EU Reportedly Planning to Charge Apple for Violating Digital Markets Act

[Beautyspin]

Or the EU could simply come out and clarify once and for all, in no uncertain terms, just exactly what it is they want Apple to do.

Rules always specify the outcome and leave the process to the company to implement. It is up to the company to ensure the processes chosen will be compliant. It is not just the EU that has a problem with how Apple complies. You can check that all the agencies in the world have a problem with Apple's compliance.

 

[jlc1978]

Which apps specifically are you referring to?

Small businesses pay 15%, and it appears all subs pay 15% after the first year.

30% gets touted as some big ripoff, but only apps generating >1mill/year pay that; and personally I'd love to sell >$1mill of my software product per year and gladly pay someone 30% if they could drive such revenue.

The 15% cut is why I think 3rd party app stores, other than one backed by a large organization, will find it hard to compete with the App Store since that 15% covers everything from payment processing to tax compliance, etc.

Yes, but can Apple take the risk? They will be fined on a daily basis while non-compliant. Assuming a daily revenue of 1 billion, they could be fined around 100 million per day. Assume that the case drags on for more than a year. That will be 36 billion per year at stake for Apple. Do you think Apple will take the risk?

Fines, as with anything, are negotiable and Apple or any company can change their practices while they litigate and if they win revert back. Who nows what they will do but I bet they will push the envelope as much as they can to preserve profit margins.

So, they would risk billions in fines, be ready for zero revenue from the Appstore rather than comply with the rules which might result in possibly some revenue loss? How does that make any business sense.

It's not revenue but profit that counts. If Apple is forced to split off the App Store, it becomes a business decision to sell it outright, make it a wholly owned subsidiary or shutter it. I suspect a wholly owned sub would make sense, much like Claris, but then again since any profit or loss would simply get rolled up it could act in any way it wanted, pay Apple the same as any other store, and presumably be free of gatekeeper requirements. I suspect many would call foul in such a case.

I suspect an outright sale would be unlikely, as Apple would lose control of its customer base and tehre is likely to be concerns about privacy of the information, especially if say Meta bought it.

The EU has 27 member states. That acts as a buffer, I guess, for political maneuvering. When the US is also going the same way, Tit-for-tat will be difficult to expect, I am guessing.

The US federal system ensures that states do not have the ultimate say in what the Federal government does, unlike the EU's system. It would be the Federal government's decision what, if any, action to take; and it need not be against tech. Look at the chicken tax fight, for instance.

I'm not saying the US would do it, but federal supremacy means it isn't up to the states, although they can exert political pressure the decision is not theirs. That is the key difference between the EU and the US political system; once a federal law is enacted all states must follow it and it trumps state law unless a federal court invalidates the law. Also, not everything need be a law, the President has some broad powers to issue issue executive orders, which direct executive officers or clarify and further existing laws.

I have no idea how the DMA will play out, but do not believe it will be the panacea some thing it is.

Nowhere in the DMA is the AppStore required to be available for free.

True, the question is what is a reasonable fee to use Apple's services.

And that’s the issue, there’s no such thing as ”Apples consumers”. They are not the property of Apple, and should be free to access and do business with whoever they want without any interference from Apple.

I agree, which is why I think Apple should adopt the Mac model in response to the DMA - allow sideloading, warn against unsigned apps, and charge for access to the APP Store and signing if a developer wants it. If they don't, they owe Apple zero.

True sideloading, however would open up a whole new set of problems for developers, IMHO.

Apple think they are entitled to users.

No more so than any company does while you are in their store or using their services.

Apple's biggest problem is not compliance, IMHO, but the they built what is arguably the most lucrative app store in the world and some greedy big corporations want Apple to provide the customers on that store for free.

Do you think EPIC or Spotify would be happy if Apple said:

"OK, you can side load without signing and pay nothing, if you want to be on the App Store you'll pay 30% of all subscription revenue or sales from the store? Or pay some smaller percentage if you use a 3rd party payment system?"

They now have the option of forgoing paying Apple, setting up their own store and forgoing access to the App Store user base. I suspect they would not be happy.

In some ways, the DMA may turn out to be case of be careful what you wish for as it may come true.

