Another regulatory brick in the wall for Apple: The iPhone maker agreed this weekend to changes to its App Store in the Netherlands focused on dating apps, agreeing to allow local developers of dating apps to be able to offer non-Apple based payments (via Reuters).
In December, the Netherlands Authority for Consumers and Markets (ACM) found Apple in breach of national competition rules — ordering it to adjust what it described as “unreasonable conditions” in the App Store that apply to dating app providers.
Apple had been facing the threat of a financial penalty if it failed to make changes by the weekend.
The tech giant went to court to seek an injunction against the order last month, including seeking to prevent the regulator from publishing its decision and applying for a temporary suspension of the order.
However, in a December ruling, the court largely rejected Apple’s arguments — giving the company until January 15 to comply with the order to let dating app providers offer alternative payment options to their users.
“The case concerns the conditions Apple imposes on dating app providers if they want to sell digital content in their apps (such as ‘superlikes’ and ‘boosts’). Those conditions mean, among other things, that payments from consumers must be made to Apple as a so-called commission agent of the dating app providers using certain software (the IAP API) that Apple has built into its iOS operating system. The dating app providers may not use any other payment settlement method and may not refer to another payment method in their apps,” the Rotterdam Court wrote [translated from Dutch using machine translation] at the time.
“With regard to this part of the conditions, the preliminary relief judge follows the position of ACM that with these conditions Apple is abusing its dominant position in the market for app store services for dating app providers. Apple’s arguments that it would not have an economic dominant position and that the conditions are necessary are not successful.”
“The ruling means that Apple must allow dating app providers for their dating apps that they offer or want to offer in the Dutch Store Front of the App Store to choose which party they have to settle payments for digital content and services sold within the app, and that those dating app providers may refer to payment systems outside the app for in-app purchases,” the court added, giving Apple a six weeks grace before the financial penalty for continued non-compliance would apply.
In the event, Apple has chosen compliance — while it continues to fight to overturn the order in the courts.
In a statement late Friday, ahead of the court-amended deadline to comply, Apple informed developers of the change to how it operates its store in the Netherlands.
It also confirmed it is appealing the ACM ruling, laying out its case that the changes risk degrading the user experience and could create risks for user privacy and security — with Apple writing:
“Because we do not believe these orders are in our users’ best interests, we have appealed the ACM’s decision to a higher court. We’re concerned these changes could compromise the user experience, and create new threats to user privacy and data security. In the meantime, we are obligated to make the mandated changes which we’re launching today and we will provide further information shortly.”
In the statement Apple also takes great care to warn local developers that if they take up the option to include non-Apple payment options in their apps there will be a reduction in the services Apple can provide their users as a result — while also emphasizing that app makers can choose to continue to use its in-app payment system without the need for any changes to how they operate.
Here’s the relevant chunk of text:
“To comply with the ACM’s order, we’re introducing two optional new entitlements exclusively applicable to dating apps on the Netherlands App Store that provide additional payment processing options for users. Dating app developers who want to continue using Apple’s in-app purchase system may do so and no further action is needed. Before considering applying for one of these entitlements, it’s important to understand that some App Store features that you may use won’t be available to your customers, in part because we cannot validate the security and safety of payments that take place outside of the App Store’s private and secure payment system. Because Apple will not be directly aware of purchases made using alternative methods, Apple will not be able to assist users with refunds, purchase history, subscription management, and other issues encountered when purchasing digital goods and services through these alternative purchasing methods. You will be responsible for addressing such issues with customers.”
An Apple spokesman confirmed to TechCrunch that the restrictions on local dating apps that offer users non-Apple based payment methods for in-app purchases relate to refunds, subscription management and similar services — pointing to the portion of the statement where it underscores how app users will be on their own if purchasing digital goods from a developer that’s taking payment via non-Apple infrastructure.
In additional information to local dating app developers, Apple further emphasizes:
“It will be your responsibility to assist your users if questions or issues arise stemming from alternative payment options. Because Apple will not be directly aware of purchases made using alternative methods, Apple will not be able to assist users with refunds, payment history, subscription management, and other issues encountered when purchasing digital goods and services through these alternative purchasing methods. You will be responsible for addressing such issues with customers.”
Apple’s spokesman confirmed that developers who choose not use Apple’s In-App Purchase (IAP) technology can either link out or use a third-party payment method within the app — pointing to further information it has provided developers here.
