Apple Maintains Strict Control Over iPhone Sales in European Market - Insights

The Apple App Store is currently the only way to download iOS apps.

Maria Diaz/ZDNET

Apple likes nothing better than calling all the shots on its products. For example, if you want an iPhone app, you have no choice but to get it from the Apple App Store . But that was then. And this is now . In the European Union (EU), going forward, the recently passed Digital Markets Act (DMA) has forced Apple to change its ways effective in March with the release of iOS 17.4.

But that doesn’t mean Apple is giving up its power easily .

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The DMA is designed to break what the EU sees as the technology monopoly of several American tech giants – Apple, Google, Facebook, Microsoft, and Amazon – as well as China’s ByteDance, TikTok’s parent company. For Apple, this means iPhone users must be allowed to use other web browsers, alternative payment systems to Apple Pay , and non-Apple App Stores to sideload applications.

Apple, in return, is doing its best to discourage both developers and users from using any of these new freedoms. To quote Apple:

The DMA requires changes to this system that bring greater risks to users and developers. This includes new avenues for malware, fraud and scams, illicit and harmful content, and other privacy and security threats. These changes also compromise Apple’s ability to detect, prevent, and take action against malicious apps on iOS and to support users impacted by issues with apps downloaded outside of the App Store.

Diving into the specifics, only Apple-authorized developers will be allowed to develop alternative web browsers , and those iOS web browsers will only be available for iOS in the EU. Today, it may appear to you that there are alternative iPhone web browsers, such as Chrome and Firefox, but those are simply skins on top of Apple’s Safari web browser. That’s why Safari appears to be the most popular mobile web browser .

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The web browser companies are well aware that Apple is doing the bare minimum to comply with the law. Damiano DeMonte, a spokesperson for Firefox’s parent company Mozilla, told The Verge that the company is unhappy with Apple because its restrictions will force “Firefox to build and maintain two separate browser implementations – a burden Apple themselves will not have to bear.”

For those who don’t want to use Apple Pay, Apple will still get a cut – iOS apps using another payment method must pay a 3% tariff.

As for the alternative app stores, they’re surrounded by a moat of restrictions. Vendors that try to sell their apps through the alternatives must show a million-euro letter of credit from a top financial institution before they’re “entitled” to offer their programs. Apple defends this because it will show that vendors can support their apps while keeping out malware agents and scammers. It will also stop startups in their tracks.

Outsider developers must also pay a €0.50 Core Technology Fee for each first annual installation of their marketplace app. While Apple App Store developers get a million free installations before having to pay this fee, anyone selling through an alternative market will have to pay the fee immediately.

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This “junk fee, “ as Damien Geradin, professor of law at Tilburg University, called it, “will disproportionately affect those app developers that have limited revenues, but whose apps are widely downloaded. “

The long-time Apple App Store critic, Spotify CEO Daniel Ek, claimed that under Apple’s new EU app store rules, the app “fees could be astronomical . Picture this: A popular free app with tens or hundreds of millions of EU users, now faces a tax on every download and update annually. Imagine the impact on popular apps like WhatsApp, Duolingo, X, and Pinterest.”

As for Spotify, Ek grumbled:

“Spotify itself faces an untenable situation. With our EU Apple install base in the 100 million range, this new tax on downloads and updates could skyrocket our customer acquisition costs, potentially increasing them tenfold.: Therefore, Spotify will have to stay with the ‘status quo’ – the very thing we’ve been fighting against for five years.”

At the same time, Apple states that the Core Technology fee will be waived for nonprofits, government agencies, and educational institutions. But, it won’t be waived for free, open source, or freemium apps. For all practical purposes, this ensures there won’t be any free iOS apps.

Put it all together, and while Apple can’t take its usual 30% cut from alternative store app sales, it’ll still make money from them.

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Further, Apple restrictions require that independent apps can only be purchased via an alternative store. You can’t sell them from your website. On top of that, only EU companies can sell their apps through third-party stores.

By the way, don’t think for one moment – if you’re outside the EU – that you’ll be able to buy one of these alternative apps. You won’t. Even if you use a Virtual Private Network (VPN), Apple will now check your Apple ID billing address, your current location, and your device’s current region.

At the same time, Apple is trying to sweeten the pot for EU vendors to encourage them to stay with the Apple store. In the EU, Apple will lower its App Store commissions to 17% for most digital goods and services and down to 10% for second-year app subscriptions and qualified small business developers.

Needless to say, a lot of software vendors are unhappy with Apple. Epic Games CEO Tim Sweeney, who’s long fought against Apple’s iron control of the iOS market, called Apple’s EU proposal an example of “malicious compliance” that are filled with “junk fees .”

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So, has Apple done enough? The European Commission, which oversees the DMA, will decide if Apple has met the law’s requirements. As EU industry chief Thierry Breton told Reuters , “If the proposed solutions are not good enough, we will not hesitate to take strong action.”

However things turn out in the EU, it’s unlikely we’ll see these changes coming to the US. Apple won its antitrust case against Fortnite maker Epic Games in January 2024. Short of action in Congress, Apple will continue to call all the shots on the iPhone on this side of the Atlantic.