Edit:Typos and a few clarifications

 

[wbeasley]

Eu don’t need to try. It doesn’t have any laws against monopolies.

Again as typical of you. iOS and android are two entrenched systems covered by economical criteria’s in EU antitrust laws. Game consoles aren’t enough to be considered entrenched and isn’t covered.

Entrenched? It's mot like we arent up to PS5 and XBox xx... theyve been around for decades and are exactly the same monopolistic environments controlled by the hardware guys.

That just doesnt suit you (or the EU) though.

 

[wbeasley]

Rules always specify the outcome and leave the process to the company to impellent. It is up to the company to ensure the processes chosen will be compliant. It is not just the EU that has a problem with how Apple complies. You can check that all the agencies in the world have a problem with Apple's compliance.

That's brilliant!

You should run a HR department...

"We wont tell you what to wear or when to work or how to communicate to any agreed and published standard BUT we will sack you if you dont act how we want".

The world has gone made.
There is no reason the EU couldnt have spelled out exactly what they wanted done.
They chose to make it vague. Simple.
And Apple met those words in the barest possible way to meet them.
Bit like most people do with their tax returns.

Perhaps the governments could make more money by taxing the top end of town who use clever accountants and loopholes to pay less tax on billions of dollars income than regular people. But the top end know their donations buy power.

 

[wbeasley]

Nothing is stopping software developers from selling their product if they don’t like the terms of Apple’s store. They just (in my opinion) shouldn’t get to sell them to Apple’s customers without playing by Apple’s rules. If you want access to a mall’s customers, you abide by the mall’s rules.

Instead, Apple built a mall and the EU is saying “you have to let Spotify in your mall, use your resources, and sell to your mall’s customers, without paying rent” even though there is an open air market (Android) across the street, that actually has more customers, where anyone can sell anything in any way they want.

People here seem to forget NOONE is forcing devs to make apps for iOS devices.
They are perfectly able to make them for Android if they want. Or MacOS or Windows or Linux...

But there is a reason Apple is seen as a good option: Apple users spend more.

Why is that? Might be the demographic (higher device prices might mean more disposable income) or perhaps the trust that Apple created with privacy and vetting apps means users are happy to buy there.

 

[Beautyspin]

Fines, as with anything, are negotiable and Apple or any company can change their practices while they litigate and if they win revert back. Who nows what they will do but I bet they will push the envelope as much as they can to preserve profit margins.

One can take a risk when the fines are in the millions. If Apple is fined 20 billion, how much can it negotiate and stay afloat?

It's not revenue but profit that counts. If Apple is forced to split off the App Store, it becomes a business decision to sell it outright, make it a wholly owned subsidiary or shutter it. I suspect a wholly owned sub would make sense, much like Claris, but then again since any profit or loss would simply get rolled up it could act in any way it wanted, pay Apple the same as any other store, and presumably be free of gatekeeper requirements. I suspect many would call foul in such a case.

Revenue is an important factor.
If Apple is forced to split, both of them will not be under Apple. It has to be a separate business, away from Apple. What is the point in making the Appstore a subsidiary. The DMA specifies that the company will be forced to sell off parts of its business.
"the Commission is also empowered to adopt additional remedies such as obliging a gatekeeper to sell a business or parts of it or banning the gatekeeper from acquisitions of additional services related to the systemic non-compliance."

Digital Markets Act (DMA) | Updates, Compliance, Training

Uncover the critical components of the Digital Markets Act. Access expert-led compliance insights to navigate regulatory requirements effectively. Earn your online certification, providing independent evidence of your quantifiable understanding of the subject matter.

www.eu-digital-markets-act.com

I suspect an outright sale would be unlikely, as Apple would lose control of its customer base and tehre is likely to be concerns about privacy of the information, especially if say Meta bought it.

It will be a last case scenario as Apple will get several chances to comply. However, if they do not comply in spite of the chances provided, then Apple might be forced to sell off the business. Apple has no say in whom to sell off the business based on security. It might have to sell it to the highest bidder.

The US federal system ensures that states do not have the ultimate say in what the Federal government does, unlike the EU's system. It would be the Federal government's decision what, if any, action to take; and it need not be against tech. Look at the chicken tax fight, for instance.

