Monday, June 17, 2024

EU to Charge Apple for Violating DMA

Joe Rossignol (Hacker News):

The European Commission plans to charge Apple for violating the Digital Markets Act after determining that the iPhone maker is not complying with obligations to allow app developers to “steer” users to offers outside of the App Store without fees, according to the Financial Times, which cites three people familiar with the matter.

It appears that the EU is taking issue with Apple’s Core Technology Fee, but the exact charges that it allegedly plans to bring against Apple are unclear.

Ryan Jones:

Reminder: The EU itself leaks to FT

John Gruber:

My basic theory is that what the EC has wanted all along is to force Apple not merely open up iOS to other methods of distribution, but to force Apple to allow apps to be distributed through those non-App-Store channels free of charge. But they don’t want to come out and say, flatly, that they seek to forbid Apple from monetizing its IP from all developers on the platform, because that’s so radically anti-capitalist. So instead the wrote the DMA to forbid the way Apple had, heretofore, mandated its cut of App Store revenue, and I suspect they somehow thought that if they banned the current rules — all apps must go through the App Store, all apps must use Apple’s App Store payment processing — then Apple would be forced to allow free-of-charge distribution through other channels and other payment processing. They didn’t foresee the Core Technology Fee as a route to collect a cut from any and all popular applications distributed by large commercial developers.

This is buying too much into Apple’s frame. As I’ve said, Apple created the “monetizing its IP” concept, long after creating the App Store itself, as a preemptive defense of its monopoly rents in the face of antitrust action. If the EU’s language had been more sweeping, surely they would have been criticized for being heavy handed. Instead, they were more measured, explaining their intent but not exactly how to get there. I think the reason they didn’t anticipate the CTF is that it obviously violates the intent of the DMA. They were wrong to expect a good faith attempt at compliance.

It’s not as if Apple is trying to monetize its IP by licensing iOS to clone vendors. It’s already monetizing via high-margin, non-upgradable hardware and hard-sell services. As commenter Doodpants mentions, this licensing business is pernicious for customers:

I don’t want to “license” software; I want to buy it. But software companies have come up with this “licensing” concept so that they can control what you can and cannot do with the software after you’ve paid for and installed it.

René Fouquet:

The thing that irritated me most is the “you can just buy an Android phone” by Federighi [at The Talk Show]. If this is your response to valid criticism, watch out not to fall from that high horse.

Of course, this recalls Tim Cook saying that the solution for iOS’s poor messaging interoperability is to buy your mother an iPhone. It reminds me of nothing so much as the current American political situation. No big deal if you’re unhappy with one of the two main candidates—you can just vote for the other guy! Yet in another four years there will be two new candidates, but we’ll still have Apple and Google and little means of influencing either.

archagon:

Listening to Apple, I come away feeling that the Mac is only an open platform for legacy reasons, and it certainly wouldn’t be one if it was released as a new product today. I am very worried that we’re heading towards a future where Apple disables my notarized emulators, torrent clients, and encrypted messaging apps for commercial, legal, or political reasons and then tells me to “just buy a PC” if I don’t like it.

Steve Troughton-Smith:

Apple leadership has twisted itself in knots to fit an App Store-centric reality distortion field and that’s why they’re facing antitrust action around the world and serious, painful consequences for their illegal conduct

mʌp:

As someone that qualified for his first WWDC scholarship in 2002 it sure feels weird to hear Tim say that there were no students in the dev community before the App Store…

Martin Pilkington:

I was literally in University when both the iPhone and the App Store were released, and had been shipping apps for years prior.

Apple seems to be stuck in its own reality distortion field when it comes to the App Store.

Previously:

Update (2024-06-18): Jesper:

The EC is not the ideal horse, and other multi-billion dollar technology firms are not the ideal cheerleaders. In a world where the phone is the dominant computing device for most people and nearly everything involves it, the case against monopolistic rent seeking and corporatist distribution restrictions should be to protect not only customers but individual freedoms. Nevertheless, the horse has been saddled and does work roughly towards the same goals.

