Apple is renovating the App Store in Europe in response to the new digital law
Since Apple introduced the App Store in 2008, it has tightly controlled the apps and services allowed on iPhones and iPads, giving the company an iron grip on one of the digital economy's most valuable storefronts.
Now Apple is loosening its grip on the store, in one of the most consequential signs yet of how new European regulations are changing consumer technology.
To comply with a European Union competition law that takes effect on March 7, Apple on Thursday announced major changes to its App Store and other services for consumers in Europe. iPhone and iPad users in the 27-nation bloc will be able to use alternative app stores to download games, productivity tools and other apps for the first time. Banks and shopping services can offer competing payment methods in their apps. People who buy new iPhones in the future will also see a new menu for downloading alternative browsers to Apple's Safari, such as Chrome and Firefox.
The changes are some of the most tangible examples of how a checkerboard of laws and regulations is now fragmenting people's technology experiences based on where they live. In China, government regulations are forcing Apple to block apps like virtual-private networks, known as VPNs, that would give users access to the unfiltered Internet. In Europe, customers now have access to competing app stores and other services. In the United States, where there are fewer laws and regulations, Apple and other tech giants have more flexibility to operate as they wish.
The shifts in the App Store stem from a 2022 law passed by the EU, the Digital Markets Act. The sweeping law was intended to loosen the power of the world's largest tech companies in areas such as e-commerce, social media and messaging. Amazon, Meta, Google and Microsoft have also announced changes to comply with the new rules.
“The changes we are announcing today are in line with the requirements of the Digital Markets Act in the European Union, while helping to protect EU users from the inevitable increased privacy and security threats this regulation poses,” said Phil Schiller , head of the App Store. a statement.
Europe accounts for about 6 percent of Apple's total App Store revenue, which is estimated at $24 billion a year globally.
Regulators in the EU have long warned that Apple is abusing its control over the App Store to stifle competition. The Silicon Valley company has argued that its role as a gatekeeper protects customers from malware, privacy breaches and flawed apps. But app developers like Spotify and Epic Games, the maker of Fortnite, have said Apple is abusing its power by demanding they pay high fees and forcing them to use the company's underlying technology.
Apple has resisted the kinds of changes it announced Thursday for years. It is unclear whether these steps will satisfy European regulators, who have vowed to aggressively enforce compliance with the Digital Markets Act.
Apple said it would maintain some oversight of new marketplaces and apps that operate outside the App Store, but warned that the new EU policy would give bad actors a new path to spread malware and defraud customers. The company said it has developed a system to monitor all iOS apps, approve alternative app stores and track alternative payment systems.
Apple said developers will also have to pay a 50 cent fee for each download of their app after it has been downloaded 1 million times or more, whether through the App Store or an alternative. This includes free apps, but not apps distributed by government, education, and nonprofit organizations.
The new rules could negatively impact Apple's finances. The App Store's policy of capturing up to 30 percent of developer revenue has made the App Store a crucial part of the company's nearly $400 billion in revenue. But it has also opened Apple up to criticism and scrutiny from regulators, as many developers complained that the fees were unfair.
In Europe, Apple said developers using the App Store would have the option to continue using existing commission terms or switch to a new fee structure. This includes a reduced commission rate of up to 17 percent for digital goods and services. An additional 3 percent fee would be charged to developers using Apple's payment system.
Apple said the fees are intended to cover the costs of developing its software and providing tools to developers.
Developers who distribute their app through a competing App Store do not have to pay a commission from Apple. Developers who provide links to complete payments outside of their apps can also waive the fees.
Developers could also avoid what some of them have said is a cumbersome review process by Apple of the apps it distributes in its store. But the company has developed a new system, which it calls notarization, to maintain some control over the apps distributed on iPhones. Each iPhone app contains an installation key that gives Apple information about when the app was installed and allows the company to run automated scans for malware.
As part of the notarization process, apps will provide Apple with descriptions and screenshots of the services they offer, as well as the name of the developers. Apple will share that information with iPhone users before downloading an app.
Apple also introduced a new feature that allows customers to use alternatives to the Wallet app for mobile payments, an increasingly common payment method for public transportation, restaurants and cafes. Major banks and companies like PayPal can now offer competitive services.
Apple has challenged some elements of the new European law, including a requirement that its messaging service, iMessage, work more smoothly with Android devices. The company has argued that iMessage is out of compliance because it is free for customers.
The EU has not yet made a final decision on the messaging issue.