The European Union (EU) has deemed that Apple’s App Store and iOS are gatekeepers that must be regulated and opened to greater competition. The new Digital Markets Act (DMA) will force Apple to enable side-loading of apps onto iOS, and presumably iPadOS devices.
Side-loading is the practice of installing apps directly to a device without going through some sort of app store. Since the launch of the App Store, with the second generation iPhone (there was no ability to add apps to the original iPhone that came out in 2007) Apple has created a thriving ecosystem that has generated revenues for developers and given users a relatively safe way to add new apps to their devices.
Without any doubt, the App Store is a monopoly. At least, in so far as Apple created it and set its own rules. Where this has become an issue for the EU is that Apple has been so successful that it has created a situation where there is no other way to install apps.
The DMA deems that companies that have a high level of market power are compelled to follow a set of new pro-competition rules. The criteria the EU applies for applying the DMA include:
- Having more than 45 million active local users
- A turnover of €7.5B+ in the last three financial years
- Market capitalisation exceeding €75B
There’s some discretion in these numbers so the EU can apply the rules to companies that look like they will gain a strong market position that could erode competition in future.
Thierry Breton, the EU’s internal market commissioner, says “We know that some tech giants have used their market power to give their own products and services an unfair advantage and hold back competitors from doing business and creating added value and jobs. These practices distort competition, undermine free consumer choice and hold back SMEs’ innovation potential notably arising from Web 4.0 and virtual worlds.”
Is there really a monopoly?
There’s no doubt Apple has a stronghold over the distributor of iOS applications. In 2020, Apple addressed some concerns. Before then, Apple took a 30% cut of all revenue from apps sold through the App Store. But Apple cut this to 15% for software developers with less than $1 million in annual net sales on its platform.
But here’s the the thing. Users do have a choice. If they want a platform where they can load any app they want, they have that – it’s called Android. Google has allowed multiple app stores to spring up and allows apps to be side-loaded. And it seems harsh to call the App Store a monopoly when the idea of a centralised App Store did not exist until Apple created.
What is the cost of competition?
Before the App Store, buying and installing apps to a mobile device was very challenging. I’m a longtime user of mobile devices, going all the way back to Windows CE, PocketPC, Windows Mobile and Palm. Developers distributed their own apps and installation processes were often complex. As for payment, you were trusting that each developer had a secure gateway.
The App Store turned mobile app installation into a single-click process that has been emulated by Microsoft, Samsung, Huawei and Google and others.
The DMA may create more problems than it solves. I can see situations where side-loaded apps access personal data, credit cards details are stolen (one element of the DMA is around the availability of alternative payment systems) and devices become less stable simply because errant apps are installed.
The App Store introduced a level of quality control – I know it’s not perfect but it’s a lot better than what we had before 2008 – as well as security and assurance. The risk of an app causing problems or resulting in lost or stolen data is greatly reduced.
In effect, the EU is buying increased competition by increasing risk.
What could Apple do?
Apple will be subject to the DMA and subject to its penalties should it not comply. And while Apple has a hefty back account, penalties for breaching the regime can scale up to 10% of global annual turnover or 20% for severe repeat offences. So, I can’t see a situation where Apple will tell the EU to shove it and simply operate in a non-compliant way. It will be expensive and punish Apple’s reputation.
Apple could choose to make certain elements of iOS region specific to the EU. One element of the DMA is that Apple will have to allow alternative app stores to be installed from its own App Store. But, we know Apple can control the regional distribution of apps so it could region-lock alternative app stores.
Ever since the jailbreaking iPhones and allowing third-party apps to be installed, Apple has continually bolstered its software to block those tools. This was really a positive as most of those apps, such as Cydia, relied on security flaws that bypassed Apple’s controls. Apple could do the same to ensure only users with an Apple ID from the EU can install those alternate stores.
Apple still has some time before the DMA will be actively enforced. And they may still fight. For example, one of the other Apple services that may have been subject to the DMA is iMessage. The far, Apple has managed to have that excluded from the list of services covered by the DMA. Apple could argue that the App Store should also be excluded.
The fight Apple and the EU over the application of the DMA is far from over. But its repercussions could be significant. Just as the EU has forced Apple’s hand over the USB-C port, it seems to be doing the same with the App Store.
Anthony is the founder of Australian Apple News. He is a long-time Apple user and former editor of Australian Macworld. He has contributed to many technology magazines and newspapers as well as appearing regularly on radio and occasionally on TV.