With the passage of European Union Digital Markets Act (DMA) in 2022, Online platforms, including Apple, with EU revenues of €75 billion or more and at least 45 million monthly active end-users must open up their devices to third parties. application stories.
The DMA aims to end unfair practices by large online platforms that have a high degree of market power and function as so-called digital ‘gatekeepers’, providing key gateways between consumers and business users. The goal of the DMA is to make it easier for small and medium-sized tech companies to enter markets currently dominated by the big tech giants.
By virtue of a provision of the law, Apple You must allow third-party app stores, such as Setappa MacPaw subscription-based service for iOS and MacOS apps, Steama popular video game distribution platform from Valve, and AltStore, a third-party app installer, on its platform. In addition, Apple must also allow sideloading, that is, allowing users to install software that they download from the Internet.
Several popular gaming apps have been cut off from the platform.
Although Apple has raised privacy and security concerns about allowing alternative app stores and downloads on its platform and has not officially stated that it will comply with the law, the company is reportedly developing software to comply with European Union requirements scheduled to go into effect in 2024, according to Bloomberg.
“This is about increased competition in the digital sphere,” said Maciej Marek, a senior associate at dentex‘ competition and antitrust division. “There is a perception that the digital giants have grown too much and there is not enough competition in this area.”
The WFD is the largest EU legislative effort to date to end Silicon Valley’s monopolization of the industry. technology giants While the EU has generally handled each antitrust problem individually, the WFD introduces comprehensive reforms aimed at addressing widespread problems across the sector. But the key question is, how will these new regulations really affect Apple, its users and the EU app market in the future?
Benefits for Apple, users and developers
Apple’s App Store comes pre-installed on all iOS devices and as it was the only app store available on iPhone and iPad devices, the tech giant has been able to set the rules for distributing apps to the users of its devices. In addition, Apple generates a large profit from its App Store, taking up to 30% (15% for those with less than $1 million in annual net sales) commission on all App Store transactions and regular subscriptions (subscription fees drop to 15% after the first year).
While Apple may balk a bit at the DMA requirements, Setapp product lead Mykola Savin believes this could benefit the company by allowing it to offer its customers more choice, new innovations, and an overall better experience. “We have seen cases like this before, for example, with the new banking regulations that came with the Payment Services Directive 2,” he said.
Payment Services Directive 2 (PSD2), which went into effect on September 14, 2019, required banks to publish their data in a secure and standardized way for easier sharing with third-party providers (including fintechs offering new financial services). First of all, the banks resisted to this idea for security reasons, but later discovered that open banking allows them to offer a broader range of services to their customers and facilitates partnerships with startups offering new solutions.
“They were handling a lot of sensitive data in terms of bank accounts and transactions but, when it was properly regulated and opened up, we now see a lot of really useful products for budgeting, asset management and peer-to-peer payments. So it’s a whole new industry and, again, this translates to a better experience,” Savin explained.
Similarly, Savin noted that competition can often help drive a company to innovate. He cited the famous US antitrust case against Microsoft in the 1990s that forced the company to allow other browsers on Windows, rather than just its own Internet Explorer.
“When done correctly, and thanks to the courtesy of Microsoft, they did it correctly, it was a clear choice for users which browsers to use as their default. This really helped Chrome and other browsers rise again because it wasn’t about the product, it was about allowing users to choose the best service. Now Microsoft has switched to Edge and they are integrating OpenAI because they were forced to compete and innovate,” Savin said.
It should be up to the user where they get their apps from.
Ioannis Kokkoris, director of the Center for Commercial Law Studies at Queen Mary University of London, pointed to another benefit for Apple.
“Apple has a benefit in having more than one app store on its platform,” he said. “Maybe there are certain apps that aren’t available on the Apple App Store because the developers only made them for the Google Play Store. By putting the Play Store on their platform, customers who would have bought (Android) phones will now be more likely to buy iPhones because they can access those other apps.”
For example, a number of popular apps, especially in the lucrative gaming sector, have been cut off from the platform due to Apple’s strict App Store rules. Fortnite, one of the most popular games, was banned from Apple’s App Store in 2020 because its parent company, Epic Games, tried to drive users to buy virtual currency on its own website, violating Apple’s terms and conditions.
Interestingly, statistics show that while iOS and Android users are split roughly 50/50 in the US, in the EU iOS users currently account for only 34% of the total market share vs. 64% of Android users.
In addition, the DMA will create many opportunities for smaller indie developers to experiment and find out what works for users, allowing them to build better products and test new business models and distribution channels, Savin said. For example, Setapp is subscription-based, which means app developers can capture an audience that might not be looking for their app directly but would consider using it as part of a productivity suite.
Allowing more competition in the market benefits users because they have more choice as to which app store they want to use, according to Kokkoris. “And more choice is always better for consumers because there will be lower prices, more innovation and higher quality because there is more competition,” she said.
Security and privacy concerns are legitimate
Marek acknowledged that Apple’s concerns around security and user privacy are legitimate, adding that the DMA recognizes those concerns as well.
“The DMA clearly states that the gatekeeper may take whatever steps are necessary and proportionate to ensure that download and third-party app stores do not jeopardize its integrity and security,” Marek said. “But of course the question is how exactly to address those concerns when you implement the (WFD) requirements.”
Testing is necessary before implementing any real security solution.
Although the DMA does not include any criteria for determining whether third-party app stores are safe, the European Commission will decide on criteria based on Apple’s views as well as recommendations from technical experts, Kokkoris said.
“Apple knows how to address these security issues,” he said. “And I think Apple could introduce some proper rules and guidelines for third-party stores to follow. And there should also be some general user awareness about security.”
Savin agreed that it’s important for users to be aware of security risks so they can make informed decisions about which apps to trust.
“Let’s leave the choice to the user. We are adults, we make our own decisions every day. On the web, we choose which bank to trust, where to buy our groceries, and I think that should also be true for our data and where we decide to get our apps for.”
Marek added that the European Commission has to ensure the security and integrity of the Apple ecosystem or users will probably lose trust in it, “and everyone would be worse off. Not just Apple but also developers and users,” he said. “They should be very careful when implementing the provision because there will be a regulatory dialogue between the Commission and Apple about exactly how to interpret this provision and exactly what they must do to implement it and what safeguards they must put in place.”
Consequently, testing is necessary before implementing any real security solution: testing on the application side, Marek said. He added that after implementation, the Commission should probably re-evaluate the solution to ensure the security and integrity of third-party app stores.
“And I think the Commission needs to be careful in that it needs to take one step at a time when implementing the solution. They should err on the side of security and then re-evaluate (the solution) periodically. I think it would really be a shame if this just reduced the quality for the user.”
The WFD has the potential to further reduce the dominance of big tech within the EU and increase competition. But, as mentioned, this may not be so bad for all parties involved. While the direct impact of the DMA on the business models of these large platforms is still unclear, it may prompt others to adopt similar legislation. In fact, there are already examples of laws aimed at curbing anti-competitive practices in Germany and South Korea. Whatever happens, the WFD is sure to make the EU app market interesting for developers, users and big tech alike.
