Europe Goes to War with Apple

The European Commission accused Apple of breaching the anti-steering app store rules included in the relatively new Digital Markets Act.

Photo of Apple CEO Tim Cook
Photo by European Union, 2024 via CC BY 4.0

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The EU’s busting out its brand-new big guns for an appropriately big target.

On Monday, the European Commission accused Apple of breaching the relatively new Digital Markets Act (DMA), a raft of legislation aimed at holding large tech companies to an elevated standard of antitrust and consumer protection. It may just result in the deepest regulatory bruise in Apple’s history.

How Do You Like Them Apples

EU edicts have already put a dent in the California company’s business model; by the end of this year, all Apple devices sold in the EU will need to have USB-C compatible charging ports, rather than Apple’s bespoke lightning charger. This was an annoyance for the proprietary-inclined Apple, but far from an existential threat.

App Store scrutiny, however, cuts a little closer to the bone. Charging a commission on in-app purchases, typically between 15% and 30%, has long been a significant profit-driver for Apple — though some developers have complained they are forced to increase prices for users in order to offset the cost. Apple also stipulates that developers cannot tell users to simply go and buy, say, a Spotify subscription on their laptop to get a cheaper deal. The EU has said its “preliminary view” is that such anti-steering tactics are not legal. In fact, the EU Commission in March slapped Apple with a nearly $2 billion fine specifically over anti-steering tactics with music services like Spotify, in no small part because Apple operates direct competitor Apple Music. 

Monday’s DMA accusation broadens the EU’s scope beyond just music streaming, and could mark a new level of threat:

  • Under the DMA, the EU can impose fines of up to 10% of a company’s annual global turnover if it finds a breach has indeed been committed, and that can go up to 20% in cases of “repeated infringements.”
  • In its last fiscal year, Apple brought in $383 billion in total revenue (with total net income of around $97 billion). Suffice to say, a fine running somewhere between $38.3 billion and $76.6 billion would be unwelcome to say the least.

“The case will be an important test of the extent to which [large tech companies] can creatively depart from the level of openness originally envisaged by the DMA’s drafters, meaning this and similar early cases are likely to set a benchmark for compliance and enforcement in the future,” Dr. Greg Taylor, an associate professor and senior research fellow at the Oxford Internet Institute, told The Daily Upside.

App Storekeepers: Apple also faces an upstart rival in the app store business: OpenAI, with which it just formed a partnership, because, you know, Silicon Valley. Six months ago, OpenAI opened an app store called GPT Store. And while the company doesn’t seem to have landed on a monetization strategy, developers told Business Insider about the various avenues they’re considering, including freemium models, ads, and affiliate links. OpenAI might want to watch how the Apple/EU drama pans out before it starts laying down any new laws in the GPT Wild West…