EU rejects Apple's changes: Company could be fined 10% of global turnover
9to5mac.com
9to5mac.com
Yes, they might gain a couple years till this is settled, but they can't use the time to crush a competing app store in between, as there is currently none. I am sure I am dumb, but IMO the smart move would have been to work with the law and a couple of years down the road point out that alternative app stores never caught on (which is very likely, IMO)
The Core Technology Fee is such a clear violation violation of the DMA rules.
Exec: So, how can we enforce a fee while complying with DMA?
Lawyer: We can't, DMA requires it to be open.
Exec: Are you sure? If you can't find a way around this you are fired!
Lawyer: Erm, of course there is a way!!!!
They lost so much good will with developers over this, have lost any goodwill with negotiations with EU, and are now going to have to speedrun compliance.
I’ve dealt with lawyers like this before in various company situations. They are sometimes really, really stupid. Not always, but it happened often enough to be terrifying.
Apple hoping for a far-right Republican presidency that would create a trade war with the EU?
That's the concerning thing...
This was Cook’s call, and hubris is guiding him.
Perhaps there was some "But we're apple! We are a luxury aspirational brand! We shouldn't have to lower ourselves to this" in the traditional reality-distortion-field of thinking they are somehow special or above the rules that everyone else has to deal with. I'll admit is kinda fund to imagine that, but hey :)
It's pretty hubristic to see that that law does not align with their long-term strategy, and then choose noncompliance with the law.
It is obvious Tim Cook is doing what ever he can to protect their services revenue. And lack the intuition Steve jobs has.
They will continue to fail until the penalties are unbearable.
They could have passed a law that says “In the EU, app stores including Apple’s App Store on iOS will not be allowed to charge a fee greater than x% on developers.” And the whole thing would be solved. We can argue about what X should be, but then we wouldn’t have to jump through all these hoops.
For example, Meta is targeted by the same law on WhatsApp messaging interoperability; Apple on their exclusive use of the contactless interface for card payments etc.
It's a much more generic and wide-reaching regulatory tool than just an "anti-app-store law".
It is possible to deliver free apps through the App Store without any download limits. But with competing App Stores it isn't.
It just seems really far fetched to me if you were to apply this logic to other industries- eg “movie theaters must let you play any movie, not just the movies they want!” Or “movie theaters must allow you to bring your own popcorn or allow competing concessions vendors!”
What I think is within regulatory oversight is the fees people charge within certain jurisdictions, because governments should regulate commerce. Similar to how they regulate bank fees, real estate transactions, VAT, etc. They could set a maximum, prevent charging fees for free software, or all sorts of other things that would help developers and consumers without forcing Apple to support weird 3rd party app distributors.
If a local movie theater doesn't play the movie you like, you can go to a competitor. If no such competitor exists, and movie theaters would be essential to daily life, such a method would make more sense. The DMA targets "gatekeepers", ie not local movie theaters, but enormous companies that have done their best to entrench their market position by making competition difficult or impossible. I would keep that in mind when comparing to other industries.
You can of course buy an Android, and I am not an expert on the DMA or economics, but the playfield of a group of local movie theaters is wildly different from Apple's Apple Store (or browser, or Apple Music store, etc).
The regulation creates the context to specify something like this. Writing ad hoc rules for named entities without a law or regulation behind it isn’t how our system of governance works. You first have to have a framework to judge against, either in law or regulation. You then assess the compliance of each in scope entity and issue findings.
Btw the term “malicious compliance” isn’t really a thing. The right term is “willful noncompliance.” For this they need to prove intent to be a defensible finding, which they probably could. However it would be easier to just find them in non-compliance.
I would also note this is a back and forth. What surprises me is Apple went public with their plans rather than developing them directly with the regulators. Going public with their plan creates all sorts of problems for Apple.
This is surprising because Apple is a pretty sophisticated regulatory player. For all their devices they go through many regulatory processes and regimes. They have tons of experience dealing with regulators across many regions and regulatory domains, including these sorts of policies. This is a shocking lack of cooperative behavior that won’t work for Apple. Apple is flush with cash, but governments have unlimited resources and the ability for forcibly enforce their will. It’s usually smart money to invest in appeasing your regulators in private.
Obviously my opinion doesn’t matter, but wouldn’t it be easier if the EU simply said, “We have the power to regulate commerce in the EU, including software marketplaces. We have decided X.” That would be pretty similar to how many governments set maximum credit card interest rates (as someone mentioned below) as well as other transaction fees in industries that are vulnerable to cartel-like behavior like real estate.