[…]

There are still ways Apple, say, in its approach to privacy and compared to some of its competitors, are exceptional. But dying on this hill, to squeeze out the same money that putatively is not the primary driver behind the company anyway, to maintain a ridiculous charade wherein no developers were successful before a distribution model that not uncommonly was a significant downgrade, is just exceptionally stupid.

Update (2024-06-19): See also: Hacker News.

Juli Clover (Mastodon):

Apple is facing a “number” of “very serious” issues with its Digital Markets Act compliance in Europe, EU competition commissioner Margrethe Vestager said in an interview with CNBC.

[…]

Vestager does not believe that Apple’s changes meet the requirements of the DMA. “We have a number of Apple issues; I find them very serious,” she said. “I was very surprised that we would have such suspicions of Apple being non-compliant.”

Craig Grannell:

I suspect there’s US arrogance here, along with a total misunderstanding of how the EU works. Ian Betteridge has said this way better than I can, but US folks appear to consider this some kind of negotiation, whereas for the EU it’s more a case of “here’s where you need to be and it’s up to you how you get there”.

See also: Steve Troughton-Smith, Hacker News.

Previously:

Update (2024-07-08): See also: Hacker News.

Previously:

26 Comments RSS · Twitter · Mastodon

Someone needs to go through every time Gruber has advocated for any sort of government regulation and accuse him of wanting to stop [insert-business-here] from monetizing it's IP.

Here he is criticizing the Trump administration for repealing net neutrality:

https://daringfireball.net/linked/2017/11/22/fcc-net-neutrality

John Gruber doesn't want to come out and say, flatly, he doesn't want Comcast, Verizon, etc monetizing their IP from all users on their platform, because that’s so radically anti-capitalist.

If Apple thinks they're entitled to the CTF for providing a platform for users to run apps… what's stopping them from charging this same fee from Mac apps? The Mac ecosystem is already endangered enough as is, I really don't think Apple should add more reasons to give developers pause.

Agree 100% with Rob on the parallel with net neutrality. This is basically app neutrality. What Apple is doing is not so much monetising their IP as it is monetising access to their customer base.

It used to be that Apple monetised through hardware sales and Google monetised through service revenue. Now Apple is doing both, because they can. Users are paying for the hardware and are still being sold as a product - not through data brokerage but through controlled access. Even Gruber has been critical of how the pursuit of service revenue is gradually changing Apple's culture for the worse, he just doesn't seem to think their App store control falls into category.

"that’s so radically anti-capitalist"

Competition is now radically anti-capitalist. You know what, that actually checks out. Maybe capitalism has been the problem all along?

Chuck Harper

@Plume: You conflate capitalism with crony-capitalism. Government involvement in private enterprise slowly chisels away capitalism until all we have left is a socialism and zero innovation.

I don't see a general value to be defended, it's just that EU wants to favour European companies against Apple. Just substitute a physical system to an operating system and the EU DMA makes no sense, example: Suppose Wallmart to be defined a gatekeeper by some metrics, they should allow any company to sell goods in their store but also they should not charge real estate fees and also they should give electricity and heat away for free.

@GioGio Walmart is not part of a duopoly.

"Government involvement in private enterprise slowly chisels away capitalism until all we have left is a socialism and zero innovation."

That's a very odd thing to believe, given the evidence available.

"they should allow any company to sell goods in their store but also they should not charge real estate fees and also they should give electricity and heat away for free."

Even if Walmart was a monopoly, this is a completely nonsensical comparison, because not preventing competition is actually free for Apple. They're intentionally investing money into keeping competition out.

An actual comparison would be if you set up a garage sale at home, and Walmart just randomly came over, closed you down, and prevented you from selling your wares, because this is Walmart town because Walmart says so.

You can be pretty sure that most governments would not be happy with that kind of behavior.

>"Government involvement in private enterprise slowly chisels away capitalism until all we have left is a socialism and zero innovation."
>That's a very odd thing to believe, given the evidence available.

I think government involvement should be a last resort usually because lawmakers very rarely know about the industry they are regulating and they often make things worse. Dutch regulators come up with some idiotic rules as it relates to dating apps which solved exactly zero problems a few years ago. Lawmakers have shown time and time again that they have very little common sense.

