Apple’s 1.8 Billion EU Fine Foreshadows Increased Regulatory Activity Under Digital Markets Act

On March 4, the European Commission announced that it had levied a fine of more than €1.8 billion ($1.95 billion USD) against American consumer tech giant Apple over app restrictions employed by Apple’s App Store. The massive fine, which the Commission increased to ensure it was sufficiently deterrent to Apple’s anti-competitive practices, is the latest in a series of legal actions within the European Union (EU) to target dominant Internet platforms under competition law.

Spotify Complaint Leads to Investigation into App Store’s Anti-Steering Provisions

The EU Commission’s fine against Apple was levied under Article 102(a) of the Treaty on the Functioning of the European Union (TFEU), which provides for investigations into claims that market dominant companies are engaging in anti-competitive activities. The Article 102(a) investigation into Apple’s illicit App Store restrictions began with a complaint filed by Swedish streaming music company Spotify, which alleged that Apple unfairly prevents companies from communicating alternative music subscription services that are available outside of Apple’s App Store.

According to the EU Commission, Apple employed anti-steering techniques in the terms and conditions preventing app developers from informing consumers about the availability of cheaper subscription services and how to subscribe to those services outside of the App Store. In particular, app developers have been prohibited from sharing information about the prices of those alternative services, price differences with services in Apple’s App Store, and providing access to alternative services to users through either in-app links or emails.

While the fine levied this week against Apple was issued under the TFEU, the fine’s timing is significant given that the Digital Markets Act (DMA) goes into full effect on March 6. Signed into law in September 2022, the DMA increased the complexity of the regulatory framework for major Internet services platforms that are deemed to be “gatekeepers” due to their dominant market position. These gatekeepers each market at least one “core platform service” that connects large numbers of users and business interests. This January, Apple announced changes to several of its digital services, including its App Store, following Apple’s unsuccessful appeal of their designation as a “core platform service” subject to the DMA. March 6 is the date by which all core platform services, including the App Store, offered by gatekeepers must comply with provisions of the DMA.

Copycat DMA Legislative Efforts Advance in Several Major Nations

Anti-steering techniques employed by app store operators have also been found to be anticompetitive under U.S. law. Although the U.S. Supreme Court recently denied an appeal by Epic Games to challenge a district court’s ruling exonerating several of Apple’s business activities, the cert denial left in place the district court’s finding that Apple’s prohibition of in-app links to alternative subscription services was illegal under California state unfair competition law. As reported this January by Apple Insider, recent U.S. district court filings by Apple in other antitrust lawsuits indicate that, while Apple has given app developers the ability to utilize in-app linking in the U.S., app developers cannot remove Apple’s in-app purchasing options while doing so. Further, Apple reportedly still retains a high commission of up to 27% on external purchases.

Along with Apple, the other tech companies designated as gatekeepers under the DMA are Alphabet, Amazon, ByteDance, Meta and Microsoft. This week, Alphabet announced several changes to its core platform services in intermediation, including Google Maps, Google Play and Google Shopping services, along with its flagship Google Search service that will impact users across the European Economic Area (EEA). Those changes include new dedicated chips for finding shopping comparisons, app developer tools for leading users to external purchase offers, and a new application programming interface (API) incorporating data portability measures. The EU’s enactment of the DMA has encouraged similar legislative initiatives in several other nations including Japan, South Korea, Brazil and the United Kingdom.

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Author: fotoskat
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