It’s just a comma in a 66-page document. But a comma that will cost Apple billions of euros in Europe. Starting June 23, the Cupertino-based company will no longer be able to collect commissions on external transactions made from an iPhone or iPad. In other words, all app developers will be able to redirect their users to a website to make a purchase or subscribe to a service without paying Apple a single cent.
This bombshell, which comes just after an unfavorable ruling in the US, is the result of a months-long syntactic battle with the European Commission over the exact meaning of an article in the Digital Markets Act (DMA), designed to strengthen competition in the digital space. In late April, Apple had already been fined €500 million.
Enacted last year, the DMA bans the so-called anti-steering practice, which Apple has enforced since the launch of the App Store. This required developers to use its payment platform and pay it 15% or 30%. Officially, Apple has abandoned this, though Brussels still accuses it of maintaining “technical and commercial restrictions.”
However, Apple has not given up on collecting commissions. It initially set them at 12% or 27% for purchases made within seven days after redirection. It has since introduced a more complex system, with fees of up to 25% on transactions during the twelve months following installation or update of an app. According to the EU, these commissions not only go “beyond what is strictly necessary”—as noted a year ago—but they also violate the DMA.
A comma that changes everything?
The disagreement between Apple and Brussels centers on Article 5.4. In its English version, the article states that the gatekeeper—the term used by the Commission for the seven major tech companies subject to the DMA—“shall allow business users, free of charge, to communicate and promote offers, including under different conditions […], and to conclude contracts with those end users.”
This lengthy sentence creates ambiguity: what exactly does “free of charge” apply to? Apple claims it only applies to “communicate” and “promote,” meaning the right to insert redirect links in an app. But not to “conclude contracts,” meaning making purchases. Based on that, Apple argues it can still charge commissions on those external transactions.
The European Commission interprets it differently: contract conclusion must also be free of charge. It relies on the comma before the phrase “and to conclude contracts,” turning the sentence into an “enumeration.” “That ‘free of charge’ applies to all that is being enumerated after”, it explains in its detailed decision sent to Apple as part of the €500 million fine, which was made public last week.
“In other words, the price for app developers to pay [for external purchases] is zero,” writes the Commission. However, its case could be weakened by inconsistencies in the French and German translations of the text, which it acknowledges are “ambiguous.” Still, “other linguistic versions leave no room for interpretation,” notes Brussels.
Daily penalties of up to €47 million
To complicate matters further, the regulator acknowledges that Apple can be compensated for the initial acquisition of a customer by a developer. But this commission—whose rate must be determined by the company—can only apply within a “limited initial time window” after the first installation of an app.
Crucially, it only concerns the very first transaction, even if the user deletes and later reinstalls the app. “An end user can only be acquired once,” says the Commission. Apple contests this, arguing that “the value of the initial purchase is a poor measure of value delivered by App Store” since it only represents a “small fraction of acquisition value to developer”.
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For a year now, it has adopted a very combative stance toward the DMA, aiming to concede as little as possible. But it faces daily penalties of up to €47 million. In April, European officials said they would not hesitate to apply them if necessary.
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Source: A simple comma is going to cost Apple billions in Europe
Apple has been putting spanners in the works of the EU DMA since inception and has been pissing off developers, the EU and customers since then. The EU is toughening it’s stance – the spirit of the law is more important than a single comma in a huge document in Europe.
Robin Edgar
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