Reporter Qian Boyan
On June 24th, the European Commission announced that after a preliminary investigation, it has been ruled that the online app store of technology giant Apple has failed to comply with the relevant provisions of the European Union's Digital Markets Act. If Apple fails to rectify its online app store regulations within the specified time, it will face a fine of up to 10% of global total revenue.
Apple's total revenue for the fiscal year 2023 reached $383.3 billion. If calculated based on a 10% penalty, this means the company will receive nearly $40 billion (approximately RMB 290 billion) in fines.
The European Commission stated in its announcement that the terms and conditions agreement of the Apple App Store does not allow app developers to provide specific price information within the app, nor does it allow developers to bypass the Apple App Store and directly provide price or discount information to consumers through other channels. At present, Apple only allows developers to redirect consumers to third-party web pages through link redirection, and this process is limited by Apple's system warning pop ups and other methods. In addition, Apple continues to charge developers for services purchased within seven days after acquiring new customers through links within the Apple App Store. The European Commission has determined that this fee exceeds the scope of such compensation.
At the same time, the European Union also announced on the same day that it will launch a new round of non-compliance investigations into the new terms of the Apple App Store, which is also the third round. The focus of this survey is on the so-called Core Technology Fee charged by Apple, which means that Apple will charge a fee of 50 euros per download for app developers who have downloaded more than 1 million times and bypassed the Apple App Store.
It should be noted that application updates are also included in the installation count. The launch of this fee itself is a new business model launched by Apple in response to EU regulations.
"Today is an important day for the effective implementation of the Digital Markets Act. We have preliminarily ruled that Apple has not fully allowed Steering. Steering is key to ensuring that application developers reduce their reliance on the Gatekeeper App Store and to better educate consumers about discounts," said Margaret Vestag, Executive Vice President of the European Commission and member of the Market Competition Committee
European Commission Internal Market Commissioner Thierry Brighton said, "Today we have taken further measures to ensure Apple complies with the rules of the bill. We will also initiate new lawsuits regarding the new provisions of the iOS system. Without compromising Apple's defense rights, we are determined to use a clear and effective DMA toolbox to open up real opportunities for innovators and consumers."
As the ruling of the European Commission is only a preliminary investigation result, Apple can exercise its right to defense in writing before the final ruling is announced on March 25th next year. If Apple still fails to comply with EU regulations by then, it will face a fine of up to 10% of global total revenue, and if it repeatedly violates regulations, this ratio will be raised to a maximum of 20%.
An Apple spokesperson said, "We believe our plan complies with legal requirements, and according to our new terms, it is estimated that over 99% of developers will pay Apple the same or less. As we have always done, we will continue to maintain communication with the European Commission."
In fact, this is not the first time Apple has been targeted by the European Union.
As early as March 2019, streaming music platform Spotify filed a complaint with the European Commission on the grounds that Apple had abused its control over its app store.
Spotify believes that although consumers can download the app for free through the Apple App Store, Apple has no right to demand Spotify to pay them a commission of 30% of the revenue generated through in app paid services. Spotify subsequently successfully pushed the European Commission to launch an investigation into Apple in June 2020. In March of this year, the European Commission imposed a fine of 1.84 billion euros on Apple, which Apple has appealed and the case is still awaiting a final ruling.
As the first large technology company to be given priority attention by the European Union, Apple has always had disagreements with the EU's digital regulation.
As early as two weeks ago at the Apple Global Developers Conference, Apple CEO Cook specifically mentioned the European Digital Market Act while showcasing the Apple Intelligence artificial intelligence suite, and stated that the service could not be launched in Europe this year due to "regulatory uncertainty.". Previously, Apple also stated that the European version of the iOS system, which was modified to comply with EU regulations, exposes users to malicious software attacks.
Even in the United States, Apple faces antitrust lawsuits from the US government.
On March 21st, the US Department of Justice officially sued Apple on suspicion of monopolizing the smartphone market. Attorney General Merrick Garland stated that if not challenged, Apple's monopoly position in the smartphone market will further strengthen, and consumers should not pay higher prices because the company violates antitrust laws.
In an 88 page lawsuit, the US Department of Justice listed some cases of Apple's alleged abuse of its market dominance, including restrictions on cross platform application development, suppression of streaming services, lack of support for encryption of cross platform messaging applications, weakening of non Apple smartwatch functionality, and restrictions on third-party digital wallets.
This is also the third time in the past 14 years that the US Department of Justice has sued Apple under antitrust laws. Previously, Apple was sued by the Ministry of Justice for allegedly manipulating e-book prices and collaborating with other technology companies to lower employee salaries.
In Europe, Apple is not the only technology company constrained by the Digital Markets Act.
The bill aims to increase competition in the European digital market by preventing large technology companies from abusing their dominant market position and encouraging new participants to enter the market. The bill includes seven enterprises with special market influence Apple, Alphabet, Meta, Microsoft, Amazon, ByteDance, and Booking in Europe into the so-called "gatekeeper" list. According to regulations, "gatekeeper" companies must open their platforms to promote competition and share data in order to provide consumers with more choices.
Although the bill only officially came into effect on March 7th this year, as early as September last year, the European Commission had already made the draft of the bill public and required "gatekeeper" companies to make corrections before the bill officially came into effect.
Under pressure from the European Union, most technology companies have made historic concessions in the European market. For example, Apple allows EU users to download third-party applications; Meta allows EU users to cancel data sharing between their Instagram and Facebook accounts and other services within the group; Microsoft also allows EU users to disable Bing search and Edge browser on Windows systems.