Europe threatens Apple with additional fines

The European Commission has published its full Digital Markets Act (DMA) decision against Apple, and it’s far, far worse than anybody expected. The Commission, the executive arm of the European Union, has accepted absolutely none of Apple’s arguments against being fined, and the decision threatens yet more existential damage to the company.

Apple isn’t winning the argument, and, right or wrong, the decision has fangs.

Huge fines, big threats

Europe announced in April that it would fine Apple an eye-popping €500 million for noncompliance with the DMA, giving Apple 60 days to comply with its decision. One month later, the Commission published the full ruling against Apple, which details that changes the company made to its App Store rules did not go far enough to bring it into compliance.

The decision warns that Apple is subject to additional periodic fines in the future if it fails to comply with the Commission’s strict interpretation of the DMA, no matter how inherently punitive some of its demands may be. (Can anyone else spell “tariffs”?)

We’ll know soon enough if there are to be wider consequences to Europe’s demands. Apple now has 30 days to fully comply with the DMA (in Europe’s opinion) or face additional fines.

The act itself came into force in November 2022 and began to be implemented against companies defined as ‘gatekeepers’ in 2023. The intention is to stop Apple and others from using their market position to impose anticompetitive limitations on developers. 

Who is steering?

The big bugbear relates to Apple’s anti-steering restrictions, which prevent developers from telling customers they can purchase services outside the App Store. The DMA demands that Apple let developers offer this option, which Apple does, but Europe argues that the limitations the company makes on doing so are not in compliance with the law.

Europe also says Apple’s existing restrictions, fees, and technical limitations undermine the effectiveness of the DMA. That seems to mean Apple cannot charge a commission and cannot warn users of the consequences they face when shopping outside the App Store. 

The Commission even plays dumb to the potential significance of permitting developers to link out to any website from within their apps, rather than being constrained to approved (and secure) sites. It says Apple has provided insufficient justification for this restriction and also wants Apple to remove messages warning users when they are about to make a transaction outside the App Store. 

That’s going to be particularly pleasing to fraudsters, who may now attempt to create fake payment portals that look like reputable ones. Apple prevented $2 billion in fraud last year, the company has confirmed. Perhaps once the first big frauds take place, the EU may catch up to the online risks we all know exist.

While I understand the original aim of Europe’s Digital Markets Act, the demands the Commission is making of Apple appear to go far beyond the original objective, which was to open up Apple’s platforms to competition. 

The decisions now open Apple’s platform up to competitors. 

There is a difference between the two, and, as described, it means Apple must now create and manage its platforms while permitting competitors to profit from those platforms at little or no cost.

Apple rejects Europe

Apple will fight in Europe. 

“There is nothing in the 70-page decision released today that justifies the European Commission’s targeted actions against Apple, which threaten the privacy and security of our users in Europe and force us to give away our technology for free,” the company said. “Their decision and unprecedented fine came after the Commission continuously moved the goalposts on compliance, and repeatedly blocked Apple’s months-long efforts to implement a new solution. The decision is bad for innovation, bad for competition, bad for our products, and bad for users. While we appeal, we’ll continue engaging with the Commission to advocate on behalf of our European customers.”

When the fine was initially revealed, the company also said: 

“Today’s announcements are yet another example of the European Commission unfairly targeting Apple in a series of decisions that are bad for the privacy and security of our users, bad for products, and force us to give away our technology for free. We have spent hundreds of thousands of engineering hours and made dozens of changes to comply with this law, none of which our users have asked for. Despite countless meetings, the Commission continues to move the goal posts every step of the way.”

My take? 

Far from saving Europe’s tech industry, the manner in which the DMA is being applied will make the region even less relevant. Lacking a significant platform of its own, Europe’s approach will reduce choice and increase insecurity.

As the clear first target of the DMA, Apple will inevitably be forced to increase prices, charge developers more for access to its developer tools, and will I think simply stop selling some products and services in Europe, rather than threaten customer security. We know it can do this because it has done so before.

Fundamentally, of course, the big question remains unaddressed: How much profit it is legitimate to make on any product or service? I imagine the European Commission doesn’t want to go near a question as fundamental to capitalist wealth extraction as that. Can you imagine the collapse in executive bonuses that would follow a decision to define what the maximum profit made in any business transaction should be?

Lobbyists across the political spectrum would be appalled — that extra profit pays for their meals. Looking to the extent to which the current application of the DMA seems to favor Apple’s biggest competitors, I can’t help but imagine it’s been paying for a few European meals already. Nice work, if you can get it. 

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