Since Apple introduced the App Store in 2008, it has tightly controlled the apps and services allowed on the iPhone and iPad, giving the company a tight grip on one of the digital economy’s most valuable storefronts.
Now Apple is loosening its grip on the Store, it’s the most consequential sign yet of how new European regulations are changing consumer technology.
Apple on Thursday announced major changes to its App Store and other services for consumers in Europe to comply with EU competition law that takes effect on March 7. iPhone and iPad users in a group of 27 countries will be able to use alternative app stores to download games, productivity tools and other apps for the first time. Banks and shopping services may offer competing payment methods inside their apps. People who buy new iPhones in the future will also see a new menu to download alternative browsers to Apple’s Safari, such as Chrome and Firefox.
These changes are the most concrete examples of how a litany of laws and regulations are now fragmenting people’s technology experiences based on where they live. In China, government regulations force Apple to block apps like virtual-private networks, known as VPNs, that would give users access to the unfiltered Internet. In Europe, customers will 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 do as they wish.
The changes to the App Store stem from a 2022 law passed by the EU called the Digital Markets Act. This far-reaching law was aimed at reducing 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.
Phil Schiller, who leads the App Store, said, “The changes we are announcing today comply with the requirements of the Digital Markets Act in the EU, while protecting EU users from the inevitable increased disruption that this regulation will cause. Help protect against privacy and security threats.” a statement.
Europe accounts for about 6 percent of Apple’s total App Store sales, which are estimated at $24 billion annually worldwide.
EU regulators have long warned that Apple is abusing its control over the App Store to stifle competition. The Silicon Valley company has argued that its gatekeeper role protects customers from malware, privacy breaches and flawed apps. But app developers like Fortnite’s creator, Spotify, and Epic Games have said Apple abuses its power by demanding they pay high fees and forcing them to use the underlying technology they created.
For years, Apple has resisted the changes announced Thursday. It is unclear whether the move will satisfy European regulators who have vowed to aggressively enforce compliance with the Digital Markets Act.
Apple said it would maintain some oversight over new marketplaces and apps operating outside its App Store, but warned that the new EU policies would give bad actors a new way to distribute malware and defraud customers. The company said it has created a system to monitor all iOS apps, approve alternative app stores, and track alternative payment systems.
Apple said developers will be charged 50 euro cents for each download of their app once it has been downloaded 1 million or more times, whether through the App Store or an alternative. This will also apply to free apps, but not to apps distributed by government, education and non-profits.
The new rules could affect Apple’s financial position. The App Store’s policy of taking up to 30 percent of developers’ sales has made it an important part of the company’s approximately $400 billion business. But it has also opened Apple to criticism and regulatory scrutiny as many developers complained that the fees were unfair.
In Europe, Apple said developers using the App Store will have the option to continue using existing commission terms or move to the new fee structure. This will include a “core technology duty” of up to 17 percent for digital goods and services. Developers using Apple’s payment system will be charged an additional fee of 3 percent.
Apple said its fees are to cover the costs of developing its software and providing tools to developers.
Developers who distribute their apps through competing app stores will not be subject to any Apple commission. Developers who provide links to complete payments outside their apps may also waive the fee.
Developers will also be able to avoid what some of them have said is a cumbersome review process by Apple for apps distributed in its store. But the company has created a new system to maintain some control over apps distributed in iPhones, which it calls notarization. Each iPhone app will include an installation key that will provide Apple with information about when it was installed and allow the company to perform automatic scans for malware.
As part of the notarization process, apps will provide Apple with descriptions and screenshots of the services they provide, as well as the names of the developers. Apple will share that information with iPhone users before they download the app.
Apple also introduced a new feature for customers to use alternatives to its Wallet app for mobile payments, a common method of payment for public transportation, restaurants and cafes. Major banks and businesses like PayPal can now offer competitive services.
Apple has challenged some elements of the new European law, including a requirement that would open up its messaging service, iMessage, to work more smoothly with Android devices. The company has argued that iMessage is not subject to the requirements because it is free to customers.
The EU has not taken a final decision on the messaging issue.