The European Publishers Council (EPC) today submitted a comprehensive Memorandum to the European Commission (EC), calling out Apple and Google’s attempts to circumvent new EU rules aimed at restoring fairness and competition in digital markets.
European Publishers Council Submits Concrete Proposals to the European Commission for Strict Enforcement of DMA’s App Store Rules
The EPC highlights critical shortcomings in how Apple and Google are implementing app store provisions under the Digital Markets Act (DMA) and how this impacts Europe’s press publishers.
With more people accessing news through apps on iOS and Android devices, the EPC underscores the DMA’s significance in fostering a fair and competitive digital market.
Angela Mills Wade, Executive Director of the EPC said: “For years, press publishers have grappled with Apple and Google’s restrictive app store policies, including tactics to prevent competition in app distribution and payment solutions, and the imposition of unfair and discriminatory fees. The EPC fully supported the DMA to ensure fairness and competition but Apple and Google’s current implementation plans undermine these goals, perpetuating high fees and limited competition.”
The EPC supports the EC’s swift action to investigate compliance with Article 5(4) and has provided concrete proposals to the European Commission. The EPC emphasizes a broad interpretation of Article 5(4), advocating for maximum freedom for app developers to present attractive offers to users. Additionally, they call for the enforcement of Article 6(12) and the fair, reasonable, and non-discriminatory (FRAND) principle.
Key points from the EPC’s analysis include:
1. Burden of Proof: Apple and Google must demonstrate how their fees comply with the DMA, not the other way around. EPC proposes a method for justified fees across all app categories.
2. Fee Justification: Apple and Google should not charge different fees for digital content apps versus apps selling physical goods unless objectively justified. If they cannot justify this, a uniform “no transaction fee” should apply.
3. Reasonable Fees: If fees are necessary, they should be reasonable and consistent across all payment methods and app categories. Apple and Google may be allowed to charge a one-time acquisition fee in some circumstances. Any additional fee should be justified by the provision of a specific service, which app developers should be free to use or not; it should also be FRAND.
4. Non-Discriminatory Practices: Any exclusive deals for certain app developers should be available to all, upholding the essential role of media publishers as highlighted in the European Media Freedom Act.
5. Core Technology Fee: Apple’s Core Technology Fee (CTF) is deemed unfair, excessive, and non-compliant with Articles 6(4) and 6(7) of the DMA.
6. User Experience: Unnecessary friction, such as “scare screens” or UX restrictions, introduced by Apple and Google must be removed to enhance user experience and competition.
The EPC calls on the European Commission to enforce rigorously all DMA provisions related to app stores to ensure fair competition and to protect consumers. Failure to do so would render the DMA a missed opportunity.
More details from the Memorandum submitted to the EC can be found below.
The EPC is a high-level group of leading European media organizations committed to ensuring the sustainability of a diverse and independent press. Through advocacy and collaboration, the EPC aims to promote fair and competitive digital markets.
In more detail:
The European Publishers Council (“EPC”) has shared with the European Commission (“EC”) a detailed report regarding the implementation by Apple and Google of the app store-related provisions contained in the Digital Markets Act (“DMA”).
The app store-related provisions of the DMA are of critical importance for press publishers considering that a growing number of people consume news online. They often do so on iOS and Android devices through apps that are distributed by the Apple App Store and the Google Play Store. Over the years, EPC members have been frustrated with Apple and Google’s app store policies, including their various tactics to preserve their app distribution monopoly, and prevent competition in app payment solutions, and the imposition of unfair and discriminatory fees.
The EPC therefore strongly supported the adoption of the DMA whose core objectives are to ensure greater contestability and fairness in digital markets. Unfortunately, Apple and Google’s implementation plans of the DMA’s app store-related provisions fall short on both counts. They frustrate greater competition in app distribution and in payment solutions through a combination of friction and excessive fees.
In this context, the EPC supports the EC’s prompt decision to open proceedings to assess whether the measuresimplemented by Apple and Google comply with Article 5(4), as well as its plan to send its objections to Apple in the near future. The EPC’s views is that Article 5(4) should not be interpreted narrowly. The goal should be to allow app developers to have the largest possible freedom to offer attractive offers to their users. The EPC’s view is that, although an essential step, enforcing Article 5(4) may not be sufficient. Article 6(12), and the fair, reasonable and non-discriminatory (“FRAND”) principle it contains, should also be implemented.
Our analysis of app store fees is based on some key principles:
· Apple and Google have the burden of demonstrating that their fees comply with the DMA. It is not for the EC or third parties to demonstrate that these fees are not compliant. However, in this memorandum, the EPC proposes a way forward that would allow Apple and Google to be paid fees when they are justified and comply with the DMA.
· Our proposed way forward should be applicable not only to news apps, but also to all other apps. Our proposal is not aimed to be news-specific as we realise that there cannot be as many different regimes as app categories.
Against that background, our position is as follows.
As per Article 6(12), Apple and Google need to objectively justify why they treat digital content apps and apps selling physical goods and services differently
· Apple and Google treat apps that sell digital content (“Digital Content Apps”) and apps that sell physical goods and services differently as only Digital Content Apps pay fees, although they use the exact same app store services.
