On Monday, the European Commission announced that Apple has become the first company likely in breach of the EU’s Digital Market Act. If the company is ultimately found guilty, it faces fines of up to $38 billion.
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Apple likes to be a trailblazer. On Monday, however, the US-based tech giant would have been happy not to be first after the European Commission announced that the iPhone manufacturer is the first company likely in breach of the EU’s Digital Markets Act (DMA).
Specifically, the commission charged that the rules of the company’s App Store “prevent app developers from freely steering consumers to alternative channels for offers and content.”
In addition, the Commission also announced that it had opened up another investigation of Apple — this one regarding new contractual requirements for third-party app developers and app stores.
What does all of that mean?
Essentially, the Commission says that Apple is using its market leading position to stifle competition.
“The developers’ community and consumers are eager to offer alternatives to the App Store,” stated Margrethe Vestager, the Commission’s executive vice-president in charge of competition policy. “We will investigate to ensure Apple does not undermine these efforts.”
The DMA is meant to ensure that tech giants, which are called “gatekeepers” in the legislation, “behave in a fair way online and leave room for contestability.”
The penalties for noncompliance are severe.
In this case, the EU could fine Apple up to 10 percent of its global revenue, i.e., up to $38 billion.
The Commission is also investigating Google and Facebook for potential DMA violations.
In this case, it determined that, while “developers distributing their apps via Apple’s App Store should be able, free of charge, to inform their customers of alternative cheaper purchasing possibilities, steer them to those offers and allow them to make purchases,” this is not the way the company operates.
Instead, according to the Commission, Apple’s rules do not allow developers to freely steer their customers away from the App Store.
“Steering is key to ensure that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers,” noted Vestager.
However, the Commission’s probe found that the tech giant only allows steering through links in apps that take their users to a separate website.
“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 Commission stated.
Apple will now be able to review the documents that led to this preliminary finding and launch its defense.
The company said that it had made “a number of changes to comply with the DMA in response to feedback from developers and the European Commission,” and that Apple is confident that it complied with the law.
