Apple is imposing unfair restrictions on app developers for its App Store in violation of a new European Union law aimed at encouraging competition in the technology industry, regulators in Brussels said on Monday.
The charges further escalated a row between Apple, which says its products are designed in the best interests of customers, and EU regulators, who say the company is unfairly using its size and significant resources to stifle competition. .
Apple is the first company to be accused of violating the Digital Markets Act, a law passed in 2022 that gives European regulators broad powers to force the biggest “online gatekeepers” to change their business practices.
After launching an investigation in March, EU regulators said Apple was placing illegal restrictions on companies that make games, music services and other apps. Under the law, also known as the DMA, Apple cannot restrict how companies communicate with customers about sales and other offers and content available outside of the App Store. The company faces a penalty of up to 10 percent of global revenue, a fine that could go up to 20 percent for repeat violations, regulators said. Apple reported $383 billion in revenue last year.
“Today is a very important day for the effective enforcement of the DMA,” said Margrethe Vestager, the European Commission’s executive vice-president for competition policy. He said Apple’s App Store policies make developers more dependent on the company and prevent consumers from knowing better deals.
EU regulators said the charges were preliminary and gave Apple a chance to respond. The final decision will be announced by next March.
Apple has defended its practices, saying its rules and fees are a fair trade for providing such a large platform to reach consumers. Developers can point consumers to websites to make purchases outside of the App Store, the company said.
“Over the past few months, Apple has made a number of changes to comply with the DMA in response to feedback from developers and the European Commission,” Apple said in a statement. “We are confident that our plan complies with the law.”
The charges highlight the risk to the company’s business from increased regulatory scrutiny around the world. In the United States, Apple is being sued by the Department of Justice over allegations that it has an illegal monopoly on the smartphone market. It is also arguing in US federal court that it has the right to take up to 27 percent of sales of certain apps through third-party payment systems, which the developers argue violates a 2021 court order.
Japan and Britain, no longer part of the European Union, have advanced rules to limit Apple’s control over the App Store, too.
The European Union has long been at the center of regulatory efforts to crack down on the world’s biggest tech companies, but the Digital Markets Act gives officials new powers to intervene without the lengthy process of filing traditional antitrust lawsuits, which can last for years. decide. Amazon, Google and Meta are also under investigation for breaking the law.
Another new law, called the Digital Services Act, gives regulators more power to govern social media platforms and illegal online content. Meta, TikTok and X are under investigation for potential violations.
The heightened scrutiny appears to be forcing companies to think about what products and services they will market across the 27-nation bloc. On Friday, Apple said it would not release a software update for iPhone users in the European Union that includes new artificial intelligence features due to “regulatory uncertainty.” Meta didn’t launch its Threads service on the block until five months after it was available in the United States, citing regulatory concerns.
However, the European Union is one of the biggest markets for Apple and other tech companies, giving them little choice but to make changes to comply with the new laws.
In January, Apple announced a list of changes to its App Store policies in an effort to comply with the Digital Markets Act, including allowing users to download competing app stores for the first time. Apple also cut the service fees it charges companies for sales through the App Store to up to 17%, down from 30%.
Apple has made other changes that have irked developers, including charging a 50 euro “core technology fee” for every download of their app after it’s been downloaded a million times or more in 12 months. Spotify and Epic Games, the maker of Fortnite, were among the companies that said the changes amounted to a new anti-competitive tax and called for regulators to intervene.
The European Commission said it is launching a separate investigation into Apple’s technology fee, saying it may be “falling short of ensuring effective compliance with Apple’s obligations under the DMA”.
Apple and other companies are expected to try to limit the scope of the Digital Markets Act in court. The outcome could take years, but it is likely to set a precedent for future regulation of the technology industry and digital economy.