But being evasive or a general asshat with a regulator leaves you open to the fact it was vague and the judge of compliance isn’t you, it’s the regulator. And if you’re too far in the wrong direction criminal consequences can kick in. Creating ill will makes all future interactions worse. So it’s really in your best interest to engage constructively with your regulators to achieve a best outcome possible.
There are exceptions - Uber has made willful non compliance a business model requiring that TLC regulation is pretty toothless. I don’t think Apple will find a similar situation here.
Thats 15 years https://www.bloomberg.com/news/articles/2024-01-18/intel-win...
Apples strategy here is baffling. They’re not unfamiliar with regulation and how to manage regulators. This is really not a good strategy they’re doing and it’ll make everything worse for them at every step. The fact they unveiled their plans publicly without a green light from the regulator means they’re doing some sort of weird game of chicken.
IMO they’re underestimating the motivation of the EU to try to break US tech megacorps grip to try to create a place that an EU tech megacorp might emerge. I don’t know that it’s a very sensible strategy as any EU megacorp will also be subject to onerous requirements, but will have to bootstrap in that regime. Also until the EU fixed its banking and investment structures, pay improves, and any number of other head winds abate, I wouldn’t expect attacking FB, Google, and Apple with regulatory burden will be meaningfully helpful to any tech company in the EU.
Me neither but I'm probably going to leave Apple ecosystem with next devices. I guess 'nationalism' is a thing even for me.
This is the conclusion they hope to force now. Strangling the babies in the cribs rather than trying to rein in a bunch of unruly teenagers that have resources to fight.
The EC is not the final arbiter in this. It’s just an executive body.
Apple complied with what they think will withstand adjudication by the CJEU and leaves the rest for the EC to act on so they can appeal it with the CJEU.
Given the EC’s poor track record in terms of getting their fines and decisions overturned by the CJEU, I too would do it this way, no matter how loud the EC likes to bark and show their teeth.
Especially considering the DMA is poorly drafted and in Europe, unlike in the US, the courts aren’t ghostbusters that go seeking for “spirits” of the law.
Whether the EC thinks so or not, Apple is in compliance with the straightforward parts of the DMA as well as with the more vague parts on the basis of reasonable interpretation, to be adjudicated by the CJEU.
In law there’s very little that’s certain, as such it’s bad form to make predictions, but I’m pretty confident in saying that the CJEU isn’t going to open Pandora’s box by prohibiting Apple from charging a reasonable fee for their IP.
That "up to" makes me nervous that 10% won't happen, but I love the idea of smacking companies with real fines for not complying / maliciously complying with laws.
"If that investigation confirms that Apple failed to comply with the antitrust law, then the iPhone maker could be fined up to 10% of its worldwide turnover – increasing to 20% for repeat infringements …"
> but I love the idea of smacking companies with real fines for not complying / maliciously complying with laws.
A lot of people don't, or to say, when you have extra-territorial penalties (we are going to fine you on all the money you spend), things get messy really quickly.
Apple can also always just exit the European market. At some point it makes no sense to be in it, and Europeans will simply buy their iPhones on overseas trips.
They would lose trillion from market cap if they exited.
$38B in fines (or up to $72B) is not going to be well received by the markets.
This isn't US legislation where you can find loopholes, EU legislation prohibits malicious compliance and not following "the spirit" of the law, the latter Apple has publicly admitted to doing.
Mind sharing a source? I’d like to see how far the admission goes.
https://www.businessinsurance.com/article/20240119/STORY/912...
If EU actually tried to get that money, Apple would have to just halt all sales of iPhones in EU.
Now, maybe that's what the EU really wants. Are there some bitter former Nokia execs on the EU panel?????
*
Two scenarios: Company A violates consumer rights. Government does nothing, consumers continue to get ripped off.
Company B violates consumer rights. Government threatens fines. Company either fixes the problem (consumer hsrm reduced) or eats the fine (and the money can be used to pay for useful stuff). Either way, they can no longer gain by tipping off consumers and have every reason to stop if the fine may be repeated for a repeat offender.
*
Calculating on global profits is standard practice and is done the same theme the US calculates fines (depending on what the fine is about - you might have different reference points for different harm). This is the only solution as otherwise companies will play the usual whack-a-mole where they create an "affiliate Europe" that is legally separate but pays 100% of its net profits as a licensing fee for the brand name to the parent company, thus making 0€ (more difficult to play this game with gross sales, but there are still plenty of ways to fudge those numbers).
