If Apple had its way, it would never open the App Store to competition, never offer web downloads of apps, never allow app developers to link to outside websites, and probably never reduce its cut of all App Store purchases from the original 30 percent tariff. For the last 15 years, Apple has had its way.
That’s all changed, now, by the force of the European Union’s Digital Markets Act (DMA), along with the results of a few legal matters in Japan, South Korea, and the Netherlands. This is a new era, where Apple can’t just have its way–instead, it has to abide by regulations specifically targeted at its own preferred business practices.
The company’s reaction to this era has been occasionally combative and passive-aggressive. Some have called it “malicious compliance,” a label that I don’t think quite encompasses Apple’s approach. As events this week have shown us, Apple’s approach to responding to regulation is incremental and iterative–kind of like its approach to designing and updating products.
The question is, what’s going to be the cost of Apple taking this approach?
I don’t want to be here
If you weren’t sure before, Apple’s statement about the DMA made it perfectly clear that Apple is at a party it doesn’t want to attend, dressed in an outfit its mom told it to wear. But rather than pull itself out of the rich European market, Apple is modifying its business model to comply with the new rules to the letter.
By which I mean, it’s going to comply with the letter of the rules, not necessarily the spirit. Many of Apple’s choices suggest that the goal is to comply with the words on the page, but in a way that makes taking advantage of them as unpalatable as possible. The plan is to satisfy the law–but nobody else.
In a way, this makes sense. The job of a tax accountant is to make you (legally!) pay what you owe to the government and not a cent more. Apple wants to give away as little control of its platform as it can manage.
The problem with this is that there are a bunch of European Commissioners and regulators who are interested in the DMA causing real change in behavior, and they have the ability to force Apple to change its ways in a way that nobody has really been able to do before.
Apple’s approach to allowing third-party app marketplaces is to do the minimum and then adjust accordingly.
Foundry
When Apple announced its new policies, it was a real question: Do these satisfy the letter and spirit of the DMA? And if not, what happens next? This week we found out.
I meant to do that
Apple’s initial DMA rollout featured a polished presentation about the creation of “alternative app marketplaces,” basically App Stores run by companies other than Apple. It was a bit surprising since one of the implications of the DMA seemed to be that Apple would add “sideloading,” letting developers offer direct downloads of apps from their own websites. But according to the letter of the law, it was an either/or–so Apple was going to force all developers to go through a middleman, even if it wasn’t Apple.
And of course, there were conditions to this already-compromised idea: Proprietors of these marketplaces needed to satisfy numerous tests in order to be allowed to run stores, and they couldn’t be company towns–they had to offer space to companies other than themselves.
But then something funny happened. Apple modified the rules, to allow “company towns” (i.e., Facebook could make a marketplace just for its own apps) and let certain developers offer marketplaces without satisfying some financial tests. And then on Tuesday, a bigger bombshell: alternative marketplaces wouldn’t be mandatory for app distribution, after all. Later this spring, developers in the EU will be able to offer their apps directly, so long as they pass some of those same eligibility tests.
Apple suggested that it made these changes after consultation with developers, which, okay, sure. But let’s be clear: this is very obviously the result of European regulators nudging Apple and telling the company that it hadn’t gone far enough and wasn’t honoring the spirit of the DMA.
And now we can fully see Apple’s strategy of incremental compliance, brought into action: The company announced the minimum possible and then waited to be told what else it needed to do. Now it will begin modifying those policies, as required, in order to satisfy regulators while still doing the minimum required of it, presumably hoping that it won’t get nudged by the regulators all that often.
How are we playing this?
I don’t think Apple should give away all of its control over its platform out of generosity. To its credit, the company has tried to build features that keep iOS as safe as possible in a world where apps can come from outside the App Store. I do believe it legitimately cares about platform security–it also cares about control and money.
Apple opened the iPhone in the EU—but did it really?
David Price / Foundry
The challenge with Apple’s approach is that while there’s a risk in giving away more control, power, and money than you have to, there’s also a risk in being perceived by the regulators as being hopelessly combative and untrustworthy. Apple needs to maintain a good relationship with its regulators, or it risks being punished.
I have to admit, it doesn’t look like things are off to a good start. Apple’s numerous policy changes suggest that the reviews of its long-gestating policies are in, and they’re not good. The company didn’t help itself by strongly suggesting last week that it kicked Epic Games off the App Store a second time because its CEO posted mean tweets that disagreed with Apple’s overall policies. (This was yet another decision that was suddenly reversed, presumably because a European regulator cleared its throat and wagged a finger at Apple.)
Expect more of this. In a far cry from its usual major product announcements and declarations, which are generally comprehensive, Apple’s App Store policies in the EU will be a work in progress. The company will continue to make changes, incrementally, in order to address specific complaints. Policies will be announced, then revised, then rescinded. These shifting sands aren’t really good for anyone–it’s tough to build a business plan on them, and consumers in the EU will undoubtedly be frustrated too–but it’s the natural consequence of Apple continuing to draw lines in the sand, daring the regulators to cross, and then drawing yet another line and issuing another dare.