· If Apple and Google are not able to justify this difference in treatment, they should apply the same fees to both categories of apps, that is “no transaction fee”. While Apple and Google may disagree, in its Apple App Store (Music Streaming) decision, the EC has recognized at § 651 that (i) app developers bring significant value to the gatekeepers’ mobile ecosystem and (ii) gatekeepers have other means of monetizing their app stores (e.g., the $99 developer fee). Apple and Google also make billions of euros in selling search ads, leaving aside the fact that Apple and Google have built extremely profitable ecosystems, which would not have been possible without the presence of apps.
· Alternatively, and subject to the requirements of Articles 5(4) and 6(12), Apple and Google should charge a reasonable fee to all app developers. Given this fee would apply to all developers, it could be very low.
· If Apple and Google are able to objectively justify this difference of treatment (something they have never been able to do), they should be allowed to charge fees for their app store services provided that the fees charged to digital content apps comply with the DMA (see below).
If Apple and Google can objectively justify the difference of treatment between Digital Content Apps and other apps (which is unlikely), Apple and Google should only be allowed to charge digital content apps DMA compliant fees
· The fees charged by Apple and Google for link outs to purchase, the use of alternative PSPs or the use of IAP/GPB breach at least Articles 5(4) and 6(12).
· Article 5(4) provides that app developers should be allowed “free of charge, to communicate and promote offers, including under different conditions, to end users acquired via its core platform service or through other channels, and to conclude contracts with those end users.”
o Apple and Google are in manifest breach of this provision considering nothing is “free of charge” in their terms and conditions. The basic rule is that communication of offers to existing users and the signing of contracts with them should be free.
o Now, if the EC was to interpret Recital 62 in such a way that Apple and Google should be allowed to charge a fee in some circumstances, they should only be allowed to charge an “acquisition fee” when they play a role in the acquisition of the user by the app developer.
▪ This “acquisition” fee should be applied on the first sale and it should not be recurrent.
▪ This fee should apply equally to all modes of payment (link outs to purchase, use of alternative PSPs, or even use of IAP/GPB in which case an extra 3% fee should apply for payment processing). But for payment processing, there is no justification for charging different rates depending on the payment solution used by the developer. An acquisition fee is linked to acquisition, independently of the mode of payment.
▪ No acquisition fee would be owed when the user bought digital content as a result of the publisher’s commercial efforts, e.g., when a news app developer converts a user of one of its free apps into a paying user.
▪ In order to make this approach practicable, we suggest that Apple and Google be allowed to charge a one-time acquisition fee when the user downloads an app via their app store and makes a purchase within a 7-day window of the install; subject to two exceptions: (i) when the user has typed the trademark of the app developer in the app store search box and (ii) when the app developer has bought search ads. In the former case, the app developer brought the user to the app store and in the latter case the app developer has already paid fees for acquisition.
o To the extent that Apple and Google intend to charge additional fees for services they render:
▪ The services must be clearly identifiable and app developers must be able to decide not to use them by opting out;
▪ Opting out of such services should be easy to perform and can be done without the approval of users (as app developers know what is best for their users);
▪ When an app developer decides to opt out of such services, its apps will continue to function (as otherwise the possibility to opt out is illusory); and
▪ If the app developers decide to continue to use these services, they should be priced in a fair, reasonable and non-discriminatory manner.
· Finally, to the extent that Apple and Google conclude tailored-made deals with some app developers whose apps sell digital content, these deals should apply to all other developers unless Apple and Google are able to objectively justify the difference of treatment. In this regard, the EPC would like to stress the essential function of news publishers in today’s society. As the EU legislator recently stated, in the first recital of the European Media Freedom Act:
“Independent media services play a unique role in the internal market. They represent a fast-changing and economically important sector and at the same time provide access to a plurality of views and reliable sources of information to citizens and businesses alike, thereby fulfilling the general interest function of ‘public watchdog’ and being an indispensable factor in the process of the formation of public opinion.”
If any industry should benefit from favourable distribution terms, it should be the news media industry so it can fulfil its general interest function.
Apple should not be able to charge a Core Technology Fee (CTF)
That is the case for the following reasons: (i) Apple is sufficiently compensated with the proposed method above; (ii) the CTF does not comply with Article 6(4) and 6(7). It seeks to prevent alternative forms of distribution (such as direct downloading and alternative app stores), and it hurts app developers which have a freemium business model; (iii) The CTF is both unfair and excessive.
We believe that the proposed approach is principled and simple to implement. It is based on the principles that: (i) apps using the same app store services should be treated equally and that (ii) Apple and Google should be fairly compensated for the specific services they render to app developers, considering they already draw significant value from the presence of apps in their ecosystem.
No friction
We finally note that Apple and Google have introduced unnecessary friction preventing app developers from enjoying the benefits of the DMA. These take the form of “scare screens” or UX restrictions which are entirely unnecessary. These restrictions should be removed to allow for optimised customer experience in
competition with the Apple and Google IAP / GPB solutions.
Conclusion
EPC regrets that Apple and Google have failed to implement the app store related provisions of the DMA, which aimed at ensuring greater contestability and fairness in mobile ecosystems to the benefit of consumers.
It is great time for the EC to enforce Article 5(4), but also to ensure that the other key provisions of the DMA are implemented in full by both Apple and Google. Otherwise, the adoption of the DMA will have been a wasted opportunity.