The DMA is a mess. It seems like they don't know what the hell they are trying to do and it changes every day. I live in the U.S. but if I lived in Europe I wouldn't even bother trying to distribute outside the App Store because the CTF makes it a losing proposition/not worth it. Sure Epic Games can distribute on iOS again so they get *something* but I don't think too many others are benefitting for the DMA. Who and what is the DMA is it for exactly?

I know *what I want* as a developer, but what the hell does the EU want exactly? They don't seem to want the same things I want (if they do they are incompetent at outlining rules coherently). All I know is indy dev operating cost has risen a couple hundred bucks a year because we need to publish a company phone number which will go right to voicemail and an address (so a new phone line a PO Box). It's not that much money sure, but is the DMA really helping developers? Is it really helping customers? What the fuck is the point of it other than allowing kids to play Fortnite on their phones?

Apple *could* just make different choices (like allow Mac-style side loading) and it's very likely they would have no antitrust issues at all but instead they dig their heels in. The piles of cash would keep pouring in from the App Store anyway even with sideloading. Apple acts like allowing side loading will destroy their entire company which is total bullshit. They are asking for it for sure...and the EU is going to stick it to them unless the US gov't hits back. BUT are *we* going to be better off when this is all over? Probably not.

It is a little annoying that regulators keep trying to come up with convoluted rules about app stores. It just gives Apple new loopholes to workaround them and forces governments to play wack-a-mole.

I think regulators need to go with a simple rule: Allow unrestricted side-loading. No required notarization. No forced sandboxing. No IP fees, etc.

It opens the way for installing third party app stores, third party payment systems, alternative browser engines, automation utilities, system extensions, etc without needing explicit laws for all of them.

Apple is welcome to add options to require notarization, sandboxing, etc for side-loaded apps, but the user must be able to turn them off, either globally or on a per-app basis. Feel free to bury them under a bunch of warnings and confirmation dialogs.

Will it make iOS/iPadOS less secure? Yes, but no more insecure than MacOS is now.

Someone else

Just curious: what are you folks wanting, exactly? I mean, I see lots of complaints about this or that but what is the actual end goal?

It sounds like…

1. You want to use Apple’s IP and work but pay less for it, ideally paying nothing.
2. You want no restrictions, like with Windows, and don’t much mind externalizing considerations like privacy, risk, or scams onto the customer… like with Windows.

So for part 1, is what you’re hoping for is nationalization of Apple’s work? Mandatory licensing of Apple’s IP, ideally in perpetuity, yeah?

For part 2, you’re okay with exposing grandma and grandpa to those risks?

Hey, just dropping a link here:

Public utilities - government sanctioned monopolies - have a typical profit margin of around 10% in the USA (and up to 29% in other countries).

https://www.investopedia.com/ask/answers/011915/what-average-profit-margin-utility-company.asp

That 10% net profit margin is guaranteed but also is set at 10% no matter what they produce (so some argue, there’s little incentive to improve, as can be seen by the coal power plants still in use today, PG&E forest fires, etc.… would Apple still try to do VR or Swift, or Swift Data with a fixed profit margin?)

I think there’s a good argument that iOS and Android are basically utility-level importance right now, so would that be an appropriate approach to what Apple can charge?

"They are asking for it for sure...and the EU is going to stick it to them unless the US gov't hits back. BUT are *we* going to be better off when this is all over? Probably not."

We're already better off because now we have emulators in the App Store.

Without government intervention that stopped Microsoft from monopolizing the web and lead to web apps replacing Windows apps as the predominant application development platform, Apple would be dead now.

"You want to use Apple’s IP and work but pay less for it, ideally paying nothing"

Stop falling for Apple's stupid talking points. This idea that making software for a platform is somehow stealing the platform holder's IP is absolutely insane. It's the literal opposite of what is happening, developers are increasing the value of that IP.

"is what you’re hoping for is nationalization of Apple’s work?"

If you're making an honest, good-faith argument, and this is your understanding of the other side's position, then you need to stop making arguments, because you don't understand what people are actually arguing about. And honestly, I don't believe you're even trying to understand it.