I'm not saying the US would do it, but federal supremacy means it isn't up to the states, although they can exert political pressure the decision is not theirs. That is the key difference between the EU and the US political system; once a federal law is enacted all states must follow it and it trumps state law unless a federal court invalidates the law. Also, not everything need be a law, the President has some broad powers to issue issue executive orders, which direct executive officers or clarify and further existing laws.

Firstly, the case is in the Federal District Court of New Jersey. It will take five to six years to get an outcome. By that time, Apple would have accrued about 100 billion in fines. Tim would be ousted and the board will get someone who will end the case.

I have no idea how the DMA will play out, but do not believe it will be the panacea some thing it is.

The DMA has specific objectives. It is supposed to achieve those outcomes. They will keep tweaking the laws until those outcomes are achieved. They will keep levying fines on Apple until they comply.

 

[AppliedMicro]

These companies like Epic Games and Spotify have done nothing to add value to the ecosystem and are using the EU to parasite off Apple.

That‘s ludicrous. Without the ecosystem of third-party apps, Apple would be nothing. The thing is, of course: One individual developer adds negligible value to the ecosystem. But all third-party developers together, the „sum of the parts“ so to speak, adds tremendous value to the ecosystem. And Apple are masters at exploiting that value - and playing off against each others the developers.

Oh, so now the standard is duopoly, not monopoly. Why not triopoly?

There’s just one monopolist store for each OS/platform. Customers commit to a platform by their purchase and use of a device. And their terms and fees are very similar. It’s not as if Google Play competed with the iOS App Store.

 

[AppliedMicro]

If a government goes out of their way to implement a host of new regulations that apply to major platforms, and platforms have to rethink their business operations as a result, it would only be logical that said government would work with those platforms to ensure their overhauls comply with the new regs. It would be odd if said government rigorously enforced these new regs without advising those platforms how to comply. Which is exactly what a pre-approval process would look like.

That’s what they’re doing.
That‘s surely also the reason why Apple makes concessions in small, incremental baby steps.
Such as allowing installation from third-party websites, instead of just alternate „store“ apps.

Which is exactly what a pre-approval process would look like.
Apple: “We read your regs, and we want to do xyz in response to them. Are you cool with that?”
EU: “Sure. That’s allowed.” (Or not).

No - wait a second here.

The EU doesn’t claim to know everything and be able to provide instant answers. After all, this is a piece of competition law - whose efficacy depends on third parties‘ and (prospective) competitors‘ market behaviour. Apple cooking up minimal changes to maintain present market conditions and the EU having to rubberstamp them immediately is not how this works.

The EU does and (in the course of a market investigation according to the DMA) has to inform platform operators by recommending changes/remedies.

 

[surferfb]

People here seem to forget NOONE is forcing devs to make apps for iOS devices.
They are perfectly able to make them for Android if they want. Or MacOS or Windows or Linux...

But there is a reason Apple is seen as a good option: Apple users spend more.

Why is that? Might be the demographic (higher device prices might mean more disposable income) or perhaps the trust that Apple created with privacy and vetting apps means users are happy to buy there.

EXACTLY. Everyone defending the EU keeps acting like developers can’t sell software if they don’t sell through an alternate App Store or via sideloading. When, in fact, one of the two major platforms, the one with a majority of users in the EU, allows alternate app stores and sideloading.

These developers WANT access to Apple’s customers without paying Apple or playing by Apple’s rules (particularly around privacy).

To use my cookie analogy again, I have two options to buy cookies: at a store that checks to make sure there isn’t rat poison in the cookies or anywhere else. I choose the store that checks for poison BECAUSE they check. The EU defenders in here would tell the store they have to allow cookies that haven’t been checked to be sold in their store, to their customers, using their resources, without telling the customers they haven’t been checked for poison, so the cookie makers can take advantage of the fact that the customers feel safe buying in the store.

 

[jlc1978]

One can take a risk when the fines are in the millions. If Apple is fined 20 billion, how much can it negotiate and stay afloat?

Look how long the EU/Ireland?Apple has dragged on with $13 Billion.

It will be a last case scenario as Apple will get several chances to comply. However, if they do not comply in spite of the chances provided, then Apple might be forced to sell off the business. Apple has no say in whom to sell off the business based on security. It might have to sell it to the highest bidder.

