BRING APPLE’S PROPOSALS IN LINE WITH THE EU DMA OR FACE NON-COMPLIANCE PROCEEDINGS, WARNS EUROPEAN PUBLISHERS COUNCIL

The EPC calls on Apple to review its new terms prior to the implementation deadline of the DMA on 7 March 2024. If important changes are not made, the EPC will request the European Commission to start non-compliance proceedings against the tech giant. The DMA’s goal is clear: to promote fairness and contestability in digital markets by imposing certain obligations on tech giants, such as Apple, in relation to app distribution. EPC members have been counting on this new legislation to lift the unfair restrictions imposed by Apple on app distribution, so that:

*Publishers can offer their subscribers promotions and deals in their own apps (currently prohibited by Apple);

*app users can buy subscriptions in-app, without publishers being subject to a disproportionate tax from Apple (currently 30%)

*publishers can use their own payment systems (currently only Apple’s is available); and

*they can potentially use alternative app stores to distribute their apps.

Angela Mills Wade, Executive Director of the EPC said: “We have reviewed Apple’s plans to “comply” with the DMA, disclosed on 25 January, and take the view that they manifestly contravene the DMA.  They will not be fairer or increase competition, and they will make the distribution of news media and magazines more expensive. At times when distributing quality news and a wide range of information should be facilitated, Apple’s proposal sits on the wrong side of history and we call upon the EC to take action to bring Apple’s proposals into line with the DMA”.

The flaws in Apple’s proposal relate in particular (but not only) to the following: 

Contrary to the text of the DMA, which mandates that some transactions should be “free of charge”, Apple is taxing all transactions relating to digital goods (even more than today); 

The transaction fee and the newly introduced Core Technology Fee are arbitrary, unreasonable and discriminatory; and

The option to use our own payment systems or alternative apps stores are subject to scare messages and / or restrictions which will make them ineffective while sideloading is still not allowed.

Angela added: “Apple must review its new terms as soon as possible and in any event prior to the implementation deadline of the DMA on 7 March 2024. If they do not, the EPC will have no choice but to request the European Commission immediately start non-compliance proceedings against Apple under the DMA.”
 
In more detail:

Nothing “free of charge”

The DMA provides that app developers should be able to promote offers and conclude contracts “free of charge” with their existing users (whether such users already pay for news content or consume free content on the app). But there is nothing free of charge under Apple’s new terms, as all transactions, whether in-app or through a link-out solution, are subject to a transaction fee of 17% (10% for subscription renewals).  

What is worse, under the new terms, Apple is removing its readers app exception, which allowed news media to link to their website to offer subscriptions free of Apple’s tax. In other words, Apple is doing the opposite of what it is supposed to do under the DMA. 

Arbitrary, unreasonable and discriminatory fees

The DMA provides that access conditions to app stores should be fair, reasonable and no-discriminatory. In contrast, the new fees introduced by Apple are arbitrary, unreasonable and discriminatory.

None of the justifications invoked by Apple for its  17% transaction fee, such as access on the app store, Apple’s discovery services, access to Apple’s programming tools and resources, can justify reaping almost a fifth of any app’s sales.  Remember that Apple imposes the use of these tools. News media need no discovery services to be found.  And if access to Apple’s programming technology is the reason for the fee, there is no reason why news media apps should pay and not apps selling physical goods – like Uber or Deliveroo.  The transaction fee is manifestly discriminatory, in plain contradiction with the DMA.

The new Core Technology Fee (CTF) is equally unfair and excessive. Since any update counts as a download, apps that are not even used – but automatically updated as per Apple’s rules – will cost app developers.  Because it applies to free apps, the CTF will significantly increase the cost of distribution of free news media content, and force publishers to put more content, not less, behind a paywall.

The use of our own payment system and alternative app marketplace is overly restricted

The EPC welcomes the introduction of alternative app stores and the possibility for app developers to use their own payment system. But this apparent compliance with the DMA is hiding a maze of conditions and circumstances which will makes these news options ineffective: 
 
Alternative marketplaces are subject to strict requirements, including the payment of a 1 million euros bond, which will likely deter many small developers from even trying. 

Because the CTF will deter most free apps from adopting the new EU terms, alternative marketplaces will not be able to scale up and benefit from network effects. They are, therefore, unlikely to be chosen as “default app marketplace”, and will thus likely be little used. 

Switching from the App Store to alternative marketplaces will come with several warnings from Apple which will likely deter users from switching.  Same for the use of alternative payment methods.  

Alternative app marketplaces are only allowed on the iPhone. This means that an app developer switching to an alternative marketplace on the iPhone will not be able to install such an app on an iPad.  For publishers, this is a no go. 

Finally, we regret Apple’s extremely narrow interpretation of Article 6(4) insisting on blocking “sideloading” (downloading apps directly from a website, as happens with its own computer software).