Bowing to pressure from European regulators, Apple has reluctantly agreed to allow iPhone and iPad users to download apps from third-party stores and use alternate payment systems – effectively ending its 15-year App Store monopoly in Europe.
The landmark changes, applying to newly purchased devices from March, represent a seismic shift for the world’s most valuable company. Apple has faced escalating accusations of anti-competitive behavior in recent years for forcing developers to use its payment systems and pay commissions of up to 30%.
Under the Digital Markets Act (DMA), Apple must permit “sideloading” of apps bypassing its store. In theory, major rivals like Google Play, Epic Games Store, Steam, and Amazon’s Android Appstore could now operate on iPhones. Users can also install web browsers like Chrome or Firefox as defaults.
Margrethe Vestager, the European Commissioner for Competition and architect of the DMA, hailed the move as a victory for consumer choice and a rare instance of regulators prevailing over Silicon Valley. She stated:
“This is a huge step forward that will give a breath of fresh air to European consumers and developers. They can now choose how and where to access apps, and how to pay for them.”
But Apple blasted the changes, claiming “new avenues for malware, fraud and scams” while failing to provide evidence for its security assertions. Tim Cook has long argued that Apple’s “walled garden” protects users and developers.
Behind the scenes, the company has scrambled to add restrictions to dissuade developers from abandoning its ecosystem. Fees for popular apps will now incur a 50 cent “technology fee” for each install over 1 million – hitting game makers relying on free downloads.
Developers also face a complex web of rules around Apple’s commissions, fees, and continued review requirements. Those not exclusively using its store will pay a minimum 15% revenue share on in-app purchases – reduced from 30%, but still substantial.
For Apple, the EU move caps years of escalating antitrust investigations and highlights a vulnerability for their most profitable product – the iPhone, which generates over 50% of revenue. With Australia, India, the UK and Apple’s home turf in the US mulling similar legislation, experts say the company will need to dramatically rethink its services strategy.
As Europe’s regulators have shown, even the world’s biggest tech titans are no match for the rapidly evolving push to rewrite the playbook on competition in the digital economy. Both app makers and Apple itself face a period of uncertainty as they navigate uncharted post-monopoly territory.