DMA takes effect, Apple’s closed system under threat

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The European Union wants to regulate the digital giants, and Apple is no exception. While a new rule obliges the firm to replace its proprietary Lighting port with a USB-C on its future iPhones, Europe is also preparing to apply the new DMA rules or legislation on digital markets.

This legislation was proposed by the European Commission in December 2020, in order to limit the power of digital platforms as well as practices that harm competition. Approved by the European Parliament and the Council, the new legislation comes into force.

Towards the end of the closed system on iPhone

And it includes a number of rules that should impact Apple products (but also those of other companies). As for the Cupertino company, it could be forced to allow iPhone users to install competitors from the App Store, or even to install apps without going through a store (things that are already possible on Android).

“When a gatekeeper engages in unfair practices, such as imposing unfair terms of access to its app store or preventing the installation of apps from other sources, the consumer is likely to pay more expensive or is deprived of the advantages that could have been obtained by other services”reads the Commission’s announcement.

Obviously, Apple suffers another setback, since it has always protected the closed system developed on the iPhone. This closed system allows the Apple brand to force developers to pay a 15% to 30% commission on purchases made via the App Store (the only option for installing apps on the iPhone).

But the firm has always justified this closed system by invoking security reasons. Craig Federighi, head of software at Apple, for example, described sideloading (the installation of applications without going through the stores) of “cybercriminals best friend”.

Consequences for iMessage and Apple Pay

In addition, Apple will not only be impacted at the level of its mobile app store. Indeed, the DMA also obliges large corporations (when considered a “gatekeeper”) to make instant messaging services interoperable.

“For example, users will be able to communicate from Telegram to WhatsApp users without first installing or using the WhatsApp application”, explains a page from the Ministry of the Economy. You can very well replace any of these examples with iMessage.

European legislation could also prevent Apple from reserving certain features of its iPhones, such as the NFC module for contactless payment, for its own services.

When will these rules apply?

The entry into force of the DMA legislation is only one step. According to the explanations of the European Commission, this will apply in six months, in May 2023.

Companies whose services are likely to be affected by the legislation must notify the Commission. And the latter assesses whether these services are considered “access controllers” subject to the new rules. Then, companies have a deadline to comply with these rules.

This process means that companies affected by the DMA will only be forced to comply in 2024.

Consequences for other tech giants

The DMA will also impact the operations of other digital companies, such as Google. For example, the legislation prohibits self-referencing, which means that the companies concerned will no longer be able to promote their products on the platforms they control.

In terms of advertising, this legislation also reinforces the collection of data between several services (in the form of third-party cookies or IDFA) without the user’s consent.

In addition, companies using online platforms will have guaranteed access to essential data. “[…] sellers active in a marketplace such as Amazon will have access to their customer information (e.g. email address) to build a trusting business relationship with their customers”explains the Ministry of the Economy.

Which companies are affected by DMA?

The list of types of services that may be affected by DMA is very long: online intermediation services such as application stores, online search engines, social networking services, certain messaging services, video-sharing platforms, virtual assistants, internet browsers, cloud computing services, operating systems, online marketplaces and advertising services.

For a company working in these fields to be designated as a “gatekeeper”, it must have a significant turnover (at least 7.5 billion euros) in the European Economic Area and provide its services in at least three EU states. According to the Ministry of the Economy, a market capitalization of more than 75 billion euros also makes a company eligible.

As far as users are concerned, the threshold is 45 million active users per month in the European Union, as well as 10,000 European user companies.

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