Apple’s holding of the App Store will face a significant challenge arising from the new European law

The new European Union legislation – which could be effectively completed this month – is supposed to tell Apple to allow software downloads outside of its App Store-generating cash and limit how companies impose their own payment systems on applications. involved in the negotiations. Failure to do so would result in sanctions of up to tens of billions of dollars.

For the past two years, iPhone manufacturers have struggled with lawmakers, regulators and competitors around the world to defend how they serve as gate guards for more than one billion users of their devices.

Critics accuse Apple of harming the competition by forcing application developers to use its stores and payment tools, from which it earns up to 30% commission for in-app purchases. Apple has argued that it gives consumers a choice of a digital platform that has proven popular with customers, and that the proposed changes will open up threats to security and privacy and weaken the overall iPhone experience.

Rivals and critics of Apple’s power hope that EU law will serve as a catalyst for other jurisdictions, such as the United States, where similar legislation awaits Congress.

“Apple is playing 5D chess right now,” said Paul Gallant, a political analyst at Cowen & Co. “It’s going to be hard to explain why government change will radically change the iPhone when Google already does, and it’s going to be hard to explain why it could be. Don’t do it in the United States when it can do so soon in Europe. “

As the language is completed behind closed doors, most technology companies and their lobbyists are resigning to the so-called Digital Markets Act. Additional DMA provisions are aimed at Inc. and parent company Google Alphabet Inc.

Apple’s biggest existential DMA threat comes with a provision that would allow software vendors to access the iPhone – through so-called sideloading – outside of Apple’s App Store rules and payment scheme. One recent DMA proposal, which was overwhelmingly approved by the European Parliament in December at a ratio of 642: 8, included an additional burden.

Apple said in a statement that the DMA would undermine its security and allow malicious actors to take advantage of the additional burden. “Governments and international agencies around the world do not explicitly recommend overhead requirements that would cripple the privacy and security that users expect,” Apple said in a statement.

The full effect of the sideloading provisions is not yet clear, as legislators are working on a final language defining security exceptions that could give Apple room to limit the scope of sideloading.

Once the text has been agreed by parliamentary and member state negotiators this month, the bill is expected to be formally approved by both institutions in the coming months. Based on this timeline, it would enter into force early next year.

Apple pushed back when it ordered to loosen its grip on economy applications such as U.S. federal judges, lawmakers in South Korea and antitrust authorities in the Netherlands. Apple has responded to these orders by revoking or restricting policy changes and has refrained from making major changes that could reduce the billions it takes from app store commissions.

The head of the EU’s antitrust office, a major supporter of the DMA, pointed to Apple’s recent actions and warned that the bloc must have law enforcement powers in order to comply with its provisions.

“Apple basically prefers to pay regular fines rather than comply with the Dutch Competition Authority’s decision,” said Margrethe Vestager, chief executive of digital policy and competition in the EU’s executive branch, last month. the key to ensuring compliance, the Commission will have sufficient resources to do so, “she said.

In the first proposals, non-compliance with the DMA would be punished by fines of up to 10% of the company’s annual global revenue, which would currently be $ 37 billion for Apple, but some lawmakers have pushed for a higher cap.

The lawsuit indicated that approximately 20% of Apple’s annual operating income came from App Store revenue. Apple said the estimate was too high but did not disclose an alternative amount.

This number underscores why some of the App Store’s largest revenue generators are aggressively pushing for change. Spotify Technology SA and Match Group Inc. have been successful in lobbying for the inclusion of language in a law that would oblige Apple to allow developers to use competing payment systems in applications, according to people familiar with the matter.

“It is much easier for companies like Spotify or Match Group to formulate their case because it is a clear case,” said Andreas Schwab, a German Member of the European Parliament in charge of the law. breeders have more difficulty explaining their business practices so clearly, ”he added.

If the DMA goes as expected, analysts and those involved in the negotiations could try to challenge law enforcement, both through litigation and in the details of the App Store policy changes it is introducing to comply.

The biggest changes in Apple’s App Store were ordered in September by a federal judge in California, who supervised the antitrust lawsuit of the manufacturer “Fortnite” Epic Games Inc. While Apple mostly won the case, the judge ordered Apple to stop banning application developers from redirecting users to their applications to cheaper alternative payment methods outside the application. However, this change is suspended until Apple appeals the verdict.

When the antitrust regulator in the Netherlands ordered Apple to allow alternative payments in dating applications in that country, Apple responded and still charged an application fee, 27% of revenue instead of 30%. The changes did not satisfy the Dutch, who fined Apple more than $ 5 million a week.

“Apple believes its solution is fully compliant with Dutch law,” Kyle Andeer, Apple’s Chief Compliance Officer, said in a letter to the regulator last month, adding that the problem could eventually be resolved in court.

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Apple’s holding of the App Store will face a significant challenge arising from the new European law

Source link Apple’s holding of the App Store will face a significant challenge arising from the new European law

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