EU’s digital markets act poses new challenges for Apple’s app store policy

Apple is navigating turbulent waters with its European operations as it faces a series of regulatory challenges from the European Union.

The European Union is increasingly becoming a significant challenge for Apple. Recently, the tech giant faced a setback as it lost its appeal against a 13 billion-euro-tax bill. Earlier this year, it was hit with a €1.8 billion fine related to its app store policies. Additionally, Apple is under scrutiny from three investigations that could result in further fines for failing to meet the EU's Digital Markets Act (DMA) requirements, Caliber.Az reports, citing foreign media.

While Apple’s recent focus was on unveiling its new iPhone, touted as being powered by "Apple Intelligence" to enhance features like message writing, movie creation, and restaurant bookings, these innovations won’t be available in the European Union. The company cited "regulatory uncertainties" as the reason for this limitation. Competition Commissioner Margrethe Vestager, a notable iPhone user, expressed relief in June at the lack of AI updates for her device. Apple enthusiasts, however, are less pleased.

Some have questioned whether purchasing the device outside the EU would allow access to these features, but Apple has confirmed that the AI capabilities will not be accessible in the EU or for phones set to EU regions. Once adept at navigating Brussels' regulations with relative ease, Apple now faces increasing scrutiny. Although it has made some concessions, such as settling an antitrust investigation into its phone payments and complying with EU mandates on charging ports, the company’s regulatory issues are far from resolved. The primary area of concern remains its app store, which has evolved from a hardware manufacturer into a major app platform, generating $383 billion in revenue in the fiscal year ending September 2023, with about a quarter of that revenue coming from Europe. 

Apple now primarily focuses on selling services and taking a commission from services offered by other developers through its app store. The company argues that this commission ensures the security and functionality of the apps available on its platform. However, some developers criticize this fee as an unfair "Apple tax" and are seeking regulatory and judicial action to address it. The European Union, among other regulators, has closely examined Apple's rules for app developers. The EU has taken more decisive action under the Digital Markets Act (DMA), which has introduced restrictions on certain practices. One contentious provision Apple fought against was a ban on side-loading—allowing users to install apps from third-party stores.

Apple argued that this practice would compromise iPhone security by making it easier for malicious software to infiltrate devices. Despite strong opposition, Apple has started to comply with the new EU regulations. Earlier this year, it developed a compliance plan and addressed criticisms in March by explaining that its engineers had to create new business terms from scratch. Ongoing criticism from developers has led Apple to make several adjustments to its terms and conditions recently. Francisco Jeronimo, Vice President of Devices for Europe, the Middle East, and Africa at IDC, noted that Apple's recent changes indicate the company is under significant pressure.