EU Accuses Apple's App Store Steering Rules of Violating DMA and Opens Investigation into Developer Fees

[AppliedMicro]

So compete. Instead of making ludicrous overreaching laws, invest in EU companies to build a competing ecosystem incl. hardware and software and see how much people like it

In order to compete, the monopoly/duopoly has to be opened up.

Developers and consumers will gravitate towards one or two operating systems.
And without an established ecosystem of third-party, no competing platform will emerge through market processes. It’s a chicken-and-egg situation, similar as on Microsoft Windows and macOS.

Instead of making ludicrous overreaching laws, invest in EU companies to build a competing ecosystem

…and if the EU truly did that and took a bite out of Apple‘s market share, many posters here would probably accuse it of unfair government aid.

 

[Tanax]

I find it interesting that Apple can't figure this out and build a solution that works according to the EU regulations when Android, run by Google, the most consumer hostile company there is, manages to do this. That's something to reflect about.

A lot of people here talking about consumers have a choice and can choose Android but on the other end, Apple also has a choice. They are free to leave EU. If they can't follow the rules, they can leave. We don't care. We don't want a company that alienates its customers and once you're "in", force you to use their stuff and make it a PITA to leave. The only ones that will care is Google who get all of that income instead and they'll laugh all the way to the bank.

At this point, Apple's behavior is just pathetic. As if a company of that size can't follow these rules. They would gain more by allowing more freedom for developers. Developers are literally what's making or breaking a platform. If they anger the developers and the developers leave, Apple would be nothing and no one would buy their products except a few hard core fans.

It's **** like this that makes customers consider switching to Android, and I doubt that was the outcome Apple had in mind.

 

[tobyx]

…and if the EU truly did that and took a bite out of Apple‘s market share, many posters here would probably accuse it of unfair government aid.

Nah. No one here would care, because competition would improve iOS as well.

Then again, the chances of the EU even managing something like this as astronomically low.

 

[chmania]

Let’s be honest: Apple sells many products and services in Europe at prices that are 25% higher than in the US...

In the US, the price on Apple's U.S. online store website is before taxes, but in the EU, the price includes the taxes.

Apple has been dictates for decades how its products are used, creating and maintaining a monopoly by forcing users to use their products and services.

And, this is what the whole thing is about for the users in the EU, let the developer earn his/her money without paying the Apple tax. You bought the device, so how you use it, or what you install in it is your decision and your problem. The device must be useable to the buyer/consumer, not to the company who made it, or sold it -- the consumer is placed before the manufacturer in the EU. The EU is a union of 27 different sovereign countries.

 

[AppliedMicro]

If a developer wants Apple to sign the app, you pay Apple's fees. if not, the user gets. warning and can chose to whether to load the app and what permissions to give it.

If a developer wants to be on the App Store, then they pay its fees. If not, sell on an alternative store.

If a developer wants access to Apple's developer tools and early betas, pay to join.

I could fully agree on that. 👍🏻

It just needs to be assured that Apple doesn‘t (again) leverage those fees to have their own Store or Services unfair advantages.

 

[AppliedMicro]

Then again, the chances of the EU even managing something like this as astronomically low.

They are. Governments aren’t good at managing consumer tech products efficiently and successfully.

If Microsoft and Blackberry and HP couldn’t compete, neither will the EU itself.
Therefore they‘ve gone the more promising road of regulating the current (biggest) market participants.

 

[jlc1978]

This will hold once Apple charges CTF for apps being distributed in the Apple's Appstore as well or remove it for both. No self-preferencing.

They could, and offset it by any revenue from the App Store. If a developer sells an app only on the store for 2 Euros. Once the CTF kicks in, the 15% they paid for all the early installs would offset what it costs them. Once they hit the ales threshold to pay 30% commission, it will more than cover the CTF. I'm guessing a small developer would love to hit the CTF threshold; I know I would if I were developing for iOS.

The could even charge it for their own apps from a P&L perspective but in the end that is just a transfer payment as it all gets rolled up into the overall income statement.

