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Tech major Apple becomes first company charged with EU's DMA rules
Apple
Photo Courtesy: Unsplash

Tech major Apple becomes first company charged with EU's DMA rules

| @indiablooms | 25 Jun 2024, 10:16 am

The European Commission has informed tech major Apple of its preliminary view that its App Store rules are in breach of the Digital Markets Act (DMA), as they prevent app developers from freely steering consumers to alternative channels for offers and content.

In addition, the Commission opened a new non-compliance procedure against 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 Apple's obligations under the DMA, read a statement issued by European Commission.

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.

"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," said Margrethe Vestager, Executive Vice-President in charge of competition policy.

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