Apple’s (AAPL) legal headaches mounted Monday with the news that European Union regulators found it violated a new law designed to rein in tech giants.
The EU’s European Commission said it informed Apple that the rules of Apple's lucrative App Store violated the Digital Markets Act by illegally blocking software developers from telling customers how to access content outside the app store.
The regulator also announced it had opened a separate investigation into Apple’s practice of charging a "core technology fee" for iOS apps available in the EU.
The heightened scrutiny overseas comes as Apple defends itself in the US against antitrust charges from the US Justice Department and 16 state attorneys general. They sued Apple in March, alleging that it used illegal tactics to hold on to a monopoly in the smartphone market.
Apple is fighting the US lawsuit, and on Monday it said in a statement that it has made a number of changes to comply with the new EU law and "we are confident out plan complies with the law."
Investors shrugged off the news, sending Apple’s stock up more than 1%.
The law that the EU claims Apple violated went into effect in March. It targets six Big Tech companies that the EU considers to be "gatekeepers" — Apple, Amazon (AMZN), Alphabet (GOOG, GOOGL), ByteDance, Microsoft (MSFT), and Meta (META) — and imposes more restrictive rules around competition.
The law’s purpose is to keep the most dominant tech companies from blocking smaller rivals from entering certain markets.
Apple is the first tech giant to receive a claim from the EC alleging that it breached the DMA.
The DMA allows Apple to charge developers a fee for new customers who sign up through the App Store.
However, the law prevents Apple from blocking developers from communicating alternative ways to purchase their content.
And that’s what regulators said Apple did.
"Under the DMA, developers distributing their apps via Apple's App Store should be able, free of charge, to inform their customers of alternative cheaper purchasing possibilities, steer them to those offers, and allow them to make purchases," the commission said in an announcement explaining its findings.
Apple said in a statement it estimates more than 99% of developers would pay the same or less in fees to Apple under the new business terms it created.
"All developers doing business in the EU on the App Store have the opportunity to utilize the capabilities that we have introduced, including the ability to direct app users to the web to complete purchases at a very competitive rate."
Violations of the DMA carry hefty consequences, permitting fines up to 10% of a company’s global annual revenue. In Apple’s case, global revenues reached $383 billion in 2023.
Apple doesn’t segregate its App Store revenue in its financial filings. However, its growing services category, which includes the store’s revenue, reached $85 billion that same year.
The EC’s announcement significantly broadened the financial risks that Apple faces from global antitrust regulators.
The commission said it had undertaken another probe to determine if Apple’s charge, which assesses developers 0.50 euros for app downloads exceeding 1 million, is in breach of the DMA.
And earlier this year, the EC revealed a fine against Apple for another lawsuit it brought on antitrust grounds.
The case, which was originated by Spotify (SPOT), targeted Apple’s rules that precluded streaming music apps from directing their users to pay for content outside the app store.
The EC fined Apple $1.95 billion for the practice. Apple is appealing that decision.
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