EU to Apple: Nope, Try Again

Apple Set to be First Big Tech Group to Face Charges Under EU Digital Law

Brussels to announce iPhone maker is failing to adhere to new rules designed to open up its app store to competition

The Financial Times Javier Espinoza and Michael Acton

With WWDC over, we return now to the regularly scheduled Apple-bogged-down-in-regulatory-headaches programming:

Brussels is set to charge Apple over allegedly stifling competition on its mobile app store, the first time EU regulators have used new digital rules to target a Big Tech group.

The European Commission has determined that the iPhone maker is not complying with obligations to allow app developers to “steer” users to offers outside its App Store without imposing fees on them, according to three people with close knowledge of its investigation.

The charges would be the first brought against a tech company under the Digital Markets Act, landmark legislation designed to force powerful “online gatekeepers” to open up their businesses to competition in the EU.

Apple can still tweak their remedies to avoid such action, apparently. But it's not entirely clear what the EU is looking for here – shocking, I know – they just don't like what they see from Apple so far, as has been clear for months now. Presumably they'd prefer that Apple would not have any restrictions in place in terms of messaging/branding/etc for how they can point to offerings outside of Apple's App Store mechanisms. But what will they settle for? The road to that compromise is likely to continue down the path of tiny Apple tweaks, I imagine.

At first, I assumed this overall charge was tied to the new fee structure imposed by Apple for transactions made outside the App Store (and it may very well be related). But that's apparently something the EU is looking at separately:

However, the EU is also looking at whether these fee changes properly adhere to its new digital rules. Apple introduced new charges in Europe, including a “core technology fee” of 50 cents on developers with apps that have more than 1mn users for every first installment by a user. Apple will also charge an additional 3 per cent fee to app developers that use its payment processor.

Some developers have argued they could face higher charges as a result of the fee changes. The EU could also announce initial charges over these developer fees, people familiar with the commission’s thinking said.

This one seems more straightforwardly bad for Apple, since they're clearly doing the absolute bare minimum to try to comply with the new rules. 27% is the new 30% – but when you take in account other non-Apple fees, developers can be paying more than what they were through Apple. This is all an issue in the US as well with the ongoing Epic Games litigation.

Anyway, I'm sure Apple will rush to remedy all this. Especially with other probes out there that will undoubtedly find other things that need to be remedied. It's not like Apple has anything else going on...

One more thing: Reuters has a similar report, and also notes Meta is likely to get hit by the EU as well for other DMA issues:

The preliminary finding on Meta focuses on its recently introduced pay or consent model where users pay a subscription fee for an ad-free Facebook and Instagram, the people said.

Update June 18, 2024: CNBC chatted with EU competition chief Margrethe Vestager on the topic:

Apple has ‘very serious’ issues under sweeping EU digital rules, competition chief says

In March, the European Commission, the EU’s executive arm, opened a probe into Apple, under the new Digital Markets Act legislation.

CNBCArjun Kharpal

The investigation featured several concerns about Apple, including whether the tech giant is blocking businesses from telling their users about cheaper options for products or about subscriptions outside of the App Store.

“We have a number of Apple issues, I find them very serious. I was very surprised that we would have such suspicions of Apple being non-compliant,” Vestager told CNBC’s Silvia Amaro.

Apple did not immediately respond to a CNBC request for comment.

″[Apple] are very important because a lot of good business happens through the App Store, happens through payment mechanisms, so of course, even though you know I can say this is not what was expected of such a company, of course we will enforce exactly with the same top priority as with any other business.”

Vestager added that the conclusions of the probe will be revealed “hopefully soon.”

The fact that she was "very surprised" is interesting, because basically no one else was. Apple was clearly – clearly – not just going to roll over and give the EU whatever they want here. Especially because it's not clear what they want here. Regardless, Apple was always going to drag this out as long as possible through either the courts or piecemeal changes – or both.

And it sort of feels like Vestager is trying to rush this latest resolution through because her term is up soon. Of course, I have a hard time seeing the EU being efficient here as they hardly are with regard to anything. And when they try to rush something through, it's often a mess.