Apple's response to the EU's gatekeeper rules is a new 'core tech' fee for apps

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Apple is there declared Incoming changes to iOS in the EU – including new fees for developers – are coming as the iPhone maker prepares to release its response to the group's previous competition reform, the Digital Markets Act (DMA).

In September, the EU designated Apple as one of six “gatekeepers” subject to the DMA, listing the iOS App Store and its browser Safari as “core platform services”. This regulation imposes a series of obligations and restrictions on gatekeepers. In Apple's case, this includes forcing apps to accept side loading, among other changes. The deadline for gatekeepers to comply with the DMA is March 7.

Apple today announced the availability of iOS 17.4 in beta, which it says will help developers prepare for changes to its mobile platform, which will be released next month to meet the European Union's compliance deadline.

In a background conference with journalists ahead of the beta release, Apple said it had been working on its solution to comply with DMA for months. But it also warned that some of the changes would create new risks for users — reiterating a longstanding argument against sideloading as a practical risk of undermining the security and privacy of iOS users.

Changes Apple says will be coming to iOS developers who distribute apps in the European Economic Area (EEA):

  • New options for distributing iOS apps from alternative app markets — including new APIs and tools to help developers deliver their iOS apps
    Download from alternative app markets.
  • New framework and APIs for building alternative app marketplaces — Marketplaces enable developers to install apps and manage updates on behalf of others
    Developers from their dedicated marketplace app.
  • New Frameworks and APIs for Alternative Browser Engines — Enables developers to use browser engines other than WebKit for browser applications and applications.
    With app browsing experiences.
  • Interoperability Request Form — Developers can submit additional requests for compatibility with iPhone and iOS hardware and software features.

Last week, details emerged of Apple's offer to the European Union to settle its antitrust action against Apply Pay. Today proposed changes to contactless payments on iOS are “DMA-compliant” – including new APIs to enable developers to use NFC technology across the EEA in their banking and wallet apps, and new controls to allow users to opt out of third-party contact. A paid app (or alternative app market) is their default.

However, as with all incoming changes that Apple is releasing today, the European Commission, which oversees gatekeepers' compliance with the DMA, must evaluate whether or not they meet the requirements of the law.

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If EU regulators decide Apple's changes don't comply with the DMA, it could impose fines of up to 10% of global annual revenue and force Apple to rethink.

New business terms – and 'core tech' fees

Alongside the DMA-focused changes, where developers can tap and opt-in, Apple is also introducing new business regulations in Europe – including a new fee called the “Core Technology Fee”.

It also ensures that Apple can continue to take a cut in some situations, even if developers choose to venture outside its walled garden — either by distributing their apps via alternative app stores or by encouraging users to pay for additional content by following a link. Redirecting them to their own websites for payment.

iOS applications from the App Store and/or a The alternative application market will pay €0.50 for each first annual installation per year A 1 million limit, per Apple.

Developers who want to take advantage of the new capabilities announced today, such as the ability to distribute their apps via alternative app stores, must accept these new business terms.

“New business regulations for applications in the EU are necessary to support DMA's requirements for alternative delivery and payment processing,” Apple wrote in a press release. “The App Store includes a pricing structure that reflects the many ways Apple creates value for developers' businesses, including distribution and discovery, the App Store's secure payment processing, Apple's trusted and secure mobile platform, and all the tools and technology to build. and share innovative applications with users around the world.

Under the new business terms, Apple is taking a cut from digital purchases of iOS apps in its App Store: 17% on transactions for digital goods and services; Or 10% “following their first year for most developers and subscriptions,” Apple says.

Apple will also charge a payment processing fee — an additional 3% — for iOS apps on the App Store that choose to use its own payment technology.

But developers can choose to use an alternative payment service provider within their app, or connect users to their website to pay outside of the App Store — at no “extra charge” to Apple.

In addition, Apple said developers can choose to stick to its current business terms — that is, it collects a commission on in-app purchases of apps distributed in its App Store of 30% (or 15% for small businesses).

