Dive Brief:

• The European Union on June 24 said Apple appears to be violating the organization’s Digital Markets Act (DMA) and is giving the tech company almost a year to respond before the findings are cemented into a charge.
• “Our preliminary position is that Apple does not fully allow steering,” Margrethe Vestager, the EU’s head of competition policy, said in announcing the findings. As the EU uses the term, steering refers to developers’ ability to direct their customers to channels and content outside of their apps, free of restrictions imposed by Apple’s app store rules.
• The EU launched its investigation into Apple’s practices in March. Since then, Apple says, it has switched gears. “Throughout the past several months, Apple has made a number of changes to comply with the DMA in response to feedback from developers and the European Commission,” the company says. “We are confident our plan complies with the law.”

Dive Insight:

The DMA applies only to what the EU calls gatekeeper companies. These are the half dozen tech giants that other companies build their businesses around: Apple has its app store, for example, and Amazon has its marketplace. Google, Meta, Microsoft and ByteDance, the Chinese company that owns TikTok, are the other gatekeepers. 

The DMA gives the EU flexibility to add other companies, and last month it added Booking as a gatekeeper because of the intermediation services of Booking.com that other companies use. 

In its Apple findings, the EU says the company prevents developers from using their apps to provide pricing information or otherwise communicate with their customers when they’re promoting offers on alternative distribution channels. 

Although Apple allows developers to steer their customers out of the apps using in-app links — what the EU calls link-outs — use of those links come with their own rules, which the EU considers anticompetitive.  

“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,” the EU says. 

Apple also charges a fee each time a customer makes a purchase within a certain time frame after using a link-out. The fee by itself isn’t a violation, but it’s higher than it needs to be. “The fees charged by Apple go beyond what is strictly necessary,” the EU says. 

Apple spokesperson Peter Ajemian says the company disagrees with the EU’s take on the fee. “App users [can leave the apps] to complete purchases at a very competitive rate,” Ajemian told the tech publication The Verge.

Even before the DMA took effect in March, the EU went after Apple for these same restrictions but only as they were applied to Spotify and other music apps. With the DMA not yet in effect, the EU charged them under its antitrust laws and fined the company $1.9 billion. 

Apple has said it will appeal the fine. “The European Commission is issuing this decision just before their new regulation — the Digital Markets Act (DMA) — comes into force,” the company said at the time. “Apple is set to comply with the DMA in days, and our plans include changes to the rules challenged here. What’s clear is that this decision is not grounded in existing competition law. It’s an effort by the Commission to enforce the DMA before the DMA becomes law.” 

In addition to its preliminary finding about Apple’s app developer restrictions, the EU said it’s opening a separate investigation into new contract terms the company has written in response to the DMA. 

Among other things, Apple is making users go through a “multistep journey” to download third-party apps on the iPhone and iPad. It also is charging developers a fee every time a customer downloads one of those third-party apps. The EU wants to see if those and one other change are violating the DMA. If so, another preliminary finding could be issued later. 

Under the DMA, if the preliminary finding leads to a permanent charge, the company could be on the hook for 10% of its annual revenue — 20% if it’s a recurring violation. The company generated $383 billion in net sales for 2023, according to the company’s earnings report.