 

[tobyx]

You bought the device, so how you use it, or what you install in it is your decision and your problem. The device must be useable to the buyer/consumer, not to the company who made it, or sold it -- the consumer is placed before the manufacturer in the EU.

The consumer is placed last in all of the ongoing proceedings.

It has nothing to do with pro-consumer laws.

The DMA will generate a market that is more confusing for the user, and it is highly doubtful that any of the benefits actually reach users. Companies in the EU—if it works—would benefit.

Creating a device that is inherently less secure by opening it up like a regular Windows PC also hurts Apple’s brand. I would highly discourage anyone who ever asked me for help with their devices to ever allow sideloading on their iPhone or iPad.

(I agree that some of what Apple is doing is security theater, and the App Store is not preventing malware. There should be a better sandboxing system in place. But then again, not everything is this clear cut. There are good aspects in the DMA, it’s just way too overreaching in its current form.)

 

[Amazing Iceman]

The EU is going too far with this.
People who don’t like Apple should stay with Android. Apple is like a private club, unless private clubs are illegal in the EU.

 

[jlc1978]

Why make it so complex though? Why not just scrap it altogether? Doesn’t the dev already pay a subscription for access to SDKs and will already have bought a Mac. Isn’t this enough if they’re not using avenues of distribution?

They could, and tier the developer fees so that the more a company makes the more they pay in fees, similar to Epic's for its engine.

Which ones? The one on staff at Apple or on staff in the EU?

Both. One thing for certain is the lawyers get paid in the end. Confusion in laws is good for lawyers, accountants and consultants because there is profit in confusion.

(I agree that some of what Apple is doing is security theater, and the App Store is not preventing malware. There should be a better sandboxing system in place.

It would be a big win if Apple came out with better sandboxing and user control over access to data and user information.

But then again, not everything is this clear cut. There are good aspects in the DMA, it’s just way too overreaching in its current form.)

There are, and it will take a while for the rules to be sorted. Small developers should be concerned they may lose out in the end with higher fees upfront, a fragmented market and possibly more piracy, and some companies should worry they may be in the next gatekeeper category.

 

[siddavis]

Let’s be honest: Apple sells many products and services in Europe at prices that are 25% higher than in the US and much of the rest of the world.
If you want to back up data, iCloud is the only option.
If you want to download an app, the App Store was the only option until recently.
Apple has been dictates for decades how its products are used, creating and maintaining a monopoly by forcing users to use their products and services.
I’m not saying this needs to stop, but either offer prices comparable to the competition or continue charging high prices like now but open up to competition.

Define monopoly

 

[youdontsay]

Just chiming in regarding the whole VAT debate. iPhone 15 Pro price in some EU country is 1229€. If you remove 20% VAT it's 1024,17€. If you bring this to US currency it's $1098.83 so $100 more than the $999 advertised on the US store. VAT alone isn't responsible for price difference.

 

[chmania]

The consumer is placed last in all of the ongoing proceedings.

It has nothing to do with pro-consumer laws.

The DMA will generate a market that is more confusing for the user, and it is highly doubtful that any of the benefits actually reach users. Companies in the EU—if it works—would benefit.

They are pro-consumer laws. The consumer in the EU knows what s/he buys, what rights s/he has. The seller is obligated to give 2 or more years of product guarantee. (In this case Apple is the seller.)

I would highly discourage anyone who ever asked me for help with their devices to ever allow sideloading on their iPhone or iPad.

I don't. People, who want to "side load" apps know what they are doing, and it is their device, bought with their own money. No seller/manufacturer can take away that right.

 

[tobyx]

They are pro-consumer laws. The consumer in the EU knows what s/he buys, what rights s/he has. The seller is obligated to give 2 or more years of product guarantee. (In this case Apple is the seller.)

What does the DMA have to do with extended warranty laws?

