Apple was found in violation of the EU’s Digital Market Act and risks a hefty fine from Brussels.
Apple was found in violation of the EU’s Digital Market Act (DMA) for abuse of dominant position, regulators said on Monday. Companies in direct violation of the DMA could face a fine of up to 10% of their global annual turnover. In the case of Apple, the fine could therefore reach almost $40 billion.
The European Commission, the EU’s executive branch, opened an investigation probe into Apple, Alphabet, Meta, and TikTok. The new Digital Market Act aims to regulate the immense power these foreign corporations have on European internet users.
The finding announced on Monday was specifically aimed at the App Store. According to the report, Apple uses its dominant position to impose unnecessary fees on European developers in its stores. Currently, Apple waives a 3% commission for in-app purchases, whether they have been made through the App Store or a third-party site.
Moreover, the process of redirection to a third-party site is “subject to several restrictions imposed by Apple that prevent app developers from communicating, promoting offers and concluding contracts through the distribution channel of their choice,” the commission noted.
According to the report, Apple also makes it extremely difficult for users to download a third-party store. European users need to go through several procedures to download a third-party store. The Commission will study this multi-step procedure and evaluate whether it complies with the DMA.
Finally, the Commission will also study Apple’s Core Technology Fee (CTF), a €0.50 fee per app downloaded outside of the App Store with over a million downloads. The Cupertino company already adjusted the fee so that it doesn’t apply to free-to-download apps, but may not be enough for the EU antitrust watchdog.
Investigative downpour
The European Union already charged Apple a €1.8 billion fine (up from €500 million) alleging its proprietary music streaming service was violating antitrust law. According to the sentence, the App Store was failing to provide users with cheaper choices than Apple Music including but not limited to Spotify subscriptions.
Outside of Europe, Apple is also under investigation in the United States, where the Department of Justice opened a lengthy dossier on the iPhone maker. The US antitrust allegations could take years to settle, losing Apple precious time and resources.
In China, the central government banned iPhones for all members of the Communist Party, causing a steep sales decline in the first quarter of 2024.
Apple was one of the slowest-growing Magnificent 7 stocks this year, surging only 18% since January 1. The only stock that performed worse was Tesla with a 21% decline. Before Apple’s latest AI announcement, the stock had grown only 5% year-to-date.