Nothing in the DMA prevents Apple from exiting a business either, they could, rather than be forced to sell, choose to close the App Store. If they are going to lose it anyway, unless they get a good enough price that may be a better option. Actually, closing it might be the best way to achieve the DMA's goals since it would force developers to find new stores, thus increasing the competitive nature of the market place as stores vie for developers and developers seek ways to stay connected with their customer base. Now they no longe have to compete with the 800 lb gorilla.

My point was that if Apple did sell it, any company with the money to be able to buy it is likely to run into the same issues Apple does.

Forcing the sale to a higher bidder, is, IMHO, a Pandora's box best left closed.

Firstly, the case is in the Federal District Court of New Jersey. It will take five to six years to get an outcome. By that time, Apple would have accrued about 100 billion in fines. Tim would be ousted and the board will get someone who will end the case.

You missed my point about federal vs confederation political systems. As a federal system, the US can react quite quickly if they want since the do not need state approval, vs a confederation where each state has a say in actions and can hold them up if they want to.

As for 100 billion, Apple at one point had over 200 billion in cash reserves alone.

Personally, while the fine potentials sound large, it would be interesting to see how those fines will be enforced; if only for the political ramifications. I suspect the EU would be as upset about the US fining an EU company 100 billion as vice versa.

The DMA has specific objectives. It is supposed to achieve those outcomes. They will keep tweaking the laws until those outcomes are achieved. They will keep levying fines on Apple until they comply.

The issue becomes what is compliance. A company does X. The EU doesn't like it so the do Y. At some point, there needs to be a regulatory mechanism to get approval to remove uncertainty and the threat of fines. Uncertainly and vague outcomes are problematic, IMHO, from a regulatory sense.

And while Apple would not leave the EU, some companies, do to the GDPR, block website access from the EU and or have all those annoying popups to comply.; which gets to my point about collateral damage.

 

[cdarlington1]

Apple were always gonna get paid regardless. One way or another they'll get their fees.

 

[gnipgnop]

That‘s ludicrous. Without the ecosystem of third-party apps, Apple would be nothing.

App developers don't develop apps for iOS/iPhone because they're altruistic. It's because iOS/iPhone are commercially successful and have a large base of customers that spend money on apps. It's like PC gaming. The reason most games are released on Windows and not on Mac is because the customer base for games on Windows dwarfs the Mac. That's where the money is. They're not thinking "I need to enhance competition and make sure I launch the game on both platforms".

 

[gnipgnop]

The DMA has specific objectives. It is supposed to achieve those outcomes. They will keep tweaking the laws until those outcomes are achieved. They will keep levying fines on Apple until they comply.

The DMA has a general objective: increase competition. The problem is that their concept of competition is to force every mobile OS to be like Windows. It's a flawed concept. The iOS/Android duopoly is probably MORE competitive than the Windows/Mac duopoly.

 

[redheeler]

Small businesses pay 15%, and it appears all subs pay 15% after the first year.

30% gets touted as some big ripoff, but only apps generating >1mill/year pay that; and personally I'd love to sell >$1mill of my software product per year and gladly pay someone 30% if they could drive such revenue.

The 15% cut is why I think 3rd party app stores, other than one backed by a large organization, will find it hard to compete with the App Store since that 15% covers everything from payment processing to tax compliance, etc.

Apple has gone to great lengths to hide how much more people are paying for certain things thanks to these fees. I’m not sure if it’s even possible to offer lower rates to repeat subscribers after a year using Apple’s tools. Is it?

 

[jlc1978]

Apple has gone to great lengths to hide how much more people are paying for certain things thanks to these fees. I’m not sure if it’s even possible to offer lower rates to repeat subscribers after a year using Apple’s tools. Is it?

Good point. If not, Apple should add that feature in for consumer benefit; not that anyone will actually lower the subscription fee.

 

[gnipgnop]

Apple has gone to great lengths to hide how much more people are paying for certain things thanks to these fees. I’m not sure if it’s even possible to offer lower rates to repeat subscribers after a year using Apple’s tools. Is it?

Apple reduced the subscription commissions in 2016. First year = 30%. Additional years after that = 15%.