Regardless of which terms developers choose, they can continue to use the App Store's payment processing technology and allow Apple to distribute their apps on the Apple App Store in the EU.

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The tech giant said it estimates that more than 99% of developers will reduce or maintain the fees they pay under the new business rules.

It also suggests that less than 1% of developers will pay the Core Technology Fee on their EU apps – which it says is intended to target only apps that reach exceptional scale (ie by being installed on millions of iOS devices).

Apple's justification for introducing the new fee is that it reflects the value that its technology platform and services provide, regardless of the App Store's capabilities and distribution.

While the DMA requires designated gatekeepers to open their app stores to sideloading, it does not impose specific business models on them. However, it remains to be seen whether Apple's careful restructuring of its business rules in the EU, and the specific choices it offers developers, will go down well with regulators.

Section 6(12) of the DMA states:

The Gatekeeper shall apply fair, reasonable and non-discriminatory general conditions for access by business users to its software application stores, online search engines and online social network services listed in the Designation Resolution pursuant to Article 3(9).

Therefore, to avoid fault for the DMA, Apple must claim that the framework laid out here is “fair, just, and impartial.”

As part of the changes, Apple is introducing several new features to its platform — which may justify the new fee — including notarization for iOS apps (which “includes a fundamental review that applies to all apps, regardless of their distribution channel, and focuses on protecting the platform's integrity and users” and automated checks and human includes both the review); app installation sheets (which use information from the notarization process to explain at a glance the apps and their functionality, with an overview of what users are about to download); authorization for Marketplace Developers (where Apple commits Marketplace developers to “current requirements to help protect users and developers” checks must be performed by); and additional malware protections, Apple says, will prevent iOS apps from launching if they're found to contain malware after they're installed on a user's device.

At today's conference with journalists, Apple representatives stressed that the changes the European Union has to make will open up completely new risks for iOS users.

The company specifically highlighted the security risk of opening up the ability of iOS apps to install other apps on a user's device (Apple calls these alternative app stores “marketplace apps”) – suggesting it's a common attack vector for malware. However, its representatives have said that there has been no widespread consumer malware attack on iOS to date.

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While any developer who agrees to Apple's new business terms can create alternative app stores (i.e. marketplace apps), they must undergo Apple's app review process and it says it is intended to protect users and developers.

Other incoming changes — some of which respond to other DMA requests for how Apple might run its App Store and Safari browser (others are intended to encourage iOS users to pay special attention before choosing any alternative, non-Apple options) — include A new one A selection screen presented to iOS users that allows them to select their default browser displays a selection of competing browsers, including Apple's own Safari browser; and the ability for developers to offer browsers that are not based on the WebKit browser engine; New Apple says App Store product page labels inform users when apps they download use alternative payment processing; In-app disclosure sheets inform users that they are no longer transacting with Apple and when the developer directs them to transact using an alternative payment app; New app review processes – Apple says will verify that developers using alternative payment apps accurately communicate information about transactions; and expanded data portability on its data and privacy platform — where EU users can retrieve new data about the App Store and export it to authorized third parties.

Notifying iOS users when they no longer transact with Apple is a way to encourage people to continue paying for third-party apps through its own payment technology. But, on the other hand, it could be argued that it's a “fair and reasonable” warning for Apple to give its users when venturing outside of its managed ecosystem.

The DMA allows third-party applications and stores to take “strictly necessary and proportionate” steps to ensure, or new DMA-required interoperability requirements, do not endanger the integrity of the hardware, software or operating systems they provide. It added a provision that such actions “must be duly justified by the gatekeeper”.

Another change Apple announced today will help give developers the equivalent of streaming games to the App Store.

Reacting quickly to Apple's move, Epic Games – suing the tech giant in the US over App Store conditions – cried foul: dubbing its EU offer a “malicious compliance” filled with “garbage fees”.

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