In a recent press release, Apple Inc. disclosed substantial alterations to its iOS, Safari browser, and App Store operations in the European Union (EU) to align with the EU’s Digital Markets Act (DMA). The noteworthy modification includes the integration of third-party app stores within the upcoming iOS 17.4 update, slated for release in March.
This transformative initiative comprises the introduction of over 600 new application programming interfaces (APIs), expanded app analytics, and novel features for alternative browser engines. The comprehensive adjustments are poised to reshape the distribution of applications and the processing of payments on iOS platforms within the EU.
A pivotal change, allowing the inclusion of third-party app stores, was not a voluntary decision by Apple but a requirement imposed by the EU’s Digital Markets Act. Discussions on this possibility emerged in 2022, coinciding with the passage of the Digital Market Act by the European Parliament and Council.
The Digital Markets Act, perceived as a means to curtail unfair practices by online platform gatekeepers, applies to companies meeting specific criteria, including a substantial annual turnover in the European Economic Area and providing core platform services in at least three EU states. In September, Apple was officially classified as a “gatekeeper” company under this legislation, alongside other major tech entities like Alphabet Inc., Amazon.com Inc., TikTok owner ByteDance Ltd., Meta Platforms Inc., and Microsoft Corp.
As of January 2024, Apple is diligently working to comply with its legal obligations in the EU. However, the company’s approach is far from discreet or straightforward. Instead of merely allowing third-party app stores, Apple announced the implementation of “new safeguards” aimed at mitigating, albeit not entirely eliminating, potential risks posed by the DMA to EU users.
To gain access to the iPhone platform, developers seeking to introduce a third-party app store are required to furnish a €1 million ($1.08 million) “letter of credit” from an A-rated financial institution, as reported by 9to5Mac. Additionally, third-party marketplace developers must pay a €0.50 “Core Technology Fee” for each initial annual installation of their marketplace app.
Beyond the inclusion of third-party apps, Apple is ushering in changes in other domains, such as browser choice. With iOS 17.4, Safari users in the EU will encounter a new choice screen upon opening Safari for the first time, enabling them to select a default browser from a list of options. All these modifications are undertaken not voluntarily, but in compliance with the Digital Markets Act.
Further adjustments are being introduced to Apple’s App Store in the EU to adhere to the DMA. Developers are now permitted to utilize their own payment service providers within their apps. Moreover, apps in the EU can facilitate users in purchasing digital goods and services on the developer’s external website.
While the allowance of third-party app stores marks a substantial shift, the significance of permitting third-party payment options is equally noteworthy. Both Apple and Google LLC have historically restricted how purchases can be made through apps in their respective stores, accompanied by a 30% commission. This policy was central to the legal dispute between Epic Games Ltd. and Apple in 2021. Although Epic Games lost its case against Apple, including an appeal, it emerged victorious in a similar case against Google.
The decision by Apple to now permit third-party payment options and third-party app stores in Europe raises questions about why similar allowances cannot be extended to other jurisdictions.
This announcement also precedes an anticipated antitrust case against Apple by the U.S. Department of Justice later this year. The lawsuit is expected to investigate whether Apple engaged in unfair tactics to safeguard the iPhone’s market share, imposed restrictions on Apple Watch access, constrained access to Apple’s Tap to Pay technology, and raised competition concerns in various sectors.