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Apple Faces Daily $50M Penalty [Update]
- EU's DMA allows independent payment systems for in-app purchases.
- Apple may face $50 million daily fines for non-compliance.
- New rules aim to reduce Apple and Google's 30% cut on purchases.
- Apple's "Core Technology Fee" seen as a loophole.
- EU also investigating Meta and Alphabet for similar issues.
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APPLE COULD BE FINED 50 MILLION DOLLARS A DAY
The megacorp may not be complying with new EU laws when it comes to games like Fortnite.
By John Walker
Published Wednesday 12:15 PM
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Back in March, the European Union brought in new rules designed to stop companies like Apple and Google from blocking third-party companies running their own in-app item stores.
This was supposed to carve a path for games like Fortnite to return to mobile, allowing in-game purchases without using Apple or Google's stores, thus regaining 30 percent of every purchase.
But it may be the case that the EU thinks Apple still isn't playing fair and could start imposing enormous fines.
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The theory was the EU's Digital Markets Act (DMA) would allow apps and games to run their own independent payment systems for in-app purchases.
Anything previously launched on iOS required all payments to go through Apple's systems, where the company would take a 30 percent cut every time.
Companies like Epic loudly argued that such a system was deeply unfair.
While it's hard to pick a side between the greedy corps taking money off the apps and the apps taking money off their customers, Epic was right that it was anti-competitive.
The EU agreed, announcing the DMA in 2023 and bringing it into law this year.
However, cheeky Apple immediately constructed its own loopholes by technically allowing apps to run their own stores but only if they paid a so-called Core Technology Fee of $0.50 per install of their app.
The charge only applied to companies with over a million installs in the previous 12 months but was obviously aimed at ensuring the company would still get its tithe.
On its face, it is very obviously not in the spirit of the new rules.
It's also worth noting that surprise breakout success apps could be especially badly stung by this, suddenly discovering charges of $1 per every two installs of their viral product plus an additional three percent fees for using iOS's payment processing software, quickly getting into a whole heap of trouble.
Tim Sweeney was predictably unimpressed.
In January 2024, he described it as a devious new instance of "Malicious Compliance."
It seems the EU somewhat agrees.
According to a report in the Financial Times, the paper's sources say the European Commission believes Apple is not complying with the new law and will soon begin imposing fines—the first brought under the DMA.
And those fines aren't cheap.
If it's officially announced that Apple is in violation of the DMA, the maximum charge is five percent of average daily turnover.
In Apple's case, this is a terrifying $1 billion, meaning $50 million a pop.
Meanwhile, the same EU group is investigating whether Meta (Facebook) and Alphabet (Google) might also be falling foul of the rules.
The FT also notes that Apple could still have time to change its new system to avoid the fines.
Apple told the FT that the company is "confident our plan complies with the DMA" and that they will "continue to constructively engage with the European Commission as they conduct their investigations."
Correction 06/20/2024 8:11 AM ET: This article and headline previously incorrectly stated the fine would be $1 billion a day due to ambiguous wording in other reporting. We've since spotted our error and fixed it.
Continue reading.
