Apple has unveiled new terms for iOS app developers in the European Union in relation to in-app payments in another bid to comply with the EU’s Digital Markets Act.
It is offering developers more flexibility when sign-posting alternative payment options outside their apps and better financial terms. Which may be enough to placate EU regulators, who concluded that Apple’s previous terms were not DMA compliant. Spotify and Fortnite maker Epic Games, however, are definitely not placated.
“Apple once again blatantly disregards the fundamental requirements of the Digital Markets Act”, Spotify says in a statement, urging the European Commission to start fining Apple for failing to comply with the DMA. Meanwhile Epic boss Tim Sweeney dubs Apple’s latest terms a “malicious” attempt to comply with EU rules.
Spotify and Epic have long criticised Apple over its App Store rules around in-app payments. Until recently, app developers were obliged to use Apple’s own transactions system for in-app payments - which charges a 15-30% commission - and were not allowed to direct app users to other places online where payments could be made outside the Apple ecosystem.
The rule that stops the sign-posting of other payment options, often called the anti-steering provision, is not allowed under the DMA, which seeks to prevent tech giants like Apple from exploiting their market dominance. Actually, an EC investigation prompted by a complaint by Spotify concluded that the anti-steering provision already violated EU competition law prior to the DMA. However, that conclusion was reached just as the DMA went into effect in March.
Either way, it was clear that Apple needed to change its rules around in-app payments. To that end, app developers were offered new business terms earlier this year which allow alternative payment options to be sign-posted. However, there are still restrictions on how all that is presented and communicated, and Apple still charges fees.
Under those rules, Apple charges a 12-27% fee on purchases that begin in an iOS app, plus there is a ‘core technology fee’ charged on every app download after the first million.
App developers like Spotify and Epic have been scathing about those proposals, insisting they go against the principles of the DMA. And EU officials agree. In June they published preliminary findings that said Apple’s new business terms did not comply with the DMA rules around sign-posting other payment options.
Which brings us to the latest proposals from Apple, shared with app developers this week and due to go into effect later this year. Under the new terms, developers won’t be as constrained as before in how they explain and promote alternative payment options.
As a result, app developers will be able to provide “information about prices of subscriptions or any other offer available both within or outside the app” and “explanations or instructions about how to subscribe to offers outside the application”.
Apple will still charge fees on purchases that begin within the iOS app, however the fees charged will be lower, if more complicated. Under the new terms there will be two fees, one of which only applies for the twelve months following the initial installation of an app. The other fee will apply for twelve months after any update of an app, which basically means it is a rolling fee.
The first fee is a 5% commission. The level of the second fee will vary, partly according to the size of the app developer, and partly because there are two versions of the new terms. One still includes the core technology fee, with an ongoing commission of 7-20%, the other gets rid of the core technology fee, with an ongoing commission of 5-10%.
The highest possible commission fee under the new terms is 25%, which is just 2% less than the highest possible commission fee under the current terms, and 5% less than using Apple's own transactions system. And, actually, under the new terms discounts are being offered on Apple’s own transactions system, meaning the fees charged on third party payments could well end up being more expensive.
Which means it’s unsurprising that Spotify is not happy with what it calls Apple’s “deliberately confusing” new proposal. While it is still assessing the new terms, Spotify says in a statement, “At first glance, by demanding as much as a 25% fee for basic communication with users, Apple once again blatantly disregards the fundamental requirements of the Digital Markets Act”.
“The European Commission has made it clear that imposing recurring fees on basic elements like pricing and linking is unacceptable”, it adds. “We call on the Commission to expedite its investigation, implement daily fines and enforce the DMA”.
Epic CEO Tim Sweeney, posting on X, focused on the lower level version of the new fees, but still isn’t happy. He says, “In the European Union where the new DMA law opens up app store competition, Apple continues its malicious compliance by imposing an illegal new 15% junk fee on users migrating to competing stores”.
Of course, it seems likely Spotify and Epic will only be happy with a version of Apple’s terms that allows the sign-posting of alternative payment options with no commissions or install fees.
Apple has long hit back at criticism from both Spotify and Epic by highlighting the huge investment it has made - and continues to make - in developing its app platform. It argues that Spotify and Epic just want a free ride, capitalising on Apple’s infrastructure and technology without paying anything in return.
However, it is EU regulators - not Spotify and Epic - that have to be persuaded that the new terms are fair. And the regulators may ultimately accept that, providing app developers are given lots of flexibility when it comes to sign-posting other payment options, it is fair for Apple to expect some payment from rivals that have clearly benefited from the App Store platform.
However, it’s possible Apple will still need to further lower the pricing from its current proposals to get EU buy in. We shall see.