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By Hugh Cameron
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Apple is accused of using its dominant market position to exploit app developers, according to a preliminary finding by the European Commission.
An investigation has been launched into whether the iPhone developer may be violating European competition laws, preventing developers from "steering" customers to better offers while handing them prohibitively high referral fees. Combined with similar previous infractions, this offense could land the company with a near $80 billion fine.
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The European Commission has informed Apple that it considers its App Store rules in breach of the Digital Markets Act, adopted by the European Parliament in September 2022.
The Digital Markets Act, which the commission calls "one of the centrepieces of European digital strategy," establishes a set of criteria to ensure contestability in the online sphere, and prevent the act of "gatekeeping" by dominant technology firms.
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Apple is alleged to have violated this act by preventing app developers from "steering" consumers to alternative channels for content.
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According to the commission's Monday press release, Apple's App Store rules mean that "developers cannot provide pricing information within the app or communicate in any other way with their customers to promote offers available on alternative distribution channels."
Margrethe Vestager, the European Commission's executive vice-president in charge of competition policy, said: "Steering is key to ensure that app developers are less dependent on gatekeepers' app stores and for consumers to be aware of better offers."
In addition, Apple is accused of landing app developers with overpriced referral fees in exchange for facilitating their acquisition of new customers.
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While Apple is entitled to receive payment for linking developers with paying users, the European Commission said: "the fees charged by Apple go beyond what is strictly necessary for such remuneration."
The commission's preliminary findings follow a probe into the company's steering rules in March, and mean Apple has until March 2025 to defend itself in writing before the commission makes a final non-compliance decision.
If Apple's app store rules are found to be in breach of the DMA, the European Commission said it will be able to impose a fine of "up to 10% of the gatekeeper's total worldwide turnover."
In the case of repeated infringements, this penalty could increase to 20% of the company's total revenue which, based on the $383 billion in sales achieved in its most recent financial year, could cost Apple just shy of $80 billion.
Newsweek has contacted Apple's press team by email regarding the investigation.
The new investigation follows a March decision by the European Commission to fine the tech giant for "abusing its dominant position" in the music streaming market.
Apple was hit with a €1.8 penalty for violating the EU's anti-steering provisions, after it "applied restrictions on app developers preventing them from informing iOS users about alternative and cheaper music subscription services available outside of the app."
The commission found that Apple's conduct, which lasted for nearly a decade, "may have led many iOS users to pay significantly higher prices for music streaming subscriptions."
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