The European Commission has reportedly decided that Apple is not compliant with the Digital Markets Act when it comes to allowing app developers to sign-post alternative payment options. This means that Apple will now need to offer more concessions to app developers in order to avoid being charged mega-fines - news that will be very much welcomed by Spotify.
We already knew that the Commission was investigating whether Apple, Alphabet and Meta are compliant with the new rules that were introduced by the European Union’s Digital Markets Act. The DMA rule that says Apple and Alphabet must allow app developers to make users aware of payment options outside their apps has been very much in the spotlight. Not least because of campaigning by Spotify and other digital music services.
According to sources who have spoken to the Financial Times, the Commission’s preliminary findings say that Apple is not yet compliant with that rule. Apple is expected to respond to the preliminary findings with proposals for additional changes to its policies that might placate the regulator.
If it fails, the Commission could instigate significant fines against Apple. As the FT notes, “if found to be breaking the DMA, Apple faces daily penalties for non-compliance of up to 5% of its average daily worldwide turnover, which is currently just over $1 billion”.
Spotify has long objected to the Apple rules which say that in-app purchases on iOS devices must be taken via the tech giant’s commission charging transactions system, and that alternative payment options outside the app cannot be sign-posted. That second rule, called the anti-steering provision, means an app developer can’t direct users to a page on its own website where it can take a payment directly without paying any commission to Apple.
The EU’s competition regulators investigated those Apple rules following a complaint by Spotify. The investigation ultimately focussed on the anti-steering provision, which it concluded was anticompetitive. At the end of that investigation Apple was ordered to change its rules. By that point, the DMA had also started to go into effect, basically making the same demand.
Apple argues that it has complied with both the ruling and its new obligations under the DMA with a new system that allows the sign-posting of alternative payment options within iOS apps.
However, there is a catch: An app developer must agree to still pay a commission on any transactions that begin in an iOS app and that commission is just 3% less than the cut Apple takes from in-app purchases.
Spotify argues that, because of the new commission, that new system does not comply with the demands made by the EU’s competition regulator or with the DMA.
In April, the streaming service’s Chief Public Affairs Officer, Dustee Jenkins, said in a statement, “By charging developers to communicate with consumers through in-app links, Apple continues to break European law”. The European Commission, he added, should fully enforce the law “so that consumers can see real, positive benefits”.
If the FT’s sources are right, that law is now set to be enforced. Though it remains to be seen if Apple can find a way to convince EU regulators that it is compliant with the law while still getting to charge at least some fees to app developers.
An announcement from the Commission regarding all this is expected in the next few weeks, although that could be delayed depending on Apple’s response.