 

[Sophisticatednut]

Probably planned by Apple all along. They will have known the CTF wouldn't fly, but it will take several years of legal wrangling to sort out, during which time they will rake in the cash. The longer they prolong the inevitable, the more money they will make.

At the end of the day I imagine the vast majority of customers will still just use the App Store by default. What would be interesting is if the App store launches on Android and the Play store launches on iOS...

I fear the EU is going to bend their decisions and fines around the spirit of the law and not the letter of the law.

Well first of This has been how Eu law have worked for 70 years or so, and a very good paper @Beautyspin quoted in the comments.

Not in the EU.

https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1526&context=ilj

"The object of all interpretation lies in the true intention of the lawmakers, whether they be framers of a constitution or a treaty, legislators, or drafters of secondary legislation. Its pursuit at The Court of Justice of the European Communities demands of the common lawyer a readiness to set sail from the secure anchorage and protected haven of “plain words” and to explore the wider seas of purpose and context."

And the issue of trying to drag it through court for years and years is exactly
The kind of strategy the DMA was written to deal with.

Unlike traditional ex-post antitrust enforcement that punishes anti-competitive practices after they occur, the ex-ante DMA rules aim to prevent unfair business practices by Big Tech firms before any abuse of their gatekeeper position takes place.

Apple would be smart to pause all 3rd party app sales to the EU until the threat to their business is eliminated. The concept that they have the right to impose a fine of 10% of their global sales. Here is why Apple may be forced to pull out of the EU over this extreme uncertainty eventually. If not, they will remove many of the features like most new apps and services, maybe just providing updated.

To determine the effect of an EU fine of 10% of global sales on Apple's profits, we need to follow these steps:

1. **Calculate the fine as 10% of global sales.**
2. **Calculate the total profit with a 36% profit margin.**
3. **Determine the new profit after accounting for the fine.**

Let’s break this down with a hypothetical example, assuming Apple’s global sales are \( X \).

1. **Fine Calculation:**
- Fine = 10% of global sales = \( 0.10 \times X \).

2. **Profit Calculation:**
- Profit margin = 36%, so total profit before the fine = \( 0.36 \times X \).

3. **New Profit Calculation:**
- New profit = Total profit before the fine - Fine
- New profit = \( (0.36 \times X) - (0.10 \times X) \)
- New profit = \( 0.36X - 0.10X \)
- New profit = \( 0.26X \).

Thus, the profit after accounting for the fine would be 26% of global sales. The fine would reduce Apple's profit by \( 0.10X \), which corresponds to a reduction in profit from 36% to 26% of global sales. This represents a significant decrease in the profit margin by 10 percentage points or approximately 27.78% of the original profit margin

That means the Fine is more than they make in the EU.

The fine in question serves as a ceiling to prevent it from becoming excessively high. Fines in the EU are calculated based on specific criteria and objective measures. Here’s why higher fines might be imposed in the EU and how they are regulated:

Reasons for Higher Fines in the EU

Spoiler: Spoiler for log text for easier reading.

1. Proportionality to Revenue:
• Many EU regulations, such as antitrust laws and the GDPR, calculate fines as a percentage of a company’s global annual revenue. This ensures that penalties are meaningful and act as effective deterrents by being proportional to the company’s size and economic impact.
2. Maximum Limits:
• These regulations set maximum limits to prevent fines from becoming excessively punitive. For example, antitrust fines can be up to 10% of global turnover, and GDPR fines can be up to 4%. These ceilings ensure that fines are substantial but not crippling.
3. Judicial and Administrative Oversight:
• The imposition and calculation of fines involve detailed assessments and are subject to judicial review. Companies can challenge fines in court, where they can be adjusted if found to be disproportionate. Regulatory bodies follow strict guidelines to ensure fines are fair and justified based on each case’s specifics.

Practical Impact

• Deterrent Effect: Tying fines to revenue ensures penalties are significant enough to deter violations. Larger companies face higher fines, making it less financially advantageous to flout regulations.
• Fairness and Proportionality: This approach balances deterrence with proportionality, ensuring fines are commensurate with the company’s financial capacity and the violation’s severity.