I guess 10% would be reserved for absolute refusal of compliance and malicious compliance might attract a smaller fine?
> The DMA would constrain gatekeepers’ behaviour while forcing them to proactively open up to more competition. Those in breach of the rules face penalties of up to 10% of their yearly turnover and repeat offenders face being broken-up.
https://www.bruegel.org/blog-post/regulating-big-tech-digita...
More info: https://en.wikipedia.org/wiki/Digital_Markets_Act
Looks like they make about 30% of that in Europe.
Sounds like about 80% of their headaches come from Europe.
If they get fined 10% of 380B, and the EU becomes ever more fine-happy, it will at one point make sense to simply shut down in Europe.
As an aside, it’s baffling to me why an aging continent with a sluggish economy would want to start a trade war with its only friend.
If the alternative is breaking EU rules - great. Let's see that happen.
>>As an aside, it’s baffling to me why an aging continent with a sluggish economy would want to start a trade war with its only friend.
It's hard to see why a country(well in this case a group of countries) would want to do good for their own citizens?
I guess in some places of the world that is indeed a very novel and unexpected thing.
No idea why we'd be in economic isolation because of that either. Is our trading of general goods with US reliant on Europeans buying iPhones?
For a long time, nothing happens.
Next thing you know, your economy is half the size it could have been. About 15 years ago, the US and EU economies were actually the same size. Since then, the US almost doubled, and the EU is literally stuck at the same size. Why should Europeans be so much worse off? Surely they deserve better - more money, more options?
Furthermore, this is clearly part of a larger pattern of targeting big US tech companies. This isn't endearing the EU to business and political leaders in the US.
Because big US tech companies are playing fast and lose with the consumer rights and privacy of our data that we as Europeans have come to expect. If a German or French company was breaking the rules in that way I would also expect them to be treated the exact same way and fined into oblivion.
>>This isn't endearing the EU to business and political leaders in the US.
I will take protection of consumers over "endearing" ourselves to businesses and political leaders in the US. Your business practices do not trump our expectations as society - but you wouldn't expect any less from foreign companies doing business in US, so why is this surprising? US is constantly introducing tariffs regulations and fines for foreign companies doing business on its soil, because you want foreign business to play by your rules. But when someone does it to you it's suddenly going to collapse our economy?
>>Surely they deserve better
They do, that's the entire point.
I'm not saying the European economy would ever collapse, I'm saying it suffers from things like this. It's good now, but could have been wonderful.
The economy? Sure. The economy really isn't all that societies are about, but I'm sure even you'd agree with that statement - like for example, if someone said that installing permanent unremovable surveilance inside your house and sharing its data publicly would grow your economy by 20%, would you agree to that? Surely it would be wonderful.
There's a line that everyone draws - some countries draw it elsewhere than others, but there is a line.
Apple doesn't seem to have any issue with that.
Surely compliance with the law is more profitable then stopping trading.
Well, that's the rational point-of-view, yes.
...but the most surprising thing to me to come out of this whole thing was how Epic Games was given the same choice w.r.t. Apple's App Store in-app-purchasing rules, but they decided to do the very irrational thing and sacrifice 100% of their income from their iOS players by being banned from the App Store instead of complying with Apple's "law".
I'm still trying to understand what went through Epic's leadership. They can argue it was over a moral principle, but their case (at the time) was so weak it made them look worse than Apple in my eyes.
It's like if Epic was Rosa Parks, but if she sat at the front of the bus in order to give a timeshare sales presentation to the other riders.
> As an aside, it’s baffling to me why an aging continent with a sluggish economy would want to start a trade war with its only friend.
This isn't a trade war, there is no competition the EU is trying to bolster. The way I see it they are just being assertive about their market rules, which is refreshing considering other regions tend to get walked over.
Now, if EU regulations created an amazing place to live where everybody's inventing and implementing the future, that would be great. (And the EU does have lots of common-sense regulations with a high return on investment). The best way to set the tone of the future is to build it yourself, not complain about what someone else built.
No you don't have to. Why is globalism a necessity?
We work to live, not live to work. We are pushing each other for economic growth so hard our population is starting to decline for "the hustle".
> The best way to set the tone of the future is to build it yourself, not complain about what someone else built.
Straw man? I'm not against innovation or the success of others. Why do you like being abused by large international organizations? :)