EU’s DMA set a precedent for competitiveness in alternative app marketplaces — What will happen next?

When the Digital Markets Act (DMA) came into full force in the EU on 7 March 2024, Apple was one of the many tech giants who had to apply amendments to their terms and conditions to comply with the legislation. This included permitting alternative app marketplaces to distribute on its iOS devices.

While many rejoiced and saw this as an industry win for businesses and consumers in the EU, these amendments have uncovered that Apple can comply with the new EU legislation while squeezing fees in other ways. On the outset, it looks like a more level playing field for other players in the market, but how it has transpired is a developing story.

Before we ideate the ripple effect of a similar DMA legislation elsewhere around the world, let’s see how this has worked out for Apple in the EU:

Apple’s response to the DMA

The implementation and removal of the Core Technology Fee (CTF)

One of the biggest amendments that many have zeroed in on is Apple’s introduction of the Core Technology Fee (CTF) of €0.50 for every download after one million downloads, if sold through an alternative app marketplace. Apple’s key reasoning for this is about keeping iPhones and their software safe through security updates.

For smaller to mid-sized developers, especially those with free or freemium app properties, this fee could bankrupt them. This is because many users may download an app but not use it — this is a popular business model for many app developers and programmers. Usually, they depend on subscribers or other freemium fees from a small handful of users. On the other hand, if they sold exclusively through Apple’s App Store (subject to Apple’s commission fees, which has also been reduced to 17%, but is still a sizeable amount), they would not have to pay the CTF. Apple has since removed the CTF for apps which makes no money, such as those made by students.

Allowing alternative app marketplaces on the iOS

Prior to Apple opening their iOS to alternative app marketplaces which was driven by this legislation, many users took to sideloading and finding workarounds through app stores such as Altstore, Sideloadly, Appdb, and among others.

With that, the EU has opened five investigations into these tech giants end of March 2024. The investigations all include different possible acts of non-compliance, such as whether Apple and Alphabet are allowing apps to freely communicate with users and make contracts with them directly, whether Apple is giving their users enough choice, whether Meta is soliciting payment from users to avoid their data being used for adverts and whether Google prioritises their own goods and services in their search engine’s results.

For example, “anti-steering” is the concern EU legislators have when it comes to tech giants like Apple and Alphabet making it difficult for apps to let users know about alternative prices and payment gateways for their services.

While the investigation is set to take 12 months to complete, it has been reported, just 3 months later that Apple’s App Store may have breached these new laws. EU legislators gave Apple the opportunity to review the preliminary findings and a chance to counter with a proposal that is in agreement with the European Commission’s expectations. Should Apple fail to do so, they face a potential fine up of to 10% of its global revenue.

UK’s own version of the DMA & other global responses

With the European Union setting a precedent in prioritising consumers first, will there be more markets around the world looking to do the same? It’s too soon to tell.

The UK, however, has followed through with the Digital Markets, Competition and Consumers Act (DMCC) as they received Royal Assent on 24 May 2024. It has three pillars, of which the first is to introduce a new regulatory regime for large digital firms. The other two pillars are to widen the enforcement and powers of the Competition and Markets Authority (CMA) when it comes to consumer protection. Simply put, the DMCC is giving the CMA the open ability to crack down on anti-competitive or misleading business practices.

This includes requiring businesses to provide clear information to consumers before entering a subscription contract, sending reminders if trials are coming to an end and allowing consumers to easily exit the contract.

Beyond Europe, Apple has also recently been put under the microscope by the Competition Commission of India (CCI) for allegedly abusing its dominant position in the app market. This is no different from developers around the world feeling strong-armed into using Apple’s in-app purchase system and be at the mercy of their influence over how products reach consumers through its App Store.

The report came out on 24 June 2024 stating that the Apple App Store “is a unavoidable trading partner for app developers, and resultantly, app developers have no choice but to adhere to Apple’s unfair terms, including the mandatory use of Apple’s proprietary billing and payment system.”

It’s not a one-size fits all as the DMA cannot be applied wholesale to other markets — taking into consideration the differences in consumer behaviour, cultural expectations and other market variations. But other markets are considering knocking Apple and other tech giants down a peg from using their sheer size to become indispensable to users and developers alike.