Apple is acknowledging that it will need to make adjustments to its business practices in response to the European Union’s Digital Markets Act (DMA) regulations. These changes could impact how Apple communicates about alternative purchasing methods and the distribution of apps outside of its App Store. Analysts anticipate that one of the initial changes Apple might implement is allowing third-party app stores in Europe.
The EU’s Digital Markets Act, which was designated on September 6th, identifies six major tech companies, including Apple, as gatekeepers due to their significant roles in connecting businesses and consumers through core platform services. Apple’s App Store serves as a gateway between consumers and other businesses, such as app developers and publishers.
The EU has issued a set of requirements and restrictions for Apple and other designated gatekeepers, giving them six months to comply. These requirements include:
1. Allowing third-party apps and app stores to operate on Apple devices under certain conditions.
2. Granting these third parties access to data generated while operating on Apple’s platforms, including its app stores and operating systems.
3. Permitting app developers to conduct payments and transactions outside of Apple’s ecosystem.
4. Preventing Apple from preventing users from uninstalling preinstalled apps on their devices.
5. Prohibiting Apple from prioritizing its own services over competing alternatives.
6. Ensuring that Apple does not track end users outside of its platforms for targeted advertising purposes.
Failure to comply with these regulations could result in fines of up to 10 percent of a company’s worldwide annual turnover, increasing to 20 percent for repeated violations. Additionally, periodic penalties of up to 5 percent of the average daily turnover may be imposed. The deadline for Apple and other gatekeepers to comply with these regulations is March 7th, 2024.
In its annual 10K filing report to the US Securities and Exchange Commission, Apple has indicated that it “expects to make further business changes in the future, including as a result of legislative initiatives impacting the App Store, such as the EU Digital Markets Act, which the Company is required to comply with by March 2024.” Apple acknowledges that these changes could potentially have adverse effects on its revenue and overall business.
However, some analysts, like those at Morgan Stanley, believe that Apple is well-positioned to navigate these changes thanks to the security, centralization, and convenience offered by the App Store. They predict that Apple is likely to introduce third-party app stores on its devices in Europe as a response to the DMA regulations.