Faced with the recently effective Digital Markets Act (DMA) by the European Union, Apple, which has been recognized as the "gatekeeper" of technology giants, has made a series of historic changes, but still cannot escape the fate of being accused by the EU. According to multiple insiders, the EU investigation confirmed that Apple has failed to fulfill its obligation to allow developers to guide users outside the App Store without charging additional fees. Of course, Apple's "flaw" is not only that it has not met the requirements of an open app store ecosystem, but also that the newly introduced "core technology usage fees" this year have raised regulatory concerns.
New and old issues
As a policy response to the implementation of the Digital Market Act, Apple announced at the beginning of the year that it would allow app sideloading in the EU market - allowing users to download apps from third-party app stores and use other payment channels.
This also means that Apple cannot receive up to 30% of the App Store commission. To address this issue, Apple has done two things: for developers who continue to use the App Store, the commission rate has been reduced from a maximum of 30% to 17%, while the commission rate for subscriptions or small businesses over a year has been further reduced to 10%.
For developers who try to bypass the App Store, Apple is indeed unable to charge a commission, but has prepared another form of payment - "core technology usage fees.". For software with an annual download volume exceeding 1 million times, developers are required to pay 0.5 euros to Apple for the first time a user installs the software each year. It should be noted that installing software updates also counts as the number of times, so this money is equivalent to the annual fee that application developers need to pay to Apple regularly based on the number of customers.
Based on this calculation, for an app that has been installed 10 million times a year, even if it is distributed from a third-party app store without generating any revenue, developers still need to pay a monthly fee of 375000 euros to Apple, which is 4.5 million euros in a year.
Insiders say that the European Union may make preliminary charges against Apple regarding this fee in the near future. Some developers believe that due to this additional fee, they actually have to pay more "Apple tax". However, according to Sensor Tower's statistics, consumer spending on the Apple App Store remained relatively stable in the second quarter of the EU's new regulations, indicating that most developers are still in a wait-and-see state, and the new regulations have little impact on Apple's "wallets".
If Apple is found to have violated the law, the fine can reach up to 5% of its daily revenue, roughly exceeding $1 billion. Apple refused to comment on the first possible punishment for the new regulations, and stated in a previous statement that Apple believes its plans comply with the Digital Markets Act and will continue to engage in constructive interaction with the European Union to cooperate with their investigation.
Standardize the market
Apart from Apple, other US technology giants are also within the scope of EU regulation. It is understood that the cases under investigation by the authorities include whether Google's parent company Alphabet favored its own app store, and whether Meta improperly used personal data in EU advertisements.
The investigations into these tech giants are all based on the European Union's Digital Markets Act. Initially, the Digital Markets Act was submitted by the European Commission to the European Parliament and Council in December 2020, and was approved by EU member states in September 2022. Enterprises providing services within the EU are under its jurisdiction. In September 2023, the bill restricted large IT companies from being "gatekeepers".
The measure of a "gatekeeper" enterprise is that its stock market value exceeds 75 billion euros, its annual sales in Europe reach 7.5 billion euros, it has 45 million active end users, and tens of thousands of corporate users. Therefore, the European Commission defines Apple, Google, Microsoft, Amazon, Meta and Tiktok as the "gatekeepers" of Internet services.
Lu Dingliang, a partner lawyer at Beijing Jingshi Law Firm, stated that the European Council and the European Commission are attempting to regulate the digital market through regulation of "gatekeepers", create a more fair and competitive digital environment, and enable competitors and consumers to benefit from the digital economy. Therefore, the Digital Market Act designates and regulates "gatekeepers" through dimensions such as revenue, number of active users, and provision of core platform services, ensuring that technology giants do not abuse their advantageous position, thereby building a digital fair competition environment.
Specifically, DMA prohibits companies from taking the following measures: preferential treatment of self branded goods and services, bundled sales of self owned software, and illegal use and occupation of personal information. Compared to traditional antitrust laws, the advantage of DMA is that even if the enterprise does not engage in obvious illegal activities such as unfair price increases, according to the judgment of the European Commission, the behavior of the enterprise can still be inspected. According to DMA's prompt, if a company does not meet sales standards, the EU can also conduct individual market research based surveys on it.
Thierry Breton, the internal market specialist within the committee, said, "For several months, we have been discussing with gatekeepers to help them adapt, and we can already see that the market has changed. However, we do not believe that Alphabet, Apple, and Meta's solutions fulfill their obligation to provide a fairer and more open digital space for European citizens and businesses. If our investigation concludes that they have not fully complied with DMA regulations, gatekeepers may face significant fines."
Long term game
The EU's investigation is also a microcosm of the global antitrust authorities' increasing review of the head Internet platform. In March of this year, the US Department of Justice officially sued Apple, accusing it of abusing its position in the smartphone industry, suppressing competitors, and limiting consumer choices. The European Union also fined Apple 1.84 billion euros in March for abusing its dominant position in the music streaming application distribution market.
However, Apple is also trying to counterattack. Subsequently, Apple's official website released a lengthy statement stating that the European Commission had announced this decision on the eve of its new rules coming into effect, which clearly did not receive support from existing competition laws. This move was to enforce the law before DMA became law.
Apple's counterattack is a reflection of the long-standing mixed reviews of the EU's strict regulation of large technology companies. Some argue that strict regulation protects market vitality and user privacy, avoiding large technology companies from using monopolistic positions to disrupt market competition. Japan is following the EU to intensify discussions and introduce new regulations to constrain the monopoly position of IT giants. The New York Times believes that DMA has a milestone significance, and its implementation signifies a turning point in regulating large technology companies. Andreas Schwab, a member of the European Parliament who once participated in drafting a digital market bill, said that over time, if the relevant provisions of the bill are strongly enforced, it will provide space for the emergence and development of new entrants in the technology industry.
There are also views that too strict regulation has restricted the normal development of enterprises, which is one of the important reasons for the lack of large technology companies in Europe, and has also hindered the progress of Internet technology in Europe, making the EU gradually lose its initiative in global competition. DMA approaches the innovative development of the digital economy through an industrial regulation approach. The pre regulatory model of introducing industrial regulation is prone to regulatory errors. Because it cannot be guaranteed that pre supervision will always be optimal, in this case, there may be a risk of "harm" to the enterprise.
Chen Jia, an independent international strategy researcher, believes that from the perspective of global technology industry chain layout and technology giant enterprise strategy, it will take time for the EU DMA to truly fully implement. The ultimate effectiveness of its policy depends not only on the law enforcement process, but also on the response strategies of major technology giants. "This will be a long-term game, and the short-term impact of each major market event is crucial."
Taking Apple as an example, Chen Jia mentioned that as the most closed and consistent iOS system in the past 20 years, opening up third-party app market installation authorization is not just a market monopoly, but also involves the entire Apple iOS ecosystem, underlying layer, architecture, and business logic. "Due to the significant differences in technology directions among the major gatekeepers, these technological contradictions are still difficult to reconcile in the short term. Based solely on the EU's DMA policy, without sufficient and precise policy innovation, a slight carelessness may cause some segmented markets to be in chaos."