In-depth reporting and analytical commentary on games industry and related regulatory issues. No legal advice.

Meta CEO Zuckerberg confirms Apple’s rules in response to EU DMA discourage creation of alternative iOS app stores

Context: A little over a week ago (Thursday, January 25, 2024), Apple announced new EU app distribution terms with a view to the entry into (full) force of the European Union’s Digital Markets Act (DMA). Apple’s terms and rules are designed to make the operation of alternative app stores, and their use by app makers, an unattractive proposition except in connection with apps that would otherwise not be allowed by Apple, such as adult content. After Epic Games, Spotify and others, Microsoft also criticized Apple (January 30, 2024 games fray article).

What’s new: Another “Big Tech” company has now effectively said that Apple’s rules are not going to make iOS app distribution competitive in the EU. Meta founder and CEO Mark Zuckerberg said in yesterday’s earnings call (as MacRumors and others report):

“I don’t think that the Apple thing is going to have any difference for us. Because I think that the way they have implemented it, I would be very surprised if any developer chose to go into the alternative app stores that they have. They’ve made it so onerous, and I think so at odds with the intent of what the EU regulation was, that I think it’s just going to be very difficult for anyone, including ourselves, to really seriously entertain what they’re doing there.”

Direct impact: For the European Commission as well as for EU lawmakers, it’s become even easier to see that the net effect of Apple’s response to the DMA is that there won’t be any significant procompetitive effect. If even a company with Meta’s vast resources and almost unparalleled ability to reach consumers does not see an opportunity to benefit from Apple’s efforts to be allegedly compliant with the DMA, it is a clear indication of the DMA’s objectives not being achieved anytime soon.

Wider ramifications: Meta would benefit from opening up app distribution on iOS, also with developers then having more flexibility with respect to in-app advertising. But Meta lobbied with some other Big Tech companies against a parallel piece of EU legislation, the Digital Services Act (DSA). Just like Meta sought to dilute the DSA, Apple achieved through “fear, uncertainty and doubt” (FUD) tactics that lawmakers refrained from enacting hard and fast rules in some critical areas.

For open app markets advocates, Mr. Zuckerberg’s statement is definitely helpful. It is more specific than Microsoft’s recent X post, though games fray believes that the two statements are consistent and just different means of expressing the same views.

Meta’s reference ot the legislative intent behind the DMA is correct, but it will be difficult for an EU court to hold Apple in violation of the DMA on the basis of some vague intent. The European Court of Justice emphasized legislative intent in a case involving links to copyright-infringing websites, but that was an outlier case.

The purpose of the DMA was to open up the market, and Apple is just thwarting it through a set of new rules that make it counterproductive for most purposes to operate or use (be it as an end user or as a developer) an alternative app store. All of that criticism validates, not specifically but at a high level, games fray‘s analysis (no “sideloading” of apps; FRAND-centric litigation strategy; 50-eurocent per-user per-year fee being far more problematic than it appears at first sight). And it shows that most media reporting was simply off-base: even reporters for some highly reputable organizations described Apple’s announced terms as a revolution when, at closer look, it’s a case of “the more things change, the more they stay the same.”

Meta’s resistance to the DSA doesn’t make its criticism of Apple’s DMA rules hypocritical or unprincipled. Those two pieces of legislation tackle different issues.

Arguably, no large company suffered more from the way Apple uses (and allegedly abuses) its market power than Meta: App Tracking Transparency (ATT) destroyed the traditional advertising business on iOS, and now Apple’s Search Ads are a huge business for the iPhone maker itself.

Meta is in a tricky position. Not only does Meta have other challenges but it also knows that it’s controversial (some even describe Meta as “toxic”, which games fray deems an exaggeration). There was a media report at some point that Meta had a lawsuit over Apple’s ATT prepared, but so far they haven’t sued and never may.

In the current situation, however, it would be good if Meta could play a more active role again. There was a time when Meta helped draw attention to Apple’s antics when Apple didn’t want to allow a promotion that was meant to help small businesses affected by the pandemic.

The DMA does not appear strong enough to solve the most pressing problems with Apple’s conduct in the short term. But politically Apple is now in a difficult position because it has basically thrown down the gauntlet to the EU institutions. It’s also interesting to observe that Apple is presently trying to resolve (through formal or de facto settlements) certain competition issues where it’s alone and can’t even count on Google as an ally (acces to NFC chip of tap-to-pay apps; mobile browser engines (one of a few issues where the DMA would likely be enforceable); cloud streaming of games). That could be a far more meaningful crack in the shell than steps Apple took in years past, such as the reduced app tax for small app makers that collectivly account for only a tiny percentage of iOS app revenues.

The more companies of all sizes speak out against Apple (even if only in response to investor questions such as in Meta’s case) and explain the issues to regulators and lawmakers, the more likely it is that Apple will be forced to open up.