Apple's DMA "malicious compliance" may not satisfy EU regulators
posted Sunday Feb 4, 2024 by Scott Ertz
The battle between the European Union (EU) and Apple has been going on for years and covers nearly every aspect of technology. Most recently, the EU updated regulations that require all devices to offer unified chargers. The most notorious battlefield, however, has been over the company's "gatekeeper" status on its mobile platforms. The Digital Markets Act goes into effect next month, and Apple has announced its plans for compliance. But, regulators are not particularly happy with the plans.
What is the Digital Markets Act?
The Digital Markets Act (DMA) is a new EU regulation that aims to make the digital economy fairer and more contestable by imposing a set of obligations and prohibitions on large digital platforms that are considered "gatekeepers" of the digital sector. Gatekeepers are platforms that have a significant impact on the internal market, serve as an important gateway for business users to reach their end users, and enjoy, or will foreseeably enjoy an entrenched and durable position. The DMA covers eight different types of core platform services, such as online search engines, app stores, social networks, and online marketplaces.
The DMA introduces rules for platforms that act as gatekeepers in the digital sector. These rules include, among others, certain obligations and prohibitions, including not using data collected to compete with businesses using the platform, allowing users to uninstall all pre-installed software, and allowing regulators effective audit access to algorithms.
However, the aspect that has been the biggest point of contention has been the requirement to allow developers, publishers, and users to bypass the platform's internal content mechanisms. The DMA requires that gatekeepers like Apple permit and facilitate third-party app stores on their platforms. Apple has fought this in courts around the world but has now announced its compliance policies in the EU.
Apple's DMA compliance complaints
Apple has famously had a "walled garden" for its iPhone, iPad, Apple Watch, Apple TV, and other platforms. This means that only Apple's own App Store can be an official source for distributing applications to its devices. This rule exists on all platforms except for Macs, where you download software outside of the App Store, though the store does exist there.
The company has long been derided for its draconian rules within the App Store. This includes the 30% fee charged to publishers for any in-store purchases. But, Apple also requires that all purchases be processed through their system, so there is no way for developers to avoid the charge.
Apple's DMA compliance plans
Apple makes a lot of its money through these fees, so it is no surprise that they have fought the changes as they have been pitched, But, as the DMA's "gatekeeper" rules go into effect next month (March 7, 2024), the company has put together its plans for compliance. This week, the plans were announced and the response has been expectedly comical.
Apple will, in compliance with the law, allow third-party app stores on their mobile devices. But, it is important to remember that this will only be allowed in the EU, so everyone else is out of luck without their own version of the DMA. This includes game stores from Epic Games, who started the whole fight, and Xbox, whose Game Pass streaming app has not been allowed on Apple's devices. But, Apple is not going to make it easy for these stores.
The basis of these new rules is the "core technology fee" which will be charged to the developers themselves. If a developer decides to use a third-party app store or a third-party payment processor, Apple will charge the developer a half euro per user account per year. This means that, if a developer releases a game through the Epic Game Store for the iPhone and receives a million active users for their game, they will owe Apple 500,000 euros, even through Apple has not had a hand in any aspect of the process. And, if they use their own payment processor for in-game purchases, they will own another 500,000 euros to Apple for NOT using their technology.
The response has not been positive
Eric Sweeney from Epic Games came out swinging. He was displeased with the announcement, and said in a post on X,
Apple's plan to thwart Europe's new Digital Markets Act law is a devious new instance of Malicious Compliance.
They are forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under DMA, or accept a new also-illegal anticompetitive scheme rife with new Junk Fees on downloads and new Apple taxes on payments they don't process.
Apple proposes that it can choose which stores are allowed to compete with their App Store. They could block Epic from launching the Epic Games Store and distributing Fortnite through it, for example, or block Microsoft, Valve, Good Old Games, or new entrants.
There's a lot more hot garbage in Apple's announcement. It will take more time to parse both the written and unwritten parts of this new horror show, so stay tuned.
Xbox President Sarah Bond had a softer but just as focused statement, saying,
We believe constructive conversations drive change and progress towards open platforms and greater competition. Apple's new policy is a step in the wrong direction. We hope they listen to feedback on their proposed plan and work towards a more inclusive future for all.
Her statement was in response to one from Daniel Ek, founder and CEO of Spotify, who has also had a lot of words for Apple in the past. He said,
After sitting with our legal team to parse through the fine print of Apple's DMA announcement (that took a while), which is, at best vague and misleading, I wanted to share my thoughts.
While Apple has behaved badly for years, what they did yesterday represents a new low, even for them.
The European Commission has taken notice to the response from developers and publishers. In a statement, EU industry chief Thierry Breton said,
The DMA will open the gates of the internet to competition so that digital markets are fair and open. Change is already happening. As from 7 March we will assess companies' proposals, with the feedback of third parties.
So, while the goal of the DMA was to end this fight once and for all, it appears that it has merely spurred Apple into a "malicious compliance" situation that observes the letter of the law while completely spitting in the eye of the intent of the law. The EU does not usually take kindly to this type of behavior, so expect the response to be intense.