Different Legal and Regulatory Frameworks:

• The EU has stringent regulatory frameworks emphasizing market competition and consumer rights protection. Institutions like the European Commission have significant enforcement powers to ensure fair competition and data protection.

Market Size and Economic Impact:

• The EU is one of the world’s largest single markets. Fines are proportional to the size and economic impact of companies operating within this market, ensuring compliance and deterring illegal activities by multinational corporations.

Policy Objectives:

• The EU prioritizes consumer protection, data privacy, and market fairness. High fines reflect these priorities and the EU’s commitment to strict regulatory enforcement.

Examples of High Fines:

• In 2018, Google was fined €4.34 billion for antitrust violations related to its Android operating system.
• In 2020, Amazon was fined €746 million under GDPR for data protection violations.

Conclusion:
EU fines are designed to be proportional to a company’s revenue and capped to prevent excessive penalties. This ensures that fines are effective in promoting compliance while being fair and justifiable. The EU’s regulatory framework and policy priorities result in higher fines compared to those typically seen in the U.S., reflecting a commitment to stringent enforcement of market and consumer protection laws.

Nono, I agree with that completely. Competition makes products better.

So compete. Instead of making ludicrous overreaching laws, invest in EU companies to build a competing ecosystem incl. hardware and software and see how much people like it. That would be the way to go.

That’s the issue, it’s not about EU companies. It’s about competition as a concept. Investing in EU companies to compete against Apple is seen as an overreach by the government and not legal.

Do you think France or Poland would like Germany to put government investment in a company to outcompete their own businesses? Or do you think Germany would be happy if Sweden unfairly benefited their company on the expense of German ones?

 

[CarAnalogy]

The lawyers will be winners out of this.

The EU is certainly overreaching, they need the fines to plug the big black hole left by the UK after Brexit.

Good luck Apple. But you won’t need it… poor drafting of a law is an EU problem not an Apple problem.

Courts deal with the letter of the law not the spirit of it. They deal with the facts not the emotion.

The law is very vague and the only way to know if one is in compliance is to guess and test.

Just like App Store approval. At least the EU doesn’t constantly move the goal posts.

Apple completely fails to see the irony here. The idea was to get them to stop abusing total control of all software distribution. But they absolutely will never do that on their own.

 

[MilaM]

Just chiming in regarding the whole VAT debate. iPhone 15 Pro price in some EU country is 1229€. If you remove 20% VAT it's 1024,17€. If you bring this to US currency it's $1098.83 so $100 more than the $999 advertised on the US store. VAT alone isn't responsible for price difference.

Some of the price difference can be explained with additional "taxes". Mostly royalties that go to right owners of copyrights and artists. They are levied on any device that is able to reproduce music, video or text.

The rest can usually be explained by fluctuating exchange rates. For some reason, Apple adjust prices for international markets very infrequently. Could have to do something with how they hedge against exchange rate risk, who knows.

My point is, sometimes the products have the same price, sometimes they are more expensive. Right now, because of a weak Euro, prices are quite high.

 

[.wojtek]

Where can I vote against all this bullshet. We don’t want it we don’t need it.

Please don't arrogantly assume that you are so wise and speak for everyone… I for one I'm all in favour of the regulation to cut Apple dumb practices…

 

[chmania]

What does the DMA have to do with extended warranty laws?

The DMA are pro-consumer law, just the same as legal guarantee period. It is not "extended," but the standard law of the EU countries, and that is also pro-consumer. Consumer right comes before the seller/manufacturer!

 

[jlc1978]

Just chiming in regarding the whole VAT debate. iPhone 15 Pro price in some EU country is 1229€. If you remove 20% VAT it's 1024,17€. If you bring this to US currency it's $1098.83 so $100 more than the $999 advertised on the US store. VAT alone isn't responsible for price difference.

