Apple's App Store Policies Violate New Tech Law, EU Regulators Say

Apple's (AAPL) App Store was found in violation of Europe's Digital Markets Act (DMA) because it is overly restrictive on how developers can communicate with users, especially in trying to "steer" users outside the App Store to make payments, European regulators said Monday.

The tech giant is the first company to be charged under the new law, which went into effect in March, and was passed with the goal of reining in the power of tech "gatekeepers" like Google parent Alphabet (GOOGL), Amazon (AMZN), Apple, TikTok parent ByteDance, Meta (META), and Microsoft (MSFT).

EU Says Apple's App Store Prevents Developers From 'Steering' Users to Outside Purchases

The European Commission said Monday that it sent preliminary findings of its investigation to Apple, giving the company the chance to review and respond to what the Commission says violates the DMA.

Of Apple's three "sets of business terms" that govern the company's relationship with app developers, the Commission said none allow developers to freely steer users away from the App Store to make a purchase.

"Our preliminary position is that Apple does not fully allow steering," said Margrethe Vestager, the EU's antitrust chief. "Steering is key to ensure that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers."

The investigation was announced in March, when the Commission also launched investigations into whether Alphabet violates the DMA based on its own steering policies in the Google Play Store, and whether Meta violated the law by forcing users to pay to not see ads, or have their data used for advertising purposes.

If the Commission's preliminary findings are confirmed, it could issue a non-compliance decision by March 2025, a year from when the investigation began, which could lead to fines for Apple.

The tech giants made changes before the DMA went into effect, but the Commission's recent investigations and claims of violations suggest that they may not have gone far enough.

Additional Investigation Opened Into Apple's Contract Terms

Monday's decision won't be the last regulatory headache for Apple, as the Commission said it is also opening a new investigation into the contractual terms Apple forces developers to sign if they want to offer an alternative app store or access other features.

Among the requirements developers must agree to, the Commission said it is investigating whether Apple's "Core Technology Fee," which charges on a per-app downloaded basis, violates the law. Other policies being investigated are the multi-step process it takes users to find and use a third-party app store, as well as the eligibility requirements for a developer to be able to offer an alternative app store.

Apple is also still facing a number of other antitrust allegations that has been leveled against the company in recent months internationally as well as at home in the U.S. The Department of Justice announced an antitrust suit against Apple earlier this year, alleging the company has used anticompetitive methods to keep its monopoly hold on the U.S. smartphone market, and the European Union fined Apple days before the DMA went into effect over its App Store rules for music streamers.

Apple did not immediately respond to a request for comment.

Shares of Apple were little changed in pre-market trading Monday at $207.66 as of 8:30 a.m. ET. They have gained close to 8% so far this year.