Apple Is Found to Be in Breach of the EU Digital Markets Act
European Union regulators have accused Apple of violating new laws to curb the dominance of big tech companies. The European Commission, which oversees competition in the EU, has found that Apple’s App Store unfairly limits rival marketplaces. This makes this the first time a company has been found in breach of the Digital Markets Act (DMA).
The commission claims that Apple’s App Store practices squeeze out competitors by not allowing developers to inform customers about cheaper alternatives to the App Store. Apple charges developers an average commission of 30%, which the commission alleges is excessive. Apple faces a potential fine of up to 10% of its global revenue if it fails to comply with these regulations.
Despite these allegations, Apple remains confident that its current practices comply with the law. The tech giant has been given the opportunity to review the preliminary findings of the investigation and can avoid a substantial fine by submitting a satisfactory proposal to the EU.
Apple maintains that it has made significant changes to ensure compliance with the DMA. In a statement, Apple said, "We estimate more than 99% of developers would pay the same or less in fees to Apple under the new business terms we created. All developers doing business in the EU on the App Store can utilise the capabilities we have introduced, including the ability to direct app users to the web to complete purchases at a very competitive rate."
One of Apple’s main defences is that the App Store provides robust security measures for users, which it argues could be compromised by using alternative app stores. The European Commission has expressed a willingness to discuss these security concerns further.
In a separate but related move, the European Commission has launched another investigation into Apple's new contractual terms for developers. This investigation focuses on three main areas:
The €0.50 fee Apple charges developers for each app downloaded outside of its App Store.
The multiple steps users must take to download apps from alternative stores.
Whether Apple’s eligibility criteria for alternative app store developers breach the DMA.
Apple has responded by noting that it has changed its eligibility criteria to make it easier for developers to set up app stores and removed the €0.50 fee for non-revenue-generating apps, such as those designed by students.
The EU Commissioner stated, "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." He also noted that Apple's fees "go beyond what is strictly necessary."
As the situation unfolds, Apple must navigate the EU’s stringent regulatory landscape while balancing the interests of developers, users, and its own business model. The tech giant's response and future actions will determine whether it can mitigate the impact of these regulatory challenges and align with the EU’s digital market regulations.
The Digital Markets Act (DMA) is a landmark regulation introduced by the European Union to ensure fairness and competition in the digital market. It establishes clear criteria to identify large online platforms, known as "gatekeepers," and sets out rules to prevent these platforms from engaging in unfair practices.
What Is the Digital Markets Act (Dma)?
The DMA is designed to regulate the behaviour of large digital platforms, ensuring they act fairly and allow for competition and innovation. It is a key component of the European digital strategy, aiming to create a more equitable online environment.
Who Are the Gatekeepers?
Gatekeepers are large digital platforms that provide core platform services, such as online search engines, app stores, and messenger services. To qualify as a gatekeeper, a platform must meet several criteria:
Strong Economic Position: Significant impact on the internal market and active in multiple EU countries.
Strong Intermediation Position: Connects a large user base with a substantial number of businesses.
Entrenched Market Position: Stability and durability in their market position over time.
On 6th September 2023, the European Commission designated six companies as gatekeepers: Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. In total, 22 core platform services provided by these gatekeepers were identified.
Benefits of the Digital Markets Act
The DMA offers several benefits for various stakeholders:
For Business Users: Companies that depend on gatekeepers to offer their services will experience a fairer business environment. The DMA ensures that gatekeepers cannot impose unfair terms and conditions, enabling businesses to thrive.
For Innovators and Start-ups: The act opens up opportunities for new technology companies to compete and innovate without being stifled by the dominant gatekeepers. This encourages a more dynamic and diverse digital market.
For Consumers: Individuals will enjoy a broader range of services, the ability to switch providers more easily, direct access to services, and fairer prices. The DMA promotes consumer choice and competition.
For Gatekeepers: While the DMA imposes restrictions on unfair practices, gatekeepers retain the freedom to innovate and offer new services. They must, however, ensure that their actions do not unfairly disadvantage business users and consumers.
Compliance and Regulations
Gatekeepers must adhere to a set of obligations (do's) and prohibitions (don'ts) outlined in the DMA. These rules are designed to prevent gatekeepers from exploiting their dominant position to the detriment of other businesses and consumers.
The DMA complements existing EU competition laws, which continue to apply fully. It is one of the first regulatory frameworks to comprehensively address the power of the largest digital companies, ensuring a balanced and competitive digital market.
The Digital Markets Act is a significant step towards fostering a fairer and more competitive digital market in the EU. By regulating the actions of gatekeepers, the DMA aims to create a level playing field for all businesses and provide better choices and prices for consumers. The DMA ensures that innovation and competition can flourish without the constraints of unfair practices by dominant platforms.
How Can Gerrish Legal Help?
Gerrish Legal is a dynamic digital law firm. We pride ourselves on giving high-quality and expert legal advice to our valued clients. We specialise in many aspects of digital law such as GDPR, data privacy, digital and technology law, commercial law, and intellectual property.
We give companies the support they need to successfully and confidently run their businesses whilst complying with legal regulations without the burdens of keeping up with ever-changing digital requirements.
We are here to help you, get in contact with us today for more information.