European regulators have ruled Apple’s App Store policies illegal. Apple is delaying European product launches. Expect hostilities to escalate.
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If any doubt remained about how regulators would wield their new competition powers under the Digital Markets Act, the shot against Apple and its App Store removes them. The battle cry from the European Commission is “be aggressive.” Amazon, Google, and Meta face similar DMA investigations.
It looks the first shots of a new war pitting US tech against European regulation. The European Union (EU)’s claimed goal is to jumpstart competition by forcing so-called “online gatekeepers” to open doors for small contenders. How effectivethe crackdown will be remains uncertain. It could boomerang, fragmenting the global Internet, creating new obstacles to competition, and leaving Europeans with second-class services that may, in the end, be less secure and consumer-friendly.
The DMA, which came into effect in March, packs firepower. If the Commission concludes that Apple’s app store policies are illegal under the new law, Apple faces a penalty of up to 10% of global revenue. That could amount to a whopping $40 billion since the company posted $383 billion in sales last year. Repeat infringements could bring fines up to 20% of annual turnover. Perhaps even more important, the new rules allow European regulators to outlaw a wide swath of business practices.
Tech companies are sure to fight back. Before going to court, Apple has an opportunity to respond to the current EU charges. Regulators will only issue a definitive decision in the spring of 2025. The company then can turn to courts and cases could drag out for years.
After receiving the app store charges, Apple insisted that its App Store plan complies with DMA. “We estimate that more than 99% of developers would pay the same or less in fees to Apple under the new business terms we have created,” it said in a statement.
Beyond legal challenges, tech companies are blaming the new rules for slow product rollouts. Apple, for example, is not releasing new AI services for iPhone users in the EU because of what it called “regulatory uncertainty.” Meta did not release its Twitter competitor Threads in Europe until five months after it was available in the United States for similar reasons.
Another risk is forcing Europeans to depend on inferior products. The DMA bans self-preferencing, meaning that companies deemed as gatekeepers are no longer allowed to favor their own services. To comply, Google has stopped allowing automatic linking from its search to its maps. Instead of a single click to find a destination, Europeans must now make multiple clicks. As a user based in Brussels, I can testify that the change has made the service worse, not better.
Uncertainty prevails. Google has also been forced to make a series of changes to search, which drives consumers to products. Companies are scrambling to gauge the impact. Will their products end up higher or lower on the search results? Some fear they will end up having to buy additional advertising to compensate.
The DMA could boomerang in other ways, too. The iPhone maker’s App Store’s rules have long been a source of contention. Before the DMA, Apple controlled all access to the app store. The DMA forced it to allow alternative stores and alternative payment methods, among other changes.
Apple has long said its policies are designed to protect security. Under the DMA, companies are allowed to reject proposed changes if it judges that they pose a security risk. The app store investigation will test the limits of this defense.
While wielding its new DMA weapon, the European Commission continues to unveil a series of traditional antitrust cases against tech companies. The latest came on June 25 when Microsoft was charged with illegally bundling its Teams collaboration tool with Office 365 and Microsoft 365.
As the competition over tech intensifies in Europe, it risks becoming a full world war. While the US has been unable to pass anything like the DMA, the Justice Department has launched a series of traditional antitrust cases against Apple, Amazon, and Google’s owner Alphabet.
Other governments from the United Kingdom to Japan are passing their versions of DMA. Most reflect similar issues raised in Europe.
Just this month, Japan finalized a law that targets Apple’s App Store.
Back in Europe, the DMA is only one regulation amongst a slew of other new rules. The Digital Services Act aims to combat illegal content, from hate speech to counterfeit products. GDPR privacy rules remain a potent weapon. A new European Commission could bring forward proposals for a Digital Fairness Act and other expansive digital regulations. Get ready for a long struggle to regulate the digital world, with the front lines firmly placed in Brussels.
Bill Echikson is a non-resident Senior Fellow at CEPA and editor of the Bandwidth blog.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
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