Brussels has accused Apple of stifling competition on its App Store, marking the first time EU regulators have brought charges against a Big Tech group under new digital rules, Financial Times reported.
The European Commission has been gearing up for years to unleash the full authority of its new Digital Markets Act against Big Tech. The landmark rules were designed to help start-ups by forcing powerful “online gatekeepers” — most of whom are US companies — to open up their businesses to competition.
In preliminary findings issued on Monday, regulators in Brussels said they were concerned about restrictions Apple is imposing on developers’ ability to “freely steer their customers” by directing them to promotions outside the App Store.
If found guilty, the iPhone maker faces a penalty of up to 10 per cent of its global annual revenue, meaning any fine could run into tens of billions of dollars. The fines can rise to 20 per cent in the event the offense is repeated, the EU said. Apple said it was “confident” in its compliance.
European Commission posted a press release titled: “Commission sends preliminary findings to Apple and opens additional non-compliance investigation against Apple under the Digital Markets Act”
Today, the European Commission has informed 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…
Apple currently has three sets of business terms governing its relationship with app developers, including the App Store’s steering rules. The Commission finds that:
* None of these businesses 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 renumeration. 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.
The Guardian reported Apple has been found to be in breach of sweeping new EU laws designed to allow smaller companies to compete and allows consumers to find cheaper and alternative apps in terms of tech business’s app store.
The European Commission, which also acts as the EU antitrust and technology regulator, said it had sent its preliminary findings to Apple after an investigation in March.
The company has 12 months to comply before it face fines of up to 10% of its global revenues but the EU hopes ongoing dialogue will lead to compliance rather than sanctions.
In my opinion, it sounds like Apple decided to do what it does, regardless of how that will affect their business. What works as a business model in the U.S. is clearly not acceptable by the European Commission.