LONDON: On Monday, European Union regulators issued their first charges under the new digital competition rules, accusing Apple of obstructing app developers from directing users to more affordable options outside its App Store.


The European Commission’s preliminary investigation findings indicate that Apple's restrictions on developers using its App Store have violated the Digital Markets Act (DMA), a comprehensive regulatory framework aimed at preventing tech giants from monopolizing digital markets. This rulebook, effective since March, imposes strict regulations to curb the dominance of tech "gatekeepers" with substantial financial penalties for non-compliance.


Alongside this case, the commission is also probing whether Apple facilitates sufficient ease for iPhone users to switch web browsers, alongside other investigations involving Google and Meta.


Apple is also facing antitrust scrutiny in the United States, where the Justice Department has filed a lawsuit accusing it of monopolizing the smartphone market, suppressing competition, stifling innovation, and maintaining artificially high prices. App developers like Spotify have long criticized Apple's policy of mandating subscription purchases through iOS apps, which allows Apple to take up to a 30% commission.


The DMA mandates that app developers must be allowed to inform customers of cheaper purchasing options and direct them to these alternatives. The commission stated that App Store rules "prevent app developers from freely steering consumers to alternative channels for offers and content."


Apple has the opportunity to respond to these findings before the commission makes a final decision on compliance by March 2025. The company could face fines up to 10% of its global revenue, potentially amounting to billions of euros, or daily penalties.


In addition, the commission has launched a new investigation into Apple’s contractual terms with app developers. This includes a “core technology fee” of 50 euro cents per download for apps installed outside the App Store. The DMA provisions are intended to foster the emergence of alternative app stores, enhancing consumer choice.


The commission expressed concern that Apple’s new fee might discourage many existing free apps from transitioning to alternative platforms. Margrethe Vestager, the European Commissioner for Competition, stated on social media, "We are concerned Apple’s new business model makes it too hard for app developers to operate as alternative marketplaces & reach their end users on iOS."


Apple responded by highlighting recent changes made to comply with the DMA, citing feedback from developers and the European Commission. The company claimed, "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." They also emphasized that developers in the EU now have the ability to direct app users to the web for purchases at a competitive rate.


Apple pledged to continue its dialogue with the commission. Meanwhile, the EU decided to conclude a separate investigation initiated in 2020 into Apple's in-app purchasing system and restrictions, focusing instead on the DMA enforcement, which explicitly defines prohibited practices for Apple.