Rise of the App Stores

Hi ZipLawyer! I'm Ludo Lugnani and this is ZipLaw: an independent newsletter covering the best commercial and legal news from the day. We explain how each story impacts law firms and their clients so that you can stand out in interviews and applications.

Today's newsletter is a ~8 min read:

• 📱 Rise of the App Stores: Why will Apple allow alternative app stores on its devices?
• ➕ Plus: Historic bio-diversity deal, EU's carbon market, Musk leadership hangs on a Twitter poll decision, and Messi is the GOAT.
• ICYMI: On Saturday, we sent out our Tracker newsletter summarising court cases and deals which law firms have been advising on.

🤿 Deep Dive

Rise of the App Stores

In brief:

• Apple is expected to allow alternative app stores on its iPhones and iPads.
• The move comes in response to the EU's strict new laws on social media platforms.

Big Decisions

The big news last week was that Apple is preparing to allow alternative app stores on its iPhones and iPads. This would let users sign up for subscriptions to dating apps, or buy in-app content from a game maker without involving Apple.

As part of the changes, customers could ultimately download third-party software to their iPhones and iPads without using the company’s App Store, avoiding Apple’s restrictions and the up-to-30% commission it imposes on payments.

Why are they doing this?

Apple's moves come in response to EU laws aimed at levelling the playing field for third-party developers and improving the digital lives of consumers.

The main law to focus on here is the Digital Markets Act (DMA). The DMA requires technology companies to allow the installation of third-party apps and let users more easily change default settings. The rules demand that messaging services work together and that external developers get equal access to core features in apps and services.

The laws apply to technology companies with market valuations of at least €75 billion and a minimum of 45 million monthly users within the EU. We recently covered key implications of another upcoming EU law (the Digital Services Act) on big tech companies here.

The DMA comes into effect in the coming months, but companies aren’t required to comply with all of the rules until 2024.

What does Apple think of this?

Apple is not keen to open up its devices to rival app stores, and potentially take a hit to its revenues by missing out on its app-store fees. However, it can't realistically avoid complying with the new laws. Europe is Apple’s second-largest after the Americas and is worth $95bn. The EU has warned that repeated infringements of the DMA could result in penalties of up to 20% of global revenue. In Apple’s case, that would be $80bn (which is quite a lot of money).

App Store Trouble

Apple already had some trouble with its App Store. Last December, Dutch regulators told Apple that preventing dating apps from using alternative payment systems was “unreasonable”. It gave the tech giant two months to allow consumers to pay outside the App Store. Apple complied after initially paying €50mn in fines for missing the deadline. However, it replaced its 30% commission with a 27% fee, leaving only up to 3% of additional revenue for the developer, with additional fees for payment processing.

Meanwhile, Epic Games, the creator of Fortnite, was involved in a Court battle with Apple over the App Store fees. After Epic sought to sidestep the commission with Fortnite, Apple removed the game from its store. In the case, Epic accused Apple of using monopolistic practices, but a US court found that the iPhone maker didn’t violate federal antitrust laws.

How does this impact law firms?

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