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Apple has become the first tech giant to be formally charged by the European Commission for violating the Digital Markets Act. On Monday, June 24, the European Commission issued a preliminary ruling that the Cupertino company could be subject to a large fine. On July 1, the European Commission ruled that a second organization, Meta, had violated the Digital Markets Act. Failure to comply Use DMA.
according to ReutersApple and Meta are priority cases, but regulators are still investigating whether Google parent Alphabet overly favors Google Play and its own services in Google search results.
If found in violation of the DMA, an organization may be fined up to 10% of its total global turnover, and in the case of repeated violations, a fine of 20% may be imposed.
What is DMA?
Established in 2022, the DMA is an EU regulation that aims to promote fairness and competition between digital products and services. It sets out obligations that certain influential tech companies, known as “gatekeepers,” must comply with in their day-to-day operations.
These include:
- Give users access to data that gatekeepers collect about them.
- Track users outside of their platforms.
- Allowing third parties to interoperate within their platform.
- Allow users to uninstall any preinstalled software or applications.
- Deprioritize services and products provided by third parties on the gatekeeper platform.
In September 2023, the European Commission designated Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft as gatekeepers, or providers of certain “core platform services,” such as Google Maps, Apple’s App Store, and Amazon’s Marketplace.
Fines for breaches of DMA regulations can be as high as 10% of a company’s total global turnover, or up to 20% for repeated violations. In more extreme cases, the Commission may order a company to sell all or part of its business, or prohibit it from acquiring related services.
The DMA comes into force from May 2023, but the deadline for gatekeepers to submit DMA compliance reports to the European Commission is March 7, 2024. A few weeks later, the Commission announced that it would open an investigation into Alphabet, Apple, and Meta for non-compliance.
Meta “Pay or Agree” features on Facebook and Instagram do not meet DMA requirements
On July 1, the European Commission ruled that Meta’s “pay or consent” advertising model, in which users who subscribe to Instagram or Facebook can opt out of targeted advertising, violated the DMA. The Commission said that the “pay or consent” model does not provide the same service as paid advertising if users choose to subscribe. The Commission also said that the “pay or consent” advertising model “does not allow users to exercise their right to freely consent to the combination of their personal data.” statement.
What does the DMA ruling mean for Apple?
The Commission found that Apple has three sets of business rules that ultimately prevent iOS app developers from directing users to third-party purchasing options. This violates the DMA, which states that developers should be able to easily and free of charge direct customers to purchasing options outside the App Store.
Apple takes a 30% commission on revenue from any in-app purchases, so it eats into its profits when users make app-related payments on their mobile browsers.
Executive Vice President Margrethe Vestager, in charge of competition policy, said in a statement Press release June 24: “Our initial position is that Apple will not allow manipulation outright. Manipulation is key to ensuring app developers are less dependent on gatekeeper app stores and that consumers are informed of better offers.”
In addition to publishing these preliminary findings, the Commission also launched a new investigation into the commercial terms that Apple has established for developers in response to the DMA. These new terms are conditions for offering iOS apps through distribution channels other than the App Store, including the so-called “core technology fee.” The Commission is primarily investigating whether Apple is still effectively restricting the distribution of apps through other channels by retaining the option for developers to subscribe under the old terms.
How did Apple violate the DMA?
The European Commission found that Apple violated the DMA in three main areas:
- None of its three sets of business rules for app developers allow them the freedom to direct customers to purchase options outside of the app.
- Directing users to purchase options outside of an iOS app can only be accomplished through “linking,” which is an in-app link that directs users to a web page to complete the transaction, but this is strictly limited.
- The fees Apple charges for bringing developers new customers by hosting their apps on the App Store go beyond what is strictly required for compensation.
Why is the European Commission launching a new investigation into Apple?
The European Commission intends to find out whether Apple’s new commercial terms for developers who want to host their iOS app distribution channels outside the App Store are too strict and thus hinder them from doing so.
Specifically, it will investigate compliance with the DMA with respect to:
- The new core technology fee requires developers to pay €0.50 for each first-time app installed above one million.
- Users must take multiple steps to download other app stores or applications on Apple devices, and information screens are displayed as part of the process.
- The developer eligibility requirements are related to the ability to offer an alternative app store or distribute apps directly from the web on the iPhone.
How did Apple and Meta react to DMA?
Apple responds to DMA’s request In January, Apple said that accessing third-party apps on Apple devices posed security risks, including “malware, scams and fraud, and illegal and harmful content.” However, it did Number of changesincluding its pricing structure.
Apple has reduced its maximum commission on subscriptions and in-app purchases for apps listed on the App Store to 17% from 30%, and the company is charging no commission on third-party app distribution. However, it has also added a controversial core technology fee to app developers with more than 1 million installs per year; apps with more than 1 million installs for the first time in the past 12 months will pay 0.50 euros.
Some developers, including the CEO of Fortnite developer Epic Games, believe that the introduction of a core technology fee means they will pay more than before, and are known as “A new instance of malicious compliance.”
look: Deadline for gatekeepers to submit EU DMA compliance reports has arrived
In response to this week’s announcement, Apple spokesman Peter Ajemian said edge: “Over the past few months, Apple has made a number of changes to comply with the DMA based on feedback from developers and the European Commission.
“All developers doing business on the App Store in the EU have the opportunity to take advantage of the features we’ve introduced, including directing app users to a web page to complete their purchase at a competitive price. As we always do, we will continue to listen and engage with the European Commission.”
Meta spokesman Matthew Pollard said Meta’s “ad-free subscription follows the directive of the European Court of Justice and is compliant with the DMA.” edge. This matches Meta’s statement In a blog post last year: “‘Ad-free subscriptions’ addresses recent regulatory developments, guidance and judgments shared by leading European regulators and courts in recent years.”
When will we know if Apple and Meta will be fined?
So far, the Commission has only reached a preliminary conclusion that Apple and Meta have violated the DMA. Apple and Meta have been informed of the matter but still have the opportunity to respond or take action to alleviate concerns before a decision is made.
However, if these preliminary findings are confirmed and Apple and Meta are found to have violated the DMA, a non-compliance decision will be made no later than March 25, 2025.
Another investigation into Apple’s web browser choice screen may take longer to reach a decision because the screen “may prevent users from truly choosing services in the Apple ecosystem.” Reuters.
Note: Megan Crouse contributed to this article to reflect the allegations against Meta.
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