Apple is facing regulatory headwinds that may threaten its App Store revenue. However, the Cupertino, California-based company still has some legal arguments that could help it to delay the implementation of one of the most far-reaching provisions in the European Commission’s Digital Markets Act (DMA).
The European Union approved in December the DMA, which aims to increase competition between digital platforms by limiting what some BigTech companies can do. New requirements set out in the bill will compel Apple to allow software to be downloaded outside its money-making App Store and to allow companies to use other payment systems on apps.
The law is expected to be approved by all the European institutions before summer, and will likely be enforced six months after it is passed. Thus, Apple should, in theory, start complying with these requirements by the end of 2022 or beginning of 2023.
However, Apple has fought any attempt so far to open up its App Store to third parties. For instance, in South-Korea, Apple challenged a new regulation that ordered the tech giant to loosen its grip over the app economy. In the Netherlands, the company has chosen to pay a $5 million weekly fine rather than complying with a decision from the competition authority that asked Apple to allow other apps to use other payment methods in the App Store.
The reason for Apple to push back on these obligations is not only financial — 20% of Apple’s annual operating income comes from the App Store — but also because by complying, it may weaken its own privacy and safety arguments to keep its system closed. Besides, Apple is facing a similar legislative threat in the U.S., the Open App Markets Act, which is on its way to the Senate floor for a vote, and any concession in Europe or elsewhere about the App Store may have repercussions in the U.S.
But the approval of the DMA is not the end of the game for Apple.
First, Apple may push back the implementation of this obligation for 12 to 18 months. The DMA will take effect six months after its publication. Apple will then have three months to notify the European Commission that it is a gatekeeper (a necessary requirement to be subject to the law), and the commission may then take two months to confirm this status.
However, if the company does not notify the commission of this status, the latter could then open a proceeding that will take a maximum of 12 months.
Second, if Apple does not comply with the law, the commission has to tell Apple how exactly what they must do, and it could take six months for them to issue a decision.
Third — and this is where Apple could have an important legal argument to play — unless this provision is subject to a last-minute change, Apple may ask a court for further clarification of certain terms.
To this end, article 6.1 says: “The gatekeeper shall allow the installation and effective use of third party software applications or software application stores using, or interoperating with, operating systems of that gatekeeper and allow these software applications or software application stores to be accessed by means other than the core platform services of that gatekeeper.”
But then, it allows gatekeepers to impose some restrictions: “The gatekeeper shall not be prevented from taking proportionate measures to ensure that third party software applications or software application stores do not endanger the integrity of the hardware or operating system provided by the gatekeeper.”
The interpretation of this provision and how far Apple can go to protect its operating system will likely play a role, and in case of a disagreement between the regulator and the company, the European Courts will have the last word, in a few years.
