Is Apple a threat to the rule of law?

Over the past couple of years, app developers have engaged on multiple fronts to force Apple to open its App Store monopoly. They have supported legislative initiatives, such as the Digital Markets Act (“DMA”) in the EU, the Open App Markets Act (“OAMA”) in the United States, and legislation in South Korea designed to bring more competition in app stores. They have been involved in the competition law investigations of various competition authorities, such as the UK CMA, the European Commission, and the Dutch ACM, to bring some of Apple’s anticompetitive conducts to an end (see here, here and here). Finally, as illustrated by Epic Games, they have filed lawsuits in United States and elsewhere to achieve the same goal.

These various initiatives and proceedings comply with the rule of law. The laws that have been proposed (or already adopted in the case of Korea) to address competitive concerns raised by the Apple and Google’s app stores are voted by democratically elected assemblies (although, in the case of the European Union, the DMA would be co-adopted by the European Parliament and the Council of Ministers) following public debates. Competition authorities (or at least those investigating Apple in Europe) give investigated parties ample opportunities to be heard in writing and orally, and these parties can appeal the decisions of these authorities before independent courts of law. In the case of litigation, the cases are also heard by independent courts where the parties have an equal right to be heard.

Now, once a law has been passed or an antitrust decision has been adopted (and its effect has not been suspended during the appeal process), one should expect that companies that are subject to the legislation or the addressees of the decision, whatever their strength and influence, will comply with their obligations under these instruments. Unless that is the case, democracy cannot function.

It is in this context that one can raise the question whether Apple – a trillion-dollar company – has become a threat to the rule of law. This question may appear provocative. After all, Apple is seen by many as one of the most sophisticated and successful corporations in the world, whose slick image is supported by multi-million-dollar marketing and lobbying campaigns. However, recent developments suggest there is a darker side to Apple, which is worrying at a time where governments are seeking to regulate Big Tech platforms.

Take the example of South Korea. In August 2021, the Korean National Assembly approved a bill that bans major app store operators – like Apple and Google – from requiring app developers to only use their in-app payment systems to process their sales. Apple initially defended the view that it was compliant with the bill in question and did not have to change its App Store policies, a position that did not make sense since the very purpose of the bill was to address the obligation imposed by Apple and Google on app developers to use their respective in-app payment systems (In App Purchase or IAP for Apple, Google Play Billing or GPB for Google).  After several months of fruitless debates with the Korean authorities, Apple finally announced in January 2022 that it intended to comply with the law, by allowing app developers to use alternative in-app payment systems, although it would still charge a commission on their sales. However, on 3 February 2022, Reuters reported that the Korean Communications Commission (“KCC”) – the regulatory body responsible for enforcing the Korean law – believes that a compliance plan Apple submitted “still lacks concrete detail” as to how compliance with the law would be ensured. By now, it is clear that Apple is engaged in a game of delaying compliance with its legal obligations under the Korean law, thus depriving app developers of their rights under that law.

Closer to home, the Dutch ACM adopted in August 2021 a decision in which it found that Apple’s App Store policies breach EU competition law. This decision was the result of a two-year investigation, which was preceded by an extensive market study the ACM had conducted into app stores. Following the adoption of the decision, Apple sought an injunction before the District Court of Rotterdam to prevent the decision from being published and producing its effects before all appeals on substance have been exhausted. On 24 December 2021, the District Court of Rotterdam refused to grant Apple an injunction to block the part of the decision that related to Apple’s obligation on dating app developers to use IAP, but granted an injunction to Apple to block some other parts of the ACM decision.

As a result, Apple had until 15 January 2022 to comply with the following remedies ordered by the ACM:

  1. Dating app providers have to be allowed to choose which party will handle payments for digital content and services sold within the app for the dating apps they offer in the Dutch Store Front of the App Store; and
  2. For purchases within dating apps offered in the Dutch Store Front of the App Store, dating app providers must be allowed to refer to payment systems outside the app.

On 14 January 2022, Apple made a public statement in which it announced that it would comply with the abovementioned remedies. However, it was obvious from reading this statement that Apple had not taken the necessary measures to comply with such remedies. On 24 January 2022, the ACM announced that, following an investigation, Apple had failed to satisfy the requirements the ACM had set regarding payment systems for dating-app providers, and condemned Apple to pay a first penalty payment of 5 million euros.

On 4 February 2022, Apple published a new statement giving further specifics on the way it intended to implement the remedies imposed by the ACM.  But, once again, what Apple describes in its statement is clearly insufficient to comply with the ACM remedies for a host of reasons. In fact, as observed by commentators (see, e.g., here and here). Apple clearly wishes to discourage dating app developers from taking advantage of the ACM remedies by, for instance, requiring developers that want to use an alternative in-app payment system or link to an off-app payment system to create a separate app for the Dutch Store Front or requiring them to display an “in app modal sheet” containing language designed to scare users.

Although the ACM has not reacted yet, this will leave it with no choice but to impose a further penalty payment on Apple. It is important to note that, as per the District Court of Rotterdam judgment, the ACM can only impose a penalty payment of 5 million euros per week in case of non-compliance, with a cap of 50 million euros, i.e., sums that represent very little for a company like Apple. Thus, the financial cost of non-compliance is small, although if Apple is still non-compliant once the 50-million euros cap has been reached, it may be exposed to further financial penalties.

In its statement, Apple has also indicated that it will charge a 27% commission on dating app developers that decide to use an alternative in-app payment system or link to an off-app payment system (that is, 3% less than the standard 30% commission, as Apple will no longer process their payments). This led noted tech commentator Marco Arment to call this an “amazing, ridiculous comedy”. Apple’s intention to charge a commission to app developers that decide to use an alternative in-app payment system or link to an off-app payment system also suggests that it may have made inaccurate statements in several proceedings where Apple claimed that without IAP it would not be possible for it to charge a commission. Well, as greed matters more than consistency, it seems it can.

There is no question that companies that are subject to an antitrust investigation should have the right to defend their case to the full extent, and Apple has already had ample opportunities throughout the ACM investigation to make its case. Apple tried to block the decision by seeking an injunction in court, but it largely failed and was ordered to implement the IAP-related remedies that were adopted by the ACM. Apple will have the opportunity to appeal the ACM decision, but this appeal is not suspensive and thus the remedies need to be implemented in the meantime. Since August 2021, Apple knew there was a likelihood it would have to implement the ACM remedies, hence it had plenty of time to do what it takes to be compliant by 15 January 2022.

There used to be a time where even large companies were hurt by financial penalties or had enough respect for the rule of law to comply with legislation or competition authorities’ remedies without engaging in various games and tactics not to do so. But it seems that Apple considers itself above the law. Now, this attitude may be short-sighted and eventually backfire as it will make lawmakers increasingly eager to regulate Big Tech and adopt tough measures to prevent circumvention. Indeed, although it contains strict provisions, the DMA could remain lettre morte if companies like Apple are allowed to obfuscate processes.

While large platforms should be allowed to use all available procedures to vigorously defend their interests, once these procedures are exhausted, they should comply with their legal obligations, and I am convinced that most of them will do so. No one is above the law. That is why the path chosen by Apple cannot be tolerated.

Damien Geradin advises various app developers and is the outside counsel of the Coalition for App Fairness. This blog post only binds the author and cannot be attributed to his clients.

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