The European Commission is to investigate whether Apple and Alphabet's app store policies are in line with the new Digital Markets Act (DMA). Lawyer Cyriel Ruers interprets the case: "The ability to conclude agreements with end users outside app stores can give app developers a big financial advantage."
The mobile application market since its inception has been dominated by the App Store and Google Play and their owners Apple and Alphabet. Both parties have since been designated as gatekeepers under the DMA, which requires them to meet far-reaching requirements to ensure fair competition. The Commission is now investigating whether the tech giants' current policies meet these requirements (1).
The editors of PONT | Data & Privacy sat down with Cyriel Ruers, attorney at Maverick Lawyers, to explain the legal thrust of the study.
What is the reason and legal basis for the investigation?
"Under the DMA (Article 5(4)), Apple and Alphabet must allow app developers, free of charge, to make offers to end users acquired through Google Play or App Store (or other channels), and to enter into agreements with those end users, regardless of whether they use these app stores to do so. Until now, this has not been possible, if at all, due to so-called anti-steering provisions in the terms and conditions of Google Play and App Store.
The idea behind this is to make app developers less dependent on these platforms by allowing them to choose how to approach end users with offers. For example, an app developer should be able to direct users in its app to its own site to subscribe to a service there. Moreover, app developers are allowed to apply different terms and conditions there, such as a lower price compared to the price offered in the app."
Both the Apple and Alphabet do now allow link-outs in apps. These are links in the app in question to an external website of the app developer. However, the companies still charge fees on transactions made through link-outs: Apple charges 17 percent on all transactions related to digital content concluded through link-outs. For subscriptions, Apple charges 10 percent after the first year. Alphabet charges lower amounts, but does charge an additional fee for security and updates, among other things, Ruers explains. So the Commission is now investigating whether these terms are compatible with Article 5(4) of the DMA.
What will be the possible defense from Apple and Alphabet?
"The investigation is ongoing and the question is what justification Apple and Alphabet will cite for their fees. Possibly they will point to recital 40 of the DMA, which leaves room for an acquisition fee.
That is, Alphabet and Apple may charge a fee to the app developer for facilitating the app developer's initial acquisition of the end user. They might argue that the fees they charge are in effect a smoothed acquisition fee, but the question is whether that doesn't bite with the premise that app developers should be able to enter into free deals off platforms."
What are the potential implications for the European mobile application market?
"The ability to enter into agreements with end users outside the app stores can give app developers a huge financial advantage by eliminating the need for one-time or recurring high fees on in-app purchases. App developers should therefore speak out clearly against Apple and Alphabet's policies. They can do this with the European Commission, but also in the Netherlands with the Consumer and Market Authority, for example through an industry association."
Read more about web shops and the DMA in this blog (4).
(1) https://ec.europa.eu/commission/presscorner/detail/en/ip_24_1689
(2) https://developer.apple.com/support/dma-and-apps-in-the-eu/
(3) https://support.google.com/googleplay/android-developer/answer/14659200?hl=en
(4) https://www.maverick-law.com/nl/blogs/webshops-en-de-digital-markets-act-weet-welke-rechten-je-hebt.html
