Apple ‘expects’ to make App Store changes due to EU pressure

Apple’s yearly Form 10-K filing with the U.S. Security and Exchange Commission is required to list “risk factors” of which the company is aware that could potentially affect the company’s bottom line. This is standard practice for all publicly-traded companies and includes all sorts of potential future issues, regardless of whether they are especially likely or not.

But as TechCruch has noticed, Apple has updated this mostly-boilerplate language in its most recent Form 10-K. The new language states:

From time to time, the Company has made changes to its App Store, including actions taken in response to competition, market conditions and legal and regulatory requirements. The Company expects to make further business changes in the future, including as a result of legislative initiatives impacting the App Store, such as the European Union (“EU”) Digital Markets Act, which the Company is required to comply with by March 2024. The Company is also subject to litigation and investigations relating to the App Store, which have resulted in changes to the Company’s business practices, and may in the future result in further changes. Changes have included how developers communicate with consumers outside the App Store regarding alternative purchasing mechanisms. Future changes could also affect what the Company charges developers for access to its platforms, how it manages distribution of apps outside of the App Store, and how and to what extent it allows developers to communicate with consumers inside the App Store regarding alternative purchasing mechanisms. This could reduce the volume of sales, and the commission that the Company earns on those sales, would decrease.

In other words, while Apple does not disclose what App Store policy changes are coming, it does say it “expects to make further business changes in the future” as a result of legislative initiatives like the Digital Markets Act, which Apple must be in compliance with by March 2024. Experts disagree on what particular changes would be necessary to comply, with some saying that Apple must allow payments for digital goods beyond its own payment processing (just as it already does with physical goods and services), or even to allow app distribution outside of the App Store (which could mean other app stores, direct downloads, sideloading, or other potential methods). Others think the changes will be quite narrow, with Apple simply loosening its rules about Apps linking to outside payment.

Any such changes are likely to be restricted to the markets under EU enforcement, though Apple faces anti-competition lawsuits and legislation in several other markets and could always seek to make global changes that address all of them.

The deadline for compliance is with the EU DMA is March 7, 2024 and the penalties have real teeth: 10% of global annual turnover with steeper fees for repeat offenders. That would be a more than a $30 billion fine in Apple’s case.