It's no different than the bottle of wine that costs 2 Euros incl VAT, in Lisbon costs $8 pre sales tax in the US, and shipping costs alone aren't accounting for the difference; rather, it's also a question of how much will the consumer pay. If they will pay more, charge more. It's simple economics to generate more profit.

I don't. People, who want to "side load" apps know what they are doing, and it is their device, bought with their own money. No seller/manufacturer can take away that right.

It would be nice if the EU extended the philosophy to cars as well. Why do I have to jump thorough hoops to activate features on my car that did not come activated from the factory but could be by simply recoding the build order. I realistically they may want you to actually pay for those features or not make them avaiable in some markets, but if it's in the software I bought the car so I should be able to access the software.

 

[MacFan23]

I find it interesting that Apple can't figure this out and build a solution that works according to the EU regulations when Android, run by Google, the most consumer hostile company there is, manages to do this. That's something to reflect about.

A lot of people here talking about consumers have a choice and can choose Android but on the other end, Apple also has a choice. They are free to leave EU. If they can't follow the rules, they can leave. We don't care. We don't want a company that alienates its customers and once you're "in", force you to use their stuff and make it a PITA to leave. The only ones that will care is Google who get all of that income instead and they'll laugh all the way to the bank.

At this point, Apple's behavior is just pathetic. As if a company of that size can't follow these rules. They would gain more by allowing more freedom for developers. Developers are literally what's making or breaking a platform. If they anger the developers and the developers leave, Apple would be nothing and no one would buy their products except a few hard core fans.

It's **** like this that makes customers consider switching to Android, and I doubt that was the outcome Apple had in mind.

The point is, if users don't like Apple's business practises, there are plenty of alternatives. If users can freely switch to Android, what's the problem?

It looks more like companies want to leverage Apple's userbase to maximise profits for themselves and it's actually nothing to do with consumer protection.

 

[tobyx]

The point is, if users don't like Apple's business practises, there are plenty of alternatives. If users can freely switch to Android, what's the problem?

It looks more like companies want to leverage Apple's userbase to maximise profits for themselves and it's actually nothing to do with consumer protection.

This is what it actually boils down to.

The fine line that has to be walked once someone gains “significant market power."

The EU might be first in crafting such an overreaching and broad law, but I don’t think the US will not do such a thing either. This would render all the “US innovates, EU regulates” arguments here moot.

Apple could’ve prevented most of this by self-regulating better. Microsoft did so. Then again, it’s easy to do when you’re the underdog that lost the mobile race by incompetence years before.

 

[jlc1978]

The DMA are pro-consumer law, just the same as legal guarantee period. It is not "extended," but the standard law of the EU countries, and that is also pro-consumer. Consumer right comes before the seller/manufacturer!

Perhaps, but every purchaser is paying a little extra for that extra warranty period upfront; the manufacturers aren't giving it to the EU consumer for free. Even with the guarantee it doesn't mean you are automatically covered but may have to prove it was a defect, and go back to the seller's location in some cases to get it fixed. It helps the consumer but it is definitely not "any issue will be covered by the manufacturer."

Plus, it only covers items bought in the EU, so if you buy something outside of the EU it's up to the manufacturer to decide if the offer a worldwide warranty or limits it to the selling geography. Even Apple only offers a worldwide warranty on some items and not on others.

 

[tobyx]

Perhaps, but every purchaser is paying a little extra for that extra warranty period upfront; the manufacturers aren't giving it to the EU consumer for free. Even with the guarantee it doesn't mean you are automatically covered but may have to prove it was a defect, and go back to the seller's location in some cases to get it fixed. It helps the consumer but it is definitely not "any issue will be covered by the manufacturer."

Many people don’t realize that it only applies to defects that were present at the time of purchase, for you to give a longer time to actually find the defect. And yes, that is a consumer law.

The DMA is not a consumer law. It affects businesses but it does nothing for consumers, and will at least in the short- and mid-term harm consumers significantly.

 

[thegerman]

I love the EU. Truly one of the greatest achievements of the modern world!