EU Set to Fine Apple in First Major Enforcement of Digital Markets Act

The European Commission is reportedly preparing this penalty after Apple’s failure to allow app developers to guide users toward external purchasing options, potentially leading them to better deals outside the App Store. Sources familiar with the matter told Bloomberg that the decision, although still in the drafting stage, could be finalized and announced as early as this month, aligning with the final days in office for EU Competition Commissioner Margrethe Vestager. However, there remains a chance the fine may be deferred to later in the year, the sources added.

The EU’s Digital Markets Act, which came into force earlier this year, is intended to proactively address monopolistic behavior, making it distinct from previous EU competition laws. Under the DMA, Apple and other tech giants deemed “gatekeepers” face more stringent requirements aimed at ensuring fair competition. This includes measures that would allow developers to bypass platform restrictions, such as Apple’s 30% commission on App Store sales—a long-standing friction point between Apple and the EU.

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The potential fine could be significant, coming just months after Apple was slapped with a €1.8 billion ($2 billion) penalty under the EU’s traditional competition rules over similar allegations. In that case, streaming giant Spotify accused Apple of preventing users from accessing cheaper subscription deals outside the App Store. Vestager, who has often clashed with Apple over these issues, argued that such practices stifle competition and harm both consumers and developers.

Related: EU to Scrutinize Apple’s iPad OS for Compliance with New Tech Rules

The Digital Markets Act grants EU regulators the power to issue fines as high as 10% of a company’s global annual revenue for initial violations, with the possibility of increasing to 20% for repeated offenses. Additionally, if Apple continues to resist compliance, the Commission could impose daily fines up to 5% of the company’s average daily revenue. Per Bloomberg, these hefty penalties underscore the Commission’s commitment to enforcing new digital competition laws that aim to prevent major tech companies from monopolizing digital markets before the harm becomes irreparable.

The timing of this action coincides with Apple’s latest quarterly earnings, which reported sales of $94.9 billion, slightly exceeding Wall Street expectations of $94.4 billion. iPhone revenue alone contributed $46.2 billion to this total, surpassing analysts’ predictions of $45 billion. Despite the brewing regulatory battles, Apple’s stock price remains resilient, closing at $223.45 on Tuesday, a modest increase that contributes to a 16% year-to-date rise.

In response to escalating scrutiny, the European Commission issued a warning to Apple in June, reminding the company of its obligation to provide developers a viable way to direct customers away from the App Store. Failure to comply, the Commission warned, could result in financial penalties under the DMA.

So far, representatives for both Apple and the European Commission have declined to comment on the anticipated fine or its potential ramifications. However, sources suggest that Vestager, known for her aggressive stance on regulating Big Tech, is determined to conclude her tenure with a definitive statement on digital market fairness, particularly as it applies to Apple’s App Store practices.

Source: Bloomberg