"For part 2, you’re okay with exposing grandma and grandpa to those risks?"

Yes. Grandma and grandpa are not morons, they're Gen X, they grew up with computers. In fact, those are the exact people who want their DOS emulators on their iPhones so they can play the games they remember from being kids. And Apple is preventing them from doing that.

And for those who are not computer-literate, their grandkids can just turn on a bunch of security features and prevent them from accidentally installing whatever imaginary scam you think they'll fall prey to that requires them to first install some kind of nefarious software.

Someone else

“This idea that making software for a platform is somehow stealing the platform holder's IP is absolutely insane. It's the literal opposite of what is happening, developers are increasing the value of that IP.”

You might want to check in with your local laws about intellectual property rights.

Seems to me that the common theme of your comments is that you are very comfortable with externalizing risks onto other people and corporations as long as it benefits yourself and an idealistic future where everyone is capable of making the same decisions you are. Techno libertarian? Privatize the benefits, socialize the harms/work?

I don’t know about you, but I create IP. I wouldn’t love that someone else can take it, and worse, wouldn’t like it being used to scam or harm others. But everyone has their own personal line in the sand. What’s yours?

@Someone else The Supreme Court found that it was OK for Google to reimplement Oracle’s Java APIs, so I’m having trouble seeing how calling Apple’s APIs is stealing their IP.

Someone else

@Michael, I use Xcode, and I think most other developers are using it, too. If and when there’s an alternative, then that’s when we cross that bridge, but I think we’re almost all using Apple’s IP in some licensable way, either as users or developers.

Perhaps I’m naive but I think of Apple as having created a super fertile plot of land, having enriched it for decades with nutrients, their labor, and developing new techniques. They’ve also got a farm stand for the produce grown at this farm.

Developers like us want to grow food to sell to others on that plot of fertile land, since it’s easy to grow stuff there and there are loads of customers that come because they heard it’s pretty good stuff available there.

We have other options. There’s an Google Android farm next door with their own farm stand, a Desktop Linux one, and heck, we can even till new land and homestead if we like. Virgin and GNU land is totally free (or nearly so) and unlimited.

So, Apple wants to charge rents to big farmers. They’re being nice and letting small farmers grow and sell for free. That’s their choice - a loss leader, actually - much like the $5 roast chicken at Costco. Brings customers in the door and it’s good for turning small farmers into big ones.

If the EU wants to say, “hey your farm is destroying all the other farms nearby, fix it” then they can certainly do that (civil law and more socialism). But we have a harder time doing that due to our legal system (common law and neoliberal economic policy).

Anyway, regardless of the laws, what are the morals involved here. It really does seem like some developers are asking for everything for nothing in return. And if not completely free, the percentage of what I see many developers willing to contribute or give back to Apple is laughably minuscule.

What’s a serious and fair compensation for Apple’s (or anyone’s) work? Perhaps we have progressive taxation/regulation where the bigger you are, the more you must give back to society? I’d be fine with that, though that would be a major shift in our entire legal and economic system - a literal revolution - and is not supported by our current systems at all. Also, the USA has gone to literal war for less.

“We build apps that make your platform valuable” just sounds like the Pilgrims ‘buying’ Manhattan for beads to me.

There are two different systems of morals/commerce/ownership abutting here, and as much as I like techno-utopia, but the reality is that we live in a world where IP is considered actual property, so we should consider those rules we live in and under, and the wider implications.

Someone else

I’ll just throw in, that Apple does have “progressive taxation”. Higher fees for bigger companies. I personally think that’s pretty fair. But those big fees are what Spotify and Epic want to avoid. “Let me tell you about the very rich. They are different from you and me.”

Their battles are not my battles. I think that the posters here also see all this as socialism vs capitalism but perhaps aren’t putting those terms to use. If we want to make Apple open up their closed system, we should do it for society’s sake and for society’s benefit, not for other rich corporations’ shareholders or developers who want to be rich.

