May 24, 2024
Apple says it 'expects to make' App Store policy changes due to EU DMA

Apple has bowed to the inevitable and said it “expects to make” App Store policy changes to comply with EU’s Digital Markets Act (DMA).

The pan-EU DMA came into application across the bloc back in May. Apple has likely been expecting for months, if not years, to be subject to the new ex ante competition regime — which was first proposed by the Commission at the end of 2020. But the language change in its filing makes it explicit policy shifts are on the way.

The iPhone-maker has updated the language pertaining to its risk factors in the fiscal year 2023 Form 10-K filing (PDF), with the revised text presenting a shift from the company’s previous position, indicating a more definitive stance on potential modifications to the App Store policies.

Apple said that future changes could also affect how the company charges developers for access to its platforms; how it manages distribution of apps outside of the App Store; and “how, and to what extent, it allows developers to communicate with consumers inside the App Store regarding alternative purchasing mechanisms.”

The DMA is EU lawmakers’ response to Big Tech, as a category — as classic competition law enforcement has repeatedly been shown to be too slow and retroactive to prevent dominant tech giants using exploitative tactics to entrench and expand their market power.

A classic case is the EU’s 2018 antitrust enforcement against Google Android. A record-breaking $5 billion penalty levied on the tech giant, after the Commission found Google had breached competition rules, has still failed to move the needle on market share for alternatives to Google’s mobile OS, search engine or browser.

The DMA aims to switch competition enforcement on tech giants to the front foot by putting a series of obligations on designated gatekeepers from the get-go. These include requirements not to prevent business users from promoting their own offers to end users, and a ban on preventing the installation of third-party app stores, to name two which look very relevant to Apple’s App Store.

Earlier this year, in July, Apple informed the Commission it expected to fall under the DMA. That was then officially confirmed in September — when the Commission named six tech giants who were being designed as so-called gatekeepers, with Apple among them.

In a report to clients late Tuesday, Morgan Stanley analysts wrote that they believe Apple’s change of language confirms the fact that App Store changes are coming and that Apple will “likely begin 3rd party app stores on device in Europe.”

It added: “We believe Apple is well positioned to compete should these changes take place due to the App Store’s security, centralization, and convenience, limiting the potential user experience and/or P&L impact.”

We’ve already had a glimpse of the impact of the incoming policy changes on Apple’s App Store via an antitrust intervention in the Netherlands last year. The local competition authority forced Apple to let local dating apps use alternative payment technologies, rather than Apple’s own, to take in-app payments from their users following complaints by developers.

The Dutch authority was acting with an eye on the incoming DMA. But where its intervention could only lead to App Store policy shifts that just got applied in the Netherlands, and only for dating apps, the DMA’s impact will be felt across the EU and is not limited to certain types of users. So the impact will be greater.

The deadline for gatekeepers’ compliance with the pan-EU DMA is March 7, 2024. Penalties for infringements can reach up to 10% of global annual turnover — or even more for repeat offences.

This report was updated with a correction: The EU designated six gatekeepers in September, rather than seven as we originally reported. We regret the error

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