Apple reportedly faces billions in fines for failing to comply with Europe's Digital Markets Act
Apple made a number of changes to the iPhone in Europe to adhere to the EU's Digital Markets Act (DMA). The DMA has forced Apple to allow iPhone users to sideload apps from third-party app stores, and use third-party browsers that run on non-WebKit engines. The DMA also allows developers to give consumers in-app options for making payments that bypass Apple's in-app payment platform.
According to the Financial Times, the European Commission is not happy with Apple's Core Technology Fee and plans to charge the company for failing to be in compliance with the DMA. If Apple is found not to have complied with the DMA, it will face a fine of up to 10% of its average annual worldwide revenue. In fiscal 2023, Apple took in $383 billion which means that it could be on the hook for a hefty $38.3 billion fine. Companies that repeatedly infringe on the DMA face penalties of up to 20% of their global annual revenue.
The tech giant imposes the Core Technology Fee fee on developers who decide to be governed by Apple's new App Store rules in the 27 EU countries. These new rules allow the developers to use alternative payment processors for their App Store apps in the EU listed throughout Apple's various operating systems. The Core Technology Fee charges developers €0.50 (valued at approximately 54 U.S. cents) for each annual install over one million. Apple does have some rules to protect smaller developers.
U.K. Apple Store. But the U.K. is not part of the EU
Developers in the EU can avoid the Core Technology Fee as long as they continue to follow the old rules and have in-app payments directed to Apple's in-app payment processing platform. Apple did reduce the so-called "Apple Tax" charged to developers who use its platform for in-app payments from a range of 15%-30% to a lower 10%-17% range.
Back in March, long-time App Store critics like Spotify and Epic Games, along with 32 other firms, wrote a letter to the EC accusing Apple of "making a mockery of the DMA and the considerable efforts by the European Commission and EU institutions to make digital markets competitive." The letter adds, "The new fee structure in the proposed new terms seems designed to maintain and even amplify Apple's exploitation of its dominance over app developers."
While today's report notes that the European Commission could formally announce charges against Apple during "the coming weeks," these findings are preliminary and Apple might still have some time to make the necessary changes to iOS that would keep the European Commission off of its back.
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Things that are NOT allowed: