Apple to face first fine under EU's Digital Markets Act for Big Tech

By Samuel Stolton 

Apple Inc. is set to face the first-ever fine under the European Union’s new digital antitrust rules for Big Tech, representing an escalation of a clash with regulators over the dominance of its hugely profitable App Store. 

Watchdogs are readying the penalty after the iPhone maker failed to allow app developers to steer users to cheaper deals and offers outside of the App Store, according to people familiar with the case, who spoke on condition of anonymity. 

 

The penalty, under the tough new Digital Markets Act, is set to come just months after Cupertino, California-based Apple was hit with a €1.8 billion ($2 billion) fine for similar abuses under the bloc’s traditional competition rules — involving music streaming service Spotify.    

 

The European Commission could still unleash the fine before current EU competition commissioner Margrethe Vestager is due to leave office later this month, according to the people. 

 

But there was a chance it could be pushed back to later this year, they said. The fine could also be accompanied by periodic penalty payments, levied on Apple until it complies with the law, said the people, adding that the decision was still being drafted.  

 

Apple spokespeople didn’t immediately respond to a request for comment. The European Commission declined to comment.

 

The move follows a warning to Apple in June that it must give developers effective means to steer users away from its App Store, or face future penalties. In contrast to traditional antitrust law, the DMA is designed to head off anticompetitive behavior before it is too late to wreck markets for good.

 

Under the law, EU regulators have powers to fine the world’s most powerful tech firms 10% of their global annual sales, 20% in the event of repeated infringements, or periodic fines of as much as 5% of the average daily revenue.   

 

In fourth quarter results posted last week, Apple reported sales of $94.9 billion, compared with an average estimate of $94.4 billion. Revenue from the iPhone came in at $46.2 billion, beating estimates of $45 billion.

 

Apple shares rose less than 1% to $223.45 at the close in New York on Tuesday. They are up 16% this year.

 

Vestager has locked horns with Apple several times during her period in Brussels. In the Spotify dispute, she accused Apple of blocking its rival from informing users of cheaper deals away from Apple’s App Store.  

 

Vestager also grabbed the headlines when she ordered Apple to repay €13 billion in allegedly unfair tax breaks from Ireland. Soon after that order, Apple Chief Executive Officer Tim Cook called the commission’s case “political crap.”

 

Earlier this year, EU antitrust regulators also managed to force Apple to allow third parties use the iPhone’s payment chip to handle transactions, a move that allows banks and other services to compete with the Apple Pay platform.