Old Unix Geek

@Someone else: I guess you must be young. In the not so distant past, computer manufacturers were delighted if you made software for their platform. The idea that calling your API or using your compiler would require a per-unit license fee would have been laughable. If nobody used their APIs, or hardware features, then it was effectively equivalent to the computer not having these features at all -- computer buyers would only see the differentiation between computers if those features were used. Yes, you paid for the compiler once per developer, and that was it. The software that came with the hardware ___OBVIOUSLY___ was paid for by the purchaser of the hardware. Manufacturers were delighted to sell a computer, and did not try to double dip. That was the entire point of personal computers, and why they overtook/killed mainframes which had all sorts of ridiculous licensing agreements attached to them.

Apple most certainly did not create a "fertile soil" for developers. They destroyed most of the competition. Sharp Zaurus? Blackberry? Nokia? Palm? Psion? All these had different OS's. Now we are limited to iOS and Android, and their terms and conditions. That's why Apple were judged by a Congressional report a number of years ago to be a monopoly. That's why the EU is regulating them. I don't much like a lot of EU policies these days, but I support them beating Apple until they comply. I'd actually support them splitting Apple up, just like I supported the Department of Justice when it threatened to split Microsoft up, for exactly the same reason. If you misuse your control of the market, you have become arrogant and an impediment to innovation, and the means by which you force others to do what is best for you and not them, must be removed from your control.

It's really ironic. They were almost destroyed by Microsoft's monopolistic behavior, Dell suggested selling them off for parts and returning the proceeds to their shareholders, and now it's them doing the exact same thing that almost killed them. The old Greek quote "And the weak must suffer what they must" still applies 2 Millennia later.

"You might want to check in with your local laws about intellectual property rights."

I have literally no idea what you are talking about, or what you want me to look up.

"I don’t know about you, but I create IP. I wouldn’t love that someone else can take it"

Nobody is taking anything. People made iOS app before there was even an App Store. The only party who took anything away from anyone is Apple, when they took away people's ability to publish their IP on Apple's platforms.

"I use Xcode"

Apple decided to make that freely available on the App Store. Using it is not stealing it, it's literally using it the way Apple licenses you to use it.

"regardless of the laws, what are the morals involved here"

What are the morals in Apple stopping people from using the software they want on the devices they bought? Well, they're obviously terrible.

"It really does seem like some developers are asking for everything for nothing in return"

Developers are literally asking for *less* than Apple is doing now. They're not asking for everything, they're asking for *less* involvement from Apple.

"What’s a serious and fair compensation for Apple’s (or anyone’s) work?"

The fair compensation is me paying them money for their hardware, which in return should give me the right to run the apps that I want on the devices I bought from them.

“We build apps that make your platform valuable” just sounds like the Pilgrims ‘buying’ Manhattan for beads to me."

This comparison is as absurd as it is insulting. Comparing a multi-billion international corporation, one of the world's richest companies, to native Americans? I find this genuinely revolting.

And just to point that out explicitly: nobody would be buying a Mac if it only ran Apple's software. It is very literally and self-evidently true that third-party apps are what makes Apple's platforms valuable.

"I think that the posters here also see all this as socialism vs capitalism"

Yes, I want more capitalist competition instead of Apple's socialist approach to their App Store.

Am I a big fan of governments telling businesses what to do? No, I'm not.

But Apple has no one to blame but themselves here. If they had bent even a tiny bit more, governments wouldn't feel compelled to force them to.

More generally, I kind of wish that Linux hadn't been dominated by people with limited to no design sense and people who were actively hostile to commercial software and products. If Linux had managed to take a sizable market share with actual users and created pressure toward open systems, I think we would be in a better place.

Not that I think that Linux is better than macOS or Windows, but I think the open paradigm is preferable for the OSs that control more and more of our lives.

@GioGio You may not be aware of this, but the EU has done plenty of monopoly enforcement action against large supermarkets in the past: https://www.somo.nl/eu-takes-action-against-the-buying-power-of-supermarkets/

The view of EU monopoly law from across the pond and outside the tech bubble is incredibly myopic. John Gruber, for example, seems blissfully unaware that the EU has spent decades enforcing antitrust rules against local companies in sectors from tourism and transport to retail and pharma.

