Some Relief for App Developers

App developers were vindicated this week after years of discontent with the App Store. The European Commission decided that Apple's App Store terms do in fact amount to a breach of the Digital Markets Act (DMA).

Breaking Down the DMA

The DMA, which became effective as of May 2023, defines objective criteria to identify "gatekeepers", who can be defined as large core platforms dominating the market (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft). It was implemented to complement EU Competition Laws, to ensure fairness and transparency in the digital sector.

Under Article 5(4) of the DMA, developers should be able to inform consumers of alternative cheaper options, and allow consumers to make an informed decision about those purchases. Developers should not be prevented from allowing consumers to link to other businesses or products, and gatekeepers can also not treat their own products and services more favourably, by positioning or ranking their own products or services higher than comparative ones offered by third-parties.

The concept is freedom of choice, removal of arbitrary control. Citizens should have enough information and should be permitted to make an informed decision on the product or service they wish to purchase.

Apple's Terms

Apple has a number of contractual business terms governing their relationship with app developers. The EU Commission found that none of the terms allow developers to freely steer consumers as they can't provide pricing information or communicate in any other way with customers to promote any alternative offers.

The terms which the Commission say are in breach of the DMA include Apple's Core Technology Fee, its multi-step user journey, and the eligibility criteria for developers.

What's Next?

Apple will likely defend their stance by responding to the Commission's preliminary findings. The Commission will complete their investigation and will probably issue a non-compliance decision within 12 months. Meanwhile, Apple could make some changes to their terms of business to bring them in line with the DMA and then Apple and the EU Commission could strike a deal, keeping both sides happy. If they don't reach a deal, the Commission will fine Apple up to 10% of its global revenue which can go up to 20% for repeated breaches. To put that into perspective, Apple's revenue last year was $383 billion.

This decision is a warning shot to the other gatekeepers, so it's also likely they will revisit their own terms to ensure compliance with the regulations. They may adopt a "wait and see" approach, but the growing scrutiny from regulators towards the technology sector is not going to be tempered any time soon and it's far better for tech giants to be proactive in this space.

When the EU flexes its muscles, the world listens. This is just one angle they're adopting towards the sector, but they EU are also separately looking at X and TikTok to determine whether enough is being done to police those platforms. Then we have the MiCA Regulations which have already been implemented, cracking down on unlicensed virtual asset service providers and adopting uniformity across the EU.

The approach to the technology sector is likely to set precedent and other jurisdictions around the world may follow suit, or adopt similar best practice guidelines, similar to the profound impact GDPR has had globally.

Whenever decisions like these are in play, you have the ask the question - who's really winning in these dogfights? Read more >>> https://ec.europa.eu/commission/presscorner/detail/en/IP_24_3433