The Digital Markets Act Impact on Apple: A Lesson for the Future?

This Monday, the European Commission informed Apple of its preliminary ruling that its App Store rules are in breach of the Digital Markets Act (DMA), as they prevent app developers from freely steering consumers to alternative channels for offers and content.

In addition, the Commission opened a new non-compliance procedure against Apple over concerns that its new contractual requirements for third-party app developers and app stores fall short of ensuring effective compliance with Apple's obligations under the DMA.

Apple was one of six "gatekeepers" chosen by the EU Commission to pioneer compliance with the Digital Markets Act.

On 25 March 2024, the Commission launched non-compliance investigations to verify the gatekeepers' status. EU Commissioner Thierry Breton emphasized, already then, that Europe meant business, declaring:

"The law is the law. We can't just sit around and wait."

This report will teach you all you need to know about the newly enforced EU Digital Markets Act, how it has impacted Apple, and how it might impact your business — in an easily digestible Q&A format.

Let's dive in.

What is the Digital Markets Act (DMA) and what will it do?

The EU Digital Markets Act is fundamentally an antitrust legislation applied directly to digital markets. In other words, it is a set of norms designed to prevent big tech companies operating in Europe from becoming digital market monopolies. The DMA purportedly establishes objective criteria to qualify a large online platform as a “gatekeeper” - that is, a company with monopolistic potential in the digital market space.

The Digital Markets Act aims to protect businesses who depend on gatekeeper corporations to offer their services in a digital market. It also strives to ensure that the terms and conditions set by gatekeepers do not strangle startup growth and innovation. In short, it aims to create an environment where businesses are empowered to compete and consumers have alternatives.

Who does the Digital Markets Act (DMA) apply to?

A company will be designated as a "gatekeeper" if it has the following characteristics:

• A strong economic position, significant impact on the European market and activity in multiple EU countries;
• A strong intermediation position, meaning that they link a large user base to a large number of businesses;
• An entrenched and durable position in the market, meaning that their position has been stable over time.

What are the DMA obligations?

The Digital Market Act is a comprehensive and robust legislation, and it cannot be completely summarized here. Data protection legislations tend to be complex and not easily reducible to layman's terms. However, here's a few key points:

Designated gatekeepers must

• Allow their business users to access the data that they generate in their use of the gatekeeper’s platform;
• Provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper;
• Allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.

And they are sure to incurr penalties if

• Treating services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper's platform;
• Preventing consumers from linking up to businesses outside their platforms;
• Preventing users from un-installing any pre-installed software or app if they wish so;
• Tracking end users outside of the gatekeepers' core platform service for the purpose of targeted advertising, without effective consent having been granted.

The Digital Markets Act's impact on Apple

At this point you're probably saying to yourself, "Okay, I get the gist. But how exactly does the DMA affect Apple?"

Let's go over the numbers first.

Apple is now at risk of a fine of up to 10% of its worldwide yearly turnover, which can scale up to 20% if the matter is left unresolved or the offense repeated. Given Apple’s $383 billion revenue last year, the fines could be astronomical. This situation highlights the significant business risks posed by increased regulatory scrutiny globally.

Apple has also decided to halt distribution of a suite of new AI technologies from hundreds of millions of consumers in the European Union, citing concerns posed by the bloc’s regulatory attempts to rein in Big Tech.

But the big Elephant in the Room is the impact on Apple's brand perception.

For starters, the EU commission has adopted a message tonality that distinctly makes an example and cautionary tale out of Apple. Consider how Thierry Breton, EU Commissioner for Internal Market, opened his statement concerning the preliminary ruling with a spin on Apple's slogan, "Think Different":

Apple’s new slogan should be “act different”. Today we take further steps to ensure Apple complies with the DMA rules. We have reason to believe that the AppStore rules not allowing app developers to communicate freely with their own users is in breach of the DMA. ...

This statement has been spread out across both Thierry Breton's personal accounts and those of the EU Commission, and it went viral.

This simple play on words would almost seem to be a calculated strike on Apple's most prized asset — its brand identity — and could marr Apple's brand name for years to come, particularly in Europe, whose consumer base has a high degree of alertness towards data privacy issues.

To compound on this, Apple's reaction to the preliminary ruling has been compared to "a teenager throwing a temper tantrum", and dubbed an example of "malicious compliance" by prominent cybersecurity commentators and tech figureheads.

Brand damage is not easily quantifiable in the short-term, but it's a time-tested axiom that consumer trust and consumer loyalty are mutually reinforcing.

Is Apple complying with the Digital Markets Act?

Apple responded to the investigations launched by the EU Commission by publishing a comprehensive breakdown of its measures to protect European users' data security, privacy and safety and to comply with the Digital Markets Act.

To comply with the DMA, Apple created new options for developers and users — and built 600+ new APIs and developer tools to enable these changes. The new options include enabling sideloading so that EU users can download apps through app marketplaces other than the App Store and enabling alternative ways to process payments.

The document also addresses Apple's perceived challenges in complying to the Digital Markets Act and its belief that it will bring negative consequences for consumers. Apple expresses a concern that one of the EU's central requests - that Apple rescinds its App's store exclusivity clause - will decrease the quality of the cybersecurity during downloads.

The company doubled down on these concerns as a response to the preliminary ruling, and has adopted a compliance strategy that is vocally critical of EU legislations and complies cautiously.

Ultimately, it will up to the EU Commission to assess the quality of Apple's compliance to the DMA. The deadline for this ruling is March 2025.