July 23, 2024
EU Announces Preliminary Finding That Apple is in Violation of Digital Markets Act

EU Announces Preliminary Finding That Apple is in Violation of Digital Markets Act

Posted June 24, 2024 at 3:00pm by iClarified
The EU has informed Apple of its preliminary view that the App Store is in breach of the Digital Markets Act (DMA) by preventing app developers from freely steering customers to alternative sources for offers and content.

Additionally, the European Commission has opened another non-compliance investigation into Apple over concerns that its new contractual requirements for third-party app developers and app stores, including Apple's new Core Technology Fee, fall short of ensuring effective compliance with DMA obligations.

Here's the announcement...


Preliminary findings on Apple's steering rules for the App Store

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.

Apple currently has three sets of business terms governing its relationship with app developers, including the App Store's steering rules. The Commission preliminarily finds that:

● None of these business terms allow developers to freely steer their customers. For example, developers cannot provide pricing information within the app or communicate in any other way with their customers to promote offers available on alternative distribution channels.

● Under most of the business terms available to app developers, Apple allows steering only through "link-outs", i.e., app developers can include a link in their app that redirects the customer to a web page where the customer can conclude a contract. The link-out process is subject to several restrictions imposed by Apple that prevent app developers from communicating, promoting offers and concluding contracts through the distribution channel of their choice.

● Whilst Apple can receive a fee for facilitating via the AppStore the initial acquisition of a new customer by developers, the fees charged by Apple go beyond what is strictly necessary for such remuneration. For example, Apple charges developers a fee for every purchase of digital goods or services a user makes within seven days after a link-out from the app.

By sending preliminary findings, the Commission informs Apple of its preliminary view that the company is in breach of the DMA. This is without prejudice to the outcome of the investigation as Apple now has the possibility to exercise its rights of defence by examining the documents in the Commission's investigation file and replying in writing to the Commission's preliminary findings.

If the Commission's preliminary views were to be ultimately confirmed, none of Apple's three sets of business terms would comply with Article 5(4) of the DMA, which requires gatekeepers to allow app developers to steer consumers to offers outside the gatekeepers' app stores, free of charge. The Commission would then adopt a non-compliance decision within 12 months from the opening of proceedings on 25 March 2024.

New non-compliance investigation into Apple's contract terms

Today, the Commission has also opened a third non-compliance investigation into Apple's new contractual terms for developers as a condition to access some of the new features enabled by the DMA, notably the provision of alternative app stores or the possibility to offer an app via an alternative distribution channel. Apple has so far kept the option to subscribe to the previous conditions, which do not allow alternative distribution channels at all.

The Commission will investigate whether these new contractual requirements for third-party app developers and app stores breach Article 6(4) of the DMA and notably the necessity and proportionality requirements provided therein. This includes:

● Apple's Core Technology Fee, under which developers of third-party app stores and third-party apps must pay a €0.50 fee per installed app. The Commission will investigate whether Apple has demonstrated that the fee structure that it has imposed, as part of the new business terms, and in particular the Core Technology Fee, effectively complies with the DMA.

● Apple's multi-step user journey to download and install alternative app stores or apps on iPhones. The Commission will investigate whether the steps that a user has to undertake to successfully complete the download and installation of alternative app stores or apps, as well as the various information screens displayed by Apple to the user, comply with the DMA.

● The eligibility requirements for developers related to the ability to offer alternative app stores or directly distribute apps from the web on iPhones. The Commission will investigate whether these requirements, such as the 'membership of good standing' in the Apple Developer Program, that app developers have to meet in order to be able to benefit from alternative distribution provided for in the DMA comply with 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.

Margrethe Vestager, Executive Vice-President in charge of competition policy, issued the following statement:

"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. 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."

Thierry Breton, Commissioner for Internal Market, said:

"Apple's new slogan should be "act different". Today we take further steps to ensure Apple complies with the DMA rules. We have reason to believe that the AppStore 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."

In an interview earlier this month, Vestager said she was surprised at Apple's non-compliance with the Digital Markets Act, noting that EU would be dedicated to enforcing the legislation.

Apple has yet to officially comment on the news; however, it may seek to challenge the decision once final. That would drag out any possible changes for developers for quite some time.

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EU Announces Preliminary Finding That Apple is in Violation of Digital Markets Act
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LeoNyx86 - July 7, 2024 at 2:46pm
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