 

[jlc1978]

App developers don't develop apps for iOS/iPhone because they're altruistic. It's because iOS/iPhone are commercially successful and have a large base of customers that spend money on apps.

It is a symbiotic relationship where both benefit from the other; which is why I think some of the fallout from the DMA will potentially hurt small developers while benefiting the big ones, depending on how this all lays out.

Look at the CTF, which has generated a lot of hand wringing, despite it won't impact small developers at all:

Apple provides conditions where many developers do not pay the CTF. Developers whose apps do not surpass one million first annual installs per year and nonprofits, educational institutions, and government entities with an Apple Developer Program fee waiver do not pay the CTF. The CTF is also not required for developers with a no revenue business that offer free apps without monetization. Additionally, small developers (earning less than €10 million in global business revenue) are provided with a 3-year free on-ramp to the CTF and won't pay the CTF for first annual installs that exceed the threshold within a 3-year period.

I suspect many small developers would like their sales to be at the point where the CTF kicks in.

 

[gnipgnop]

It is a symbiotic relationship where both benefit from the other; which is why I think some of the fallout from the DMA will potentially hurt small developers while benefiting the big ones, depending on how this all lays out.

That's the main problem with the EU's approach: they say they want more competition but the DMA was primarily a response to lobbying from billion dollar developers like Spotify and Tinder and trillion dollar developers like Microsoft.

 

[ric22]

Fantastic news

It's time to start with some ramifications for the continual blatant disregard for the spirit of the EU regulations and their intent

Apple apparently thinks they can just make a mockery of regulations
It's time to remind them who's in charge in a jurisdiction (not them)

Agreed. They tried to circumvent the spirit of the law, and deserve fines. I love Apple products, but dislike this (along with their fake environmental messaging, which is equally as disingenuous). It is, however, embarrassing if the EU left any loopholes for Apple to sneak through.

 

[ric22]

That's the main problem with the EU's approach: they say they want more competition but the DMA was primarily a response to lobbying from billion dollar developers like Spotify and Tinder and trillion dollar developers like Microsoft.

No, it wasn't.

 

[Abazigal]

Regardless, I am going to trust that Apple knows what they are doing, and it will work out for them in the end (ie: they manage to meet the demands of the DMA with minimal concessions and impact to the underlying security of iOS and Apple’s bottom line).

 

[JimmyHook]

Yes. That would be logical. The DoJ is relying on antiquated laws, trying to apply them in our modern era. If a government goes out of their way to implement a host of new regulations that apply to major platforms, and platforms have to rethink their business operations as a result, it would only be logical that said government would work with those platforms to ensure their overhauls comply with the new regs. It would be odd if said government rigorously enforced these new regs without advising those platforms how to comply. Which is exactly what a pre-approval process would look like.

Apple: “We read your regs, and we want to do xyz in response to them. Are you cool with that?”

EU: “Sure. That’s allowed.” (Or not).

That’s what they’re doing.
That‘s surely also the reason why Apple makes concessions in small, incremental baby steps.
Such as allowing installation from third-party websites, instead of just alternate „store“ apps.


No - wait a second here.

The EU doesn’t claim to know everything and be able to provide instant answers. After all, this is a piece of competition law - whose efficacy depends on third parties‘ and (prospective) competitors‘ market behaviour. Apple cooking up minimal changes to maintain present market conditions and the EU having to rubberstamp them immediately is not how this works.

The EU does and (in the course of a market investigation according to the DMA) has to inform platform operators by recommending changes/remedies.

Lololol!

So, “that’s what they are doing.” Then, “No”???

So they aren’t telling companies what is legal and what isn’t ahead of time… that was my whole point. Government-sponsored gaslighting. Great system… lol.

Apple announced the CTF months ahead of time, and the EU stayed silent. They waited until it was implemented to say, “We may charge you with breaking the law.” That isn’t good governance, that’s gaslighting.

 

[AppliedMicro]

However, by your interpretation, the CTF shouldn't be allowed because it discourages developers from venturing outside the App Store

It shouldn’t be allowed without Apple passing it through to consumers on their own store.