It does not appear that local developers switching away from Apple’s IAP tech will be able to access entirely commission-free payments, however.
In information provided to developers, Apple also notes [emphasis ours]: “Consistent with the ACM’s order, dating apps that are granted an entitlement to link out or use a third-party in-app payment provider will pay Apple a commission on transactions.”
Apple’s spokesman declined to provide any additional details about this — such as whether the commission Apple will charge on any non-Apple/third party payments is lower than its standard IAP commission. But presumably it is.
On its website the company further notes that “more information on all aspects of the entitlements will be available shortly”.
Big Tech’s Big Antitrust Reckoning
While this regulator-enforced change only applies to iOS developers in the Netherlands — and only to dating apps — it offers a taster of additional App Store rule changes that could follow as European regulators continue to dial up their attention on how Apple operates the store after years of complaints over its “tax” on in-app payments.
A number of competition regulators in Asia have also targeted Apple over in-app payments — and, earlier this month in South Korea, Apple agreed to let local devs use third party payment options in their apps following a law banning payment mandates.
Meanwhile, over in the US, Apple has been appealing against an order following litigation by developers that it must allow devs to communicate with users about alternative payment methods available outside their iOS apps.
In Europe, the App Store remains under close antitrust scrutiny across the region — with open investigations by the European Commission (which issued a formal charge focused on the music streaming market last April) and the UK’s Competition and Markets Authority (CMA), to name two.
Germany’s Federal Cartel Office also begun its own Apple App Store probe this summer.
A major mobile market study — looking at Apple and Google’s duopoly control of the ecosystem — by the UK’s CMA is also ongoing. But in a preliminary finding in December the regulator gave a heavy hint that enforcement is coming — highlighting in-app payments as a concern, with the CMA suggesting that current approaches by Apple and Google could be contributing to higher prices for consumers and squeezing competition.
The UK is in the process of reforming digital competition law to create a new ex ante — and explicitly pro-competition — regime that will apply to the most powerful platforms, aka those judged to have so-called ‘strategic market status’.
Whether Apple meets the bar of that future law remains to be seen but the company is already in the CMA’s crosshairs — and enforcements could be on the horizon as a result of the investigation the regulator started last March to consider whether Apple imposes “unfair or anti-competitive terms on developers”.
Similar legislative reforms targeting Big Tech are in train in the EU — where lawmakers are busy hashing out the fine details of the Digital Markets Act.
The Commission proposed the regulation at the end of 2020, suggesting a fixed set of operational requirements on gatekeeping Internet giants — coupled with centralized enforcement to avoid regulatory capture and enforcement bottlenecks — which means the biggest tech companies are facing far tighter limits on how they can do business in the EU in the near future.
Germany’s FCO, meanwhile, already has ex ante powers to smack tech giants — with so-called paramount market significance in its case. And, earlier this month, Google was the first tech giant to get a taster of its more alacritous antitrust action, as the FCO confirmed it meets the legal threshold for special powers to kick in. Soon after, Google made an offer of operational commitments related to how it operates News Showcase, one of its products that remains under FCO probe.
The German regulator is, similarly, in the process of deciding if Apple’s business meets the operational bar for faster antitrust enforcement. So a pipeline of enforcements looks likely.
In a set of further competition-related enforcements, France has also been going after Google hard on the news front — hitting the company with a massive fine last summer. Its antitrust regulator has leveraged a pan-EU update to digital copyright law to extract local operational commitments soon after the update was transposed into national law.
Also recently, France’s antitrust watchdog has obtained a series of commitments from Google around adtech, following another bevvy of complaints.
As has the UK’s CMA — which is busy forcing Google to reshape its plans around Privacy Sandbox. In that case the tech giant has offered to make the commitments global if the UK regulator accepts them.
One thing is clear: Big Tech’s operational room for manoeuvre is shrinking fast as regulators around the world up their interventions and get smarter about joint working, digital market analysis and knowledge sharing.
The only silver lining for the biggest beasts of tech is perhaps that talk of breaking up platform empires has been dialled back in regions like Europe.
Tighter regulation appears to be the preference for Europe’s competition regulators — likely as it’s seen as a more realistic (and faster) route for reshapeing the local market impact of US Internet giants.