Apple Risks More App Store Fines as EU Antitrust Rift Widens

Apple Inc. risks billions of euros of new fines over its App Store rules as European Union antitrust regulators escalated a growing conflict over rules that strike at the heart of the iPhone maker’s business model.

Bloomberg
First Published24 Jun 2024, 11:05 PM IST
Apple Risks More App Store Fines as EU Antitrust Rift Widens
Apple Risks More App Store Fines as EU Antitrust Rift Widens

(Bloomberg) -- Apple Inc. risks billions of euros of new fines over its App Store rules as European Union antitrust regulators escalated a growing conflict over rules that strike at the heart of the iPhone maker’s business model.

The European Commission said the US company must allow app developers to steer users to cheaper deals and offers outside of the App Store, in order to comply with the bloc’s landmark Digital Markets Act, which lays out a raft of dos and don’ts for some of the world’s largest technology platforms.

At the same time, the commission said that it had opened a fresh investigation into Apple’s new App Store fees for developers in the EU, to examine whether they are in line with the DMA. Failure to comply with the law could come with fines for the company — as much as 10% of global annual revenue.  

“I think this is a bigger leap” for Apple to adapt to the new rules “than it is for others,” Margrethe Vestager, the EU’s antitrust commissioner told reporters in Amsterdam on Monday. “For Apple in particular, since the system is very much integrated with the hardware, the software, the operating system, the App Store, you need to open for competitors.”

Monday’s announcement  — while still a preliminary step — is the commission’s first formal enforcement action under the law. It marks the latest round of a dispute between the EU’s Vestager and one of the world’s most profitable companies. 

Why Regulators Have iPhone, Android in Their Sights: QuickTake

Not only was Apple on the receiving end of a €1.8 billion ($1.9 billion) EU penalty for stifling music app rivals earlier this year, but Vestager also earlier ordered Apple to repay €13 billion in allegedly unfair tax breaks from Ireland, as part of a case that it being fought over in the EU courts. Soon after that order, Apple Chief Executive Officer Tim Cook called the commission’s case “political crap.”

The commission, the EU’s antitrust arm, is due to come to a final decision in the DMA case by the end of March 2025. 

That move could unleash another legal battle between Apple and the EU through the bloc’s courts — already on the cards after Cupertino, California-based Apple questioned whether EU regulators were right in the first place to designate some of its services under the new law. 

“We are confident our plan complies with the law, and estimate more than 99% of developers would pay the same or less in fees to Apple under the new business terms we created,” Apple said in a statement in response to the EU announcement.

Apple shares rose 2% at 11:55 a.m. in New York as the Russell 3000 Index Computer Hardware Subsector advanced.

Despite ramping up its action targeting Apple, the commission said Monday that it was closing another part of its investigation into Apple’s App Store rules — which targeted the firm’s rules on the mandatory use of its own in-app payments system for sales on the platform.

The EU’s focus on how Apple allegedly abuses its dominance on the app store was originally sparked by a 2019 complaint from Spotify Technology SA. The Swedish service claimed it was forced to ramp up the price of its monthly subscriptions to cover costs associated with Apple’s alleged stranglehold on how the app store operates.

Under the DMA, it’s illegal for certain services operated by the likes of Apple, Alphabet Inc.’s Google, Meta Platforms Inc., Microsoft Corp., and Amazon.com Inc. to favor their own services over those of rivals. They are barred from combining personal data across their different services, prohibited from using data they collect from third-party merchants to compete against them, and have to allow users to download apps from rivals platforms. 

Apple blamed the DMA for a separate announcement on Friday to halt the rollout of its artificial intelligence technologies in the 27-nation EU.

The company said that it would block the release of Apple Intelligence, iPhone Mirroring and SharePlay Screen Sharing from users in the EU this year, because the DMA allegedly forces it to downgrade the security of its products and services. 

(Updates with shares in 10th paragraph)

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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First Published:24 Jun 2024, 11:05 PM IST
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