As it stands, there’s one store (and all of its apps) that will be exempt from the Core Technology Fee: Apple’s App Store.
Which makes it unviable for third parties to offer that extremely popular and widespread business model of free-to-download apps. That is anticompetitive self-preferencing.

“Pricing or other general access conditions should be considered unfair if they lead to an imbalance of rights and obligations imposed on business users or confer an advantage on the gatekeeper which is disproportionate to the service provided by the gatekeeper to business users or lead to a disadvantage for business users in providing the same or similar services as the gatekeeper. The following benchmarks can serve as a yardstick to determine the fairness of general access conditions: prices charged or conditions imposed for the same or similar services by other providers of software application stores; prices charged or conditions imposed by the provider of the software application store for different related or similar services or to different types of end users; prices charged or conditions imposed by the provider of the software application store for the same service in different geographic regions; prices charged or conditions imposed by the provider of the software application store for the same service the gatekeeper provides to itself.”

Unless Apple’s App Store business is split off, Apple - evil and maliciously as they are in their “compliance” - would of course happily besr these costs internally to suppress any competitio.

Solution: force Apple to “pass on/through” that fee to end users.
And why should they not, given it’s supposedly a “Core Fee” - their own store can’t be exempt.

In an earlier response, you also asserted that Apple should have no business billing developers whose apps are sold outside of the App Store. In other words, they should be allowed to keep 100% of revenue.

Does this then not contradict the DMA? Like the EU doesn't expressly prohibit Apple from trying to charge developers,

Again, no issue if Apple charge “themselves” - in this case a fixed add-on price to in-app purchasing that will be the same for other transaction/payment options.

 

[JimmyHook]

Just because there aren't resources and guides listed publicly on the EC website doesn't mean there's no mechanism. In all likelihood, there is a pool of staff in Brussels to advise companies on this matter.

No. Apple announced the CTF months in advance, and the EU stayed silent. That isn’t good governance, or being a good partner to companies trying to do business in their market. That’s cheap and pathetic.

 

[JimmyHook]

And EU knows what they’re doing, you simply have an ideological difference that doesn’t square with how EU thinks about markets and economics.

EU have a very flawed approach if you think they are trying to meet the same goals as you value.

European Union​

The Treaty on European Union set the following goals in Article 3(3):



Ordoliberals are also known for pursuing a minimum configuration of vital resources.

EU follows a mix of the Ordoliberal theory that the state must create a proper legal environment for the economy and maintain a healthy level of competition through measures that adhere to market principles.
This is the foundation of its legitimacy. The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) power will emerge, which will not only subvert the advantages offered by the market economy, but also possibly undermine good government, since strong economic power can be transformed into political power.

And the The social market economy also called Rhine capitalism, Rhine-Alpine capitalism, the Rhenish model, and social capitalism.

Social market economies aims to combine free initiative and social welfare on the basis of a competitive economy.

The social market economy is opposed to laissez-faire policies and to socialist economic systems

and combines private enterprise with regulation and state intervention to establish fair competition, maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, social welfare and public services.

Although the social market economy model evolved from ordoliberalism, this concept was not identical with the conception of the Freiburg School.

The main elements of the social market economy in EU are the following.

• The social market contains central elements of a free market economy such as private property, free foreign trade, exchange of goods and free formation of prices.
• In contrast to the situation in a free market economy, the state is not passive and actively implements regulative measures

That the thing EU aren’t disingenuous, they just aren’t laissez-faire.

Ordoliberals thought that liberalism (the freedom of individuals to compete in markets) and laissez-faire (the freedom of markets from government intervention) should be separated. Walter Eucken, the founding father and one of the most influential representatives of the Freiburg School, condemned classical laissez-faire liberalism for its ‘naturalistic naivety.’ Eucken states that the market and competition can only exist if economic order is created by a strong state. The power of government should be clearly determined, but in its area in which the state plays a role, the state has to be active and powerful. For ordoliberals, the right kind of government is the solution of the problem.

That may be the underlying theory, however, what they are practicing now is naked protectionism. They’ve openly admitted they should have done more to prop Nokia up. They are upset that the EU isn’t the center of innovation. I get it, politicians want power. But trying to mask it and make these unelected folks out to be heroes is pathetic.

Democracy is the core of a free society. The EU isn’t democratic.