loosen Apple’s grip on the accessibility of the iOS platforms and the fees they were able to charge - by opening up the platform while imposing its own new set of regulations and fees.

Rather than enter into the spirit of the new ruling, Apple effectively introduced a system that pays lip service to the DMA while being far more complicated than the simple ‘we are the gatekeepers and we charge 30% of your takings’ rules which it has administered since the Apple App Store’s opening back in July 2008. 

Rather than herald in the era of freedom that the EU had planned, Apple put in place their own unique interpretation of the law so that they could, A) Basically charge as much as they did before. B) Make the whole thing confusing in the hope that developers and publishers continue to agree to Apple’s 30% cut. And C) By offering an alternative to their 30% at all, fulfill their obligations to the DMA to the letter.

It appears that - as of this morning - part C of that plan has failed and the repercussions from this failure will doubtless impact parts A and B.

It’s basically the nightmare scenario that Apple had hoped to dodge and the moment that every DMA watcher had anticipated.

It’s basically the nightmare scenario that Apple had hoped to dodge and the moment that every DMA watcher had anticipated.

What happens now? 

Instead of allowing Apple to bend the rules the European Commission has opened a new non-compliance procedure against Apple, specifically identifying Apple’s new contracts for third-party app developers and app stores, and the introduction of Apple's new Core Technology Fee as measures which “fall fall short of ensuring effective compliance with Apple's obligations under the DMA.”

“Under the DMA, developers distributing their apps via Apple's App Store should be able, free of charge, to inform their customers of alternative cheaper purchasing possibilities, steer them to those offers and allow them to make purchases,” states the latest preliminary findings.

Three steps to freedom

In three key points, the Commission has found that, firstly, Apple’s business terms don’t allow developers to freely steer their customers (i.e. developers cannot provide pricing information within the app or communicate other places to purchase).

Secondly, while Apple does now allow devs to include links, this “link-out process” is subject to restrictions imposed by Apple that prevent app developers from communicating and promoting offers and concluding contracts through the distribution channel of their choice.

And thirdly, the fees charged by Apple go beyond what is strictly necessary. Apple even currently go so far as to charge developers a fee for every purchase of digital goods or services a user makes within seven days after a link-out from the app.

This, the EU has decided today, simply isn't on.

“By sending preliminary findings, the Commission informs Apple of its preliminary view that the company is in breach of the DMA. In parallel, the Commission will continue undertaking preliminary investigative steps outside of the scope of the present investigation, in particular with respect to the checks and reviews put in place by Apple to validate apps and alternative app stores to be sideloaded.”

Apple's game is up 

In short, the EU is basically picking apart every pernickety structure that Apple put in place (rules AND fees) following the introduction of the DMA, with the desired outcome being that Apple simply adhere to the law in the manner in which the EU originally envisaged.

“Today is a very important day for the effective enforcement of the DMA.” says Margrethe Vestager, Executive Vice-President in charge of competition policy.

“We are determined to use the clear and effective DMA toolbox to finally open real opportunities for innovators and for consumers..”
Thierry Breton, the EU's commissioner for internal markets

“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.”

“Apple’s new slogan should be 'act different'," suggests Thierry Breton, the commissioner for internal markets. “Today we take further steps to ensure Apple complies with the DMA rules. We have reason to believe that the App Store 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.”

At the time of writing Apple is yet to retaliate, but expect this one to run and run…