I've yet to see anyone who argues that EU is just a way of getting at US companies put up a case as to why Servier was fined 330m euro, or AstraZenica 60m euro, or BMW, Daimler and VW 875m euro for colluding in a cartel on emissions. The EU fines EU companies *all the time*. You have to be extremely one-eyed to think the whole thing is some kind of anti-US scam.

Someone else

@Old Unix Geek, welcome to the modern world of subscriptions.

@Plume, your worldview doesn’t match up with US laws. Perhaps you’re from elsewhere? Apple ‘taking’ things as you claim is an odd way of looking at the world.

You two are edge cases, and I’m sympathetic to your ideals, but they just don’t match up to the modern world, our laws, and realistic human behavior.

Fair compensation is your deciding to buy the thing under the terms by which they were offered (as long as it’s legal)..
You might want more than that, but it’s not Apple’s (or anyone else’s) responsibility to sell what you want to you if it’s not also in their interests.

Unless it’s a utility. Natural monopoly. Take a look at that other post about utilities. 29% doesn’t sound too far off from what the Apple Store charges, for far less work or investment that Apple puts in.

If the US wants to mandate fee structures, then they should just declare android and iOS as utilities and accept the likely outcomes.

Price fixing doesn’t go over well in the USA (except as subsidies).

Yes, we should all be on desktop Linux. But have you tried using it? Theres a reason it’s not popular.

> Apple most certainly did not create a "fertile soil" for developers. They destroyed most of the competition. Sharp Zaurus? Blackberry? Nokia? Palm? Psion? All these had different OS's. Now we are limited to iOS and Android, and their terms and conditions. That's why Apple were judged by a Congressional report a number of years ago to be a monopoly.

Sharp Zaurus is a surprising example to bring up here, trumped only by Psion, who left the consumer market in 2001. What does Apple have to do with any of that? (Psion, like the Newton, IMHO largely failed because it was a decade ahead of hardware and software technology quite being there. Thus, it never quite jumped from neat tech demo to actually useful thing. We _may_ see something similar play out with Vision Pro.)

But as for the greater point — too few smartphone OSes — I agree. I just don't think Apple (or Google) is to blame. Nor do I think the EU has put forward any proposal on what to do about that. Fining Apple, requiring them to do things, or preventing them from doing other things isn't going to magically bring back more platform diversity. And IMHO, the analysis on _why_ those platforms went away is wrong. Yes, Apple and Google benefit from each controlling half the market, much like Microsoft controlled the vast majority of it in the 1990s. But Microsoft didn't kill Amiga, Atari, Be, NeXT, OS/2 et al, and Apple and Google didn't kill Symbian or Blackberry. Apple, Google, and definitely Microsoft may have employed dirty tactics to _accelerate_ the demise, I put the blame on third-party developers. People buy stuff there's apps for, and developers want to target as few platforms as they can. We've never really grappled with this paradox.

And I don't know how much Apple or the EU is to blame, but "if macOS Sequoia doesn't also offer Android Mirroring, you don't get iPhone Mirroring either! So there!" is… not the right way of approaching this. If that _is_ the basis for why the feature won't (initially) make it to the EU, I understand the line of thinking, but now you've made things worse for everyone. Why not compromise with "if you offer a system-level feature that benefits your own hardware products, you must, within 36 months, provide APIs to third parties so they can use the same functionality"? That's still faster than how Apple offered the accessory API for AirPods-like integration (which took eight years, and I'm not even sure it's _quite_ the same level).

>Unless it’s a utility.

IMHO, smartphone platforms absolutely are a utility nowadays. You can barely apply for a job without them. Therefore, I don't object to increased regulation.

> I’ll just throw in, that Apple does have “progressive taxation”. Higher fees for bigger companies.

You mean all those big companies like Facebook, Amazon, Uber, Airbnb, etc who have free apps, pay no per-app or per-user or per-transaction fees to Apple even though those apps have hundreds of millions of users, and who pay the same $99/year developer fee as a high school kid that codes iOS apps for fun?

Huh.

@Ben G
Exactly, many of the biggest companies pay the least. I as well don't quite understand the assertion here.

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