Apple Inc. AAPL has been warned by the EU’s industry chief of facing possible severe repercussions if the company’s App Store changes do not comply with the imminent EU regulations.
What Happened: Apple has been making amendments to its App Store to align with the EU’s forthcoming Digital Markets Act or DMA. Starting in early March, developers will have the liberty to distribute their apps through alternative stores, sidestepping Apple’s in-app payment system that charges up to 30% commission.
However, these changes have faced criticism for being inadequate and potentially violating the DMA.
See Also: Apple's iMessage To Follow WhatsApp In Opening Up To Third-Party Chats Amid EU Push?
“The DMA will open the gates of the internet to competition so that digital markets are fair and open. Change is already happening. As of 7 March, we will assess companies’ proposals, with the feedback of third parties,” EU industry chief Thierry Breton told Reuters, adding, “If the proposed solutions are not good enough, we will not hesitate to take strong action.”
Under the new EU guidelines, developers are still required to submit their apps to Apple for cybersecurity and fraud review. In addition, Apple users in the EU will have the freedom to choose their preferred web browsers and contactless payment apps, thus avoiding Apple Pay.
Even if developers opt out of using Apple’s App Store or payment system, a “core technology fee” of 50 euro cents per user account per year will still apply. Apple maintains that under the new terms, 99% of developers would either keep or lower the fees they owe to the company.
Why It Matters: Previously, JP Morgan predicted that the changes made by Apple in line with new EU regulations would not significantly impact its App Store revenue. However, the new “Alternative App Store” model could potentially cost developers like Meta Platforms millions of dollars in yearly payments.
Meanwhile, in response to the new competition law for Big Tech in Europe, Spotify Technology will allow its European users to make in-app purchases for audiobooks and subscription plans, bypassing Apple's 30% fee on the App Store.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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