Apple's non-compliance decision at first glance: consistently seeing through the gatekeeper's non-compliance game (without access to damning evidence as in Epic v. Apple). Sending an important message to the others as well. Can't wait to read Meta's 5(2) decision too.
One of the advantages of having (non-captured) regulators is that they get to know their regulated entities pretty well, seeing through smokescreen strategies rather quickly. Like a mum dealing with a child she knows all too well.
Some first impressions
The first notable point is the Commission’s confirmation that every set of business conditions offered by Apple to app developers must permit steering, not only those tied to a particular contractual framework developers can choose from. Non-compliance cannot be remedied by offering an alternative, compliant path. In any event, this was not the case here: all the options offered were non-compliant.
On the "Original Business Terms," the Commission had little difficulty: no form of steering was permitted, as Apple itself acknowledged, referring to the practice almost as a time-honoured tradition, not unlike the Romans venerating their own, largely fabricated, ancestral deeds, lost in the shadowy mists of time.
Another notable point is that, insofar as the Original Business Terms, found to be non-compliant, continued to apply to the New Business Terms, the latter were, by that fact alone, already non-compliant. One might wonder whether Apple’s contract lawyers assumed they had been particularly clever, and that the Commission wouldn’t notice. This is also of interest in that the presence of a non-compliant element taints any part that might otherwise have been compliant, though, as noted above, in this case there was nothing compliant to begin with. That principle, of course, may prove important well beyond the confines of this particular decision.
Proceeding further, what stands out is that Apple’s understanding of a “self-executing” obligation appears to translate into business as usual, without any need to venture into "technical complexity ("“required to ‘allow’ developers to contract with end users within or outside of the app, as it has always done”). Even more reminiscent of clinging to a slippery surface is Apple’s argument that the absence of any security exception in Article 5(4) must mean the EU co-legislators intended to give it carte blanche to impose restrictions on app developers’ ability to steer and conclude steered transactions. Naturally, this is because Apple is solely concerned with the security of its users.
As one would expect in the first non-compliance decision, much turns on the interpretation of what amounts to effective compliance under Article 8(1). Importantly, as I noted in a separate comment on the DMA, though I confess I can no longer recall which 😊, the Regulation makes clear that the measures implemented by the gatekeeper must be effective in achieving the objectives of both the Regulation and the relevant obligations. What matters, then, is not whether steering and steered transactions are "theoretically permitted" by Apple’s terms and conditions, but whether Apple allows in practice, including through contractual or technical means, business users to steer acquired end users. It is difficult to imagine that the DMA could function without requiring technical changes on the part of gatekeepers, or that the co-legislators were unaware of this.
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| Unbelievable |
Many are the facets that make up the prism of app developers’ freedom to promote and choose the distribution channel they consider most appropriate for interacting with end users, and the discussion of how Apple sought to limit and effectively nullify that freedom is particularly telling. On a personal note, I still recall my very emotional reaction the first time I read the text of the disclosure sheet shown after a link-out. In contrast, the Commission offers a calm and reasoned discussion thereof. The main points are, first, that the recurrence of the disclosure and, second, its wording are both designed to discourage rather than properly inform the user. This attention to what is actually required for users to exercise the rights guaranteed by the DMA is certainly to be welcomed, unlike Apple’s eagerness to cast itself, uninvited, as the guardian of its users’ privacy, a role which in the EU belongs properly to the national data protection authorities (a role which, it must be said, is however often poorly discharged, and we need noyb and others to step in).
The decision then turns to a detailed discussion of what “free” actually means, and whether one can be free yet still required to pay, and, if so, how much. And although it is admittedly difficult to dispute that the text states quite plainly “free of charge”, Apple is quick to argue that, in fact, it was never meant to be there in the first place, and in any event, it should be read far more narrowly, excluding any application to the "conclusion of contracts." The argument wavers between suggesting a drafting oversight and hinting at a sort of Missverständnis, with the Commission cast in a dark wood of discordant translations. And any alternative reading of the otherwise plain terms “free of charge” would turn Article 5(4) into a convoluted mechanism of price control so elaborate that not even socialism would have dared attempt it (I may be overstating it, but only slightly). In any case, Recital 40 itself makes it clear that the gatekeeper may be remunerated for the "initial acquisition."
And here it is crucial, as the Commission rightly does, not to lose sight of the objectives of the DMA. The contestability of Apple’s App Store is reinforced precisely by reducing app developers’ dependence on it. This crucial step presupposes that those developers have real economic incentives to use alternative distribution channels, which is exactly what the DMA seeks to provide. Those incentives, however, either vanish or are signifacantly reduced if app developers must pay Apple for the privilege of concluding contracts after (free!) steering.
Thus, Apple’s express provision of a “Commission Fee” in its New Business Terms, applying to all transactions completed by end users within seven calendar days of each link-out from the developer’s app, constitutes a clear breach of the obligation under Article 5(4). A Commission Fee structured in this way cannot, in any case, be regarded as remuneration for facilitating the initial acquisition of the end user by the app developers (something the DMA does not, in itself, prohibit). What follows is a lengthy, and arguably borderline ridiculous, explanation of what “initial” is meant to convey, which of course does not mean “forever."
In the course of the relatively straightforward dismantling of Apple’s counterarguments, one is struck once again by its appeal to ancestral tradition, in the form of its pre-DMA business model. As the Commission states in no uncertain terms, defending that business model is no excuse for failing to comply with the DMA. On the contrary, complying with the DMA may well require changing the business model itself. Indeed, there is nothing sacrilegious or unlawful about it. As the Commission seems almost compelled to remind to a company whose market capitalisation surpasses the GDPs of most countries, the "Union legislature is permitted to place such restrictions on an undertaking’s freedom to conduct a business, provided those restrictions are laid down by law, respect the essence of that freedom, and, subject to the principle of proportionality, are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others."
Arriving finally at the fitting epilogue of the decision, not the fine, but the cease-and-desist order, the whole matter is dealt with in little more than a single page. Particularly interesting is the comparison with the obligations Apple now faces following its defeat across the Atlantic in the Battle Royale with Epic.
We’ll see in just under a month whether periodic penalty payments will prove necessary.
Update: Apple's statement provided to 9TO5Mac is rather, well, unsurprising:
“There is nothing in the 70-page decision released today that justifies the European Commission’s targeted actions against Apple, which threaten the privacy and security of our users in Europe and force us to give away our technology for free. Their decision and unprecedented fine came after the Commission continuously moved the goalposts on compliance, and repeatedly blocked Apple’s months-long efforts to implement a new solution. The decision is bad for innovation, bad for competition, bad for our products, and bad for users. While we appeal, we’ll continue engaging with the Commission to advocate on behalf of our European customers.”
Also on LinkedIn (not capitulating yet, though)
