Apple is imposing unfair restrictions on app developers for its App Store in defiance of a new European Union law aimed at encouraging competition in the technology industry, regulators in Brussels said on Monday.
The allegations further escalated a row between Apple, which says its products are designed in the best interests of customers, and EU regulators, who say the company is unfairly using its size and resources. significant to stifle competition.
Apple is the first company to be accused of violating the Digital Markets Act, a law passed in 2022 that gives European regulators broad authority to force the “biggest internet gatekeepers” to change their business practices.
After launching an investigation in March, EU regulators said Apple was imposing illegal restrictions on companies that make games, music services and other apps. Under the law, also known as the DMA, Apple cannot restrict how companies communicate with customers about sales and offers and other content available outside of the App Store. The company faces a penalty of 10 percent of global revenue, a fine that could go up to 20 percent for repeat violations, regulators said. Apple reported $383 billion in revenue last year.
“Today is a very important day for the effective implementation of the DMA,” said Margrethe Vestager, the European Commission’s executive vice-president in charge of competition policy. She said Apple’s App Store policies make developers more dependent on the company and prevent consumers from being aware of the best deals.
EU regulators said the allegations were preliminary and gave Apple a chance to respond. The final decision will be announced next March.
Apple defended its practices, saying its rules and fees are a fair trade for providing such a large platform for developers to reach consumers. Developers can direct consumers to websites to make purchases outside the App Store, the company said.
“Over the past few months, Apple has made a number of DMA-compliant changes in response to feedback from developers and the European Commission,” Apple said in a statement. “We are confident that our plan complies with the law.”
The fine underscores the risk to the company’s business from increased regulatory scrutiny around the world. In the United States, Apple has been sued by the Department of Justice over allegations that it has an illegal monopoly in the smartphone market. It is also arguing in US federal court that it is entitled to 27 percent of app sales through third-party payment systems, which developers argue violates a 2021 court ruling.
Japan and Britain, which are no longer part of the European Union, have advanced rules to curb Apple’s control over the App Store as well.
The European Union has long been at the center of regulatory efforts to crack down on the world’s biggest tech companies, but authorities in Brussels are going even further. The Digital Markets Act gives officials new powers to intervene without the lengthy process of filing traditional antitrust lawsuits, which can take years to resolve. Amazon, Google and Meta are also under investigation for violations of the law.
Another new law, called the Digital Services Act, gives regulators more power to govern social media platforms and illegal online content. Meta, TikTok and X are under investigation for possible violations.
The growing scrutiny appears to be causing companies to consider which products and services to release across the 27-nation bloc. On Friday, Apple said it will not release a software update to iPhone users in the European Union that includes new artificial intelligence features due to “regulatory uncertainty.” Meta didn’t release its Threads blockchain service until five months after it was available in the United States, citing regulatory concerns.
But the European Union is one of the biggest markets for Apple and other tech firms, giving them little choice but to make changes to comply with the new laws.
In January, Apple announced a list of changes to its App Store policies in an effort to comply with the Digital Marketplaces Act, including allowing users to download rival app stores for the first time. Apple also reduced the service fees it charges companies for all sales through the App Store to 17 percent, down from 30 percent.
Apple has made other changes that have upset developers, including charging them a “basic technology fee” of 50 euro cents for every download of their app after it has been downloaded a million times or more within 12 months. Spotify and Epic Games, the maker of Fortnite, were among the companies that said the changes amounted to a new anti-competitive tax and called for regulators to intervene.
The European Commission said it was launching a separate investigation into Apple’s technology charge, saying it may “fail to ensure effective compliance with Apple’s obligations under the DMA”.
Apple and other companies are expected to try to limit the scope of the Digital Markets Act in court. The outcome may take years, but it is likely to set a precedent for future regulation of the technology industry and the digital economy.