Apple to permit rival app stores on European devices

The iPhone maker is reported to have begun making preparations to comply with the EU's Digital Markets Act, which comes into force in 2024. 

In meeting the requirements set by European legislators, Apple could allow its customers to download third-party software to their iPhones and iPads without using the company’s App Store, sidestepping Apple’s restrictions and commission charges of up to 30 per cent.

The EU's Digital Markets Act (DMA) aims to curb anti-competitive behaviour and keep “gatekeepers” from suppressing market competition. The fines for non-compliance can reach up to 10 per cent of annual turnover. 

To address what it deems as unfair business practices, the DMA is set to require 'Big Tech' companies such as Apple, Google, Amazon, Facebook and Microsoft to make their messaging services interoperable with third parties and provide business users with access to the data they generate to promote their own offers and conclude contracts with customers outside of the host platform.

The DMA only apply to technology companies with market valuations of at least €75bn (£65bn) and a minimum of 45 million monthly users within the EU.

The act came into force on 1 November, 2022, but gives affected gatekeepers - including Apple -  until March 2024 to comply. 

“What we want is simple: fair markets also in digital. Large gatekeeper platforms have prevented businesses and consumers from the benefit of competitive digital markets,” said EU anti-trust chief Margrethe Vestager in March. 

As part of the reported planned change, Apple customers could ultimately install apps without using the company's App Store. However, Apple has not made decisions on whether to comply with other provisions of the DMA, such as allowing for alternative payment systems to its own, according to Bloomberg's sources. 

Last year alone, about $10bn (£8bn) worth of transactions flowed through the App Store, according to estimates from Sensor Tower, a mobile analytics company, with Apple taking a commission of up to 30 per cent. 

Opening up to outside app stores could therefore present a major threat to Apple's fast-growing services business, but rivals would first have to surmount the hurdle of convincing consumers to leave the security and simplicity of using Apple's own store.

Angelo Zino, a stock analyst at CFRA, said he expects less than 0.2 per cent of Apple's total sales to be affected by competing app stores in Europe.

"The ultimate impact will be minimal as most consumers are creatures of habit and are very satisfied with the platform," he said. "We expect a majority of consumers will keep the status quo by utilising [Apple's] existing app store."

The changes are only set to be implemented in Europe, although there is potential for other countries to pass similar legislation. 

The Australian Competition Commission has announced it is studying the DMA, and Epic Games boss Tim Sweeney has called on US politicians to follow Europe's lead, saying an EU-only edict would "leave American developers in serfdom in the nation where Apple was founded".

Over the past few years, Apple has been engaged in legal fights with the video games giant, which claimed that the iPhone's native App Store constitutes a monopoly. The legal dispute began when Epic's flagship title, Fortnite, was removed from the store for trying to bypass Apple's 30 per cent commission rate. 

Apple has lobbied intensively against the DMA since the legislation was first proposed, arguing that it would expose users to security and privacy dangers. 

Earlier this year, the company reiterated its worries in a statement, saying: “We remain concerned that some provisions of the DMA will create unnecessary privacy and security vulnerabilities for our users, while others will prohibit us from charging for intellectual property in which we invest a great deal”.

Last year, it was revealed that 612 companies, groups and associations spend more than €97m (£83m) annually lobbying against EU digital economy policies, specifically the DMA and the DSA (Digital Services Act), with lobbyists involved in three-quarters of the 270 meetings Commission officials had on the two draft laws.

Despite this intense lobbying, Apple has been recently forced to change several of its policies as a result of European and UK legislation, such as enabling customers' right to repair and changing its future devices to use a USB-C charging port.