Today, Apple is launching updated terms for alternative app marketplaces in Europe and the developers who distribute through them. Breaking open Apple's infamous "walled garden" has been one of Europe's more successful digital regulation pushes. Apple is territorial over its App Store; commissions from the trillions of dollars that pass through it each year are the company's second largest revenue source after iPhone sales. Historically, Apple has taken a 30 percent cut of every download and in-app purchase, and a 15 percent cut of every recurring subscription. Developers who wanted to avoid the fees, or the arduous process by which Apple approves every app launch and update, had
nowhere to turn, since the App Store is the only shop in town on iOS. The EU's Digital Markets Act (DMA) aimed to change this. After several years of feet-dragging, today's updated terms are Apple's latest attempt to satisfy the Commission, even as Apple retains some control over and profit from app distribution.
The changes are twofold. First, Apple has significantly lowered the bar to run an alternative app marketplace, though it still requires operators to be an established entity in good financial standing. Second, Apple simplified the fees it charges developers for digital purchases made through alternative app marketplaces. Where it previously imposed an arcane tiered system, it now charges a flat 5 percent commission. And yet, Apple still remains a gatekeeper of app distribution: it notarizes all apps distributed on iOS, regardless of the distribution method, and developers must pay for an Apple Developer Membership. In other words, you still cannot distribute an app on iPhone without paying Apple, even if the app is free. This has never been true for Android—until now.
Apple's launch coincides with Android's new developer verification system, which went into effect in a handful of countries yesterday and will eventually apply globally. The program allows only verified developers (who pay a fee) to distribute apps by any means on Android devices. Google, which runs the Android operating system that powers almost all non-iPhones, has long championed independent app marketplaces, direct downloads, and alternative operating systems. While Apple promised to protect users from malware by seriously vetting apps on offer, Android let users decide whom to trust. If the possibility of fraud or malware spooked users, they could find an app marketplace whose vetting and curation they trusted. But it was their choice; Google minded its own business. This week marks the end of that hands-off, freedom-first approach.
Google's announcement of the program last year came within a month of a European Commission (EC) investigation into how Google protects consumers from the scams of suspicious developers and money-swindling apps posing as banks or trading platforms. It may not have been a coincidence. Google cites financial scams as the reason for adopting the verification process, and its announcement quotes a banking federation that touts the boon to security it offers. The choice not to pilot the verification program in Europe is a calculated one. If the Commission finds Google Play's current approach to fraud apps overly lax, Google can offer the program's expansion to Europe as a commitment to compliance. Even if the program's European rollout is insufficient, Google has at least bought itself several years and demonstrated a good-faith effort.
The timing of these changes by Apple and Google highlights an uncomfortable truth: Europe has a love-hate relationship with gatekeepers. The European Commission views the open internet as a threat, and relies on its thoroughfares to police the indecent, uncivil, scam-ridden web. This is why even as the EC nudges Apple toward openness, it pushes Google to become more closed.
In the context of European digital regulations, the term "gatekeeper" is derogatory, lobbed at Big Tech incumbents that have inhibited thriving, competitive digital markets in Europe. But the word is technically a legal distinction. The DMA designates seven "gatekeeper" companies that together control 23 core online services. The DMA's primary goal is to knock gatekeepers down a peg to make room for smaller market disruptors and European rivals.
Although the DMA's sister law, the Digital Services Act (DSA), uses a different term to describe gatekeepers, it relies on them to build a friendlier internet. Many of the DSA's goals, from preventing election interference to stemming the tide of illegal sales to stopping online harassment and sexual abuse, would be harder for the EC to enforce if very large online platforms gave way to decentralized chat rooms and marketplaces. It is easier to moderate content on a handful of platforms where most people conduct their online life (download apps, talk politics, share photos, shop) than it is to play whack-a-mole with a decentralized web where indecent users scuttle from one small internet hole to another.
Europe is not the only place where the ideals of internet openness and platform accountability compete. As I've pointed out elsewhere, America has always faced the same tension between allowing total anarchic freedom online and promoting a more palatable internet. The "twenty-six words that created the internet" (a provision in a 1996 law that absolved web platforms of the traditional duty to patrol what they publish) were originally couched in 4,500 words circumscribing the internet's limitlessness for the sake of decency. Those other words were struck down by courts, but Meta's recent settlement with state attorneys general on behalf of parents demonstrates that the pendulum has swung back toward holding platforms accountable for how consumers use them.
Every society needs to decide for itself how to balance openness and accountability. The European difference is that the EC uses the blunt tool of massive fines to demand both simultaneously. Meta must filter out disinformation while also promoting dissenting voices and smaller, less established media outlets. TikTok must protect youth without being ageist. Apple must allow more optionality in downloading apps, while Android must crack down on it. In the U.S., you may get competing interpretations from district courts, changing standards under different executives, and legislative bodies approaching an issue differently as it develops and political winds change. But in Europe, you get the same body demanding opposite things at the same time. The U.S. process is far from perfect, but compared to Europe, it is the difference between finding the equilibrium of two competing ideals and talking out of both sides of your mouth.
A narrow view of these European regulations is that Europe is lobbing digital tariffs on American companies in the form of massive fines, even while criticizing the American recoil from free-market globalism. There is truth to this, and indeed many Europeans have admitted the regulations' unstated aim is European digital sovereignty. However, the view prompts an unproductive American response, one that lends itself to escalatory retaliation and threats to take our ball home if Europe is so tired of us winning. Heightening the European political temptation to double down on tech sovereignty is a suboptimal strategy. In the bigger competition between the U.S. and China, the U.S. would clearly prefer Europe to be on our side.
Perhaps some of the U.S. fist-shaking is necessary, but pity towards the EU is probably more appropriate. Better still, the U.S. could show the EU an alternative future, where we capture the best of the interoperability and openness the DMA has prompted without getting mired in its tangle of contradictory obligations. During the Cold War, the CIA covertly funded many moderately liberal European organizations, operating under the belief that the best answer to communism was a democracy more responsive to people's needs. The equivalent in the new age of great power competition is to show Europe a better path forward on tech regulation as a way of encouraging it to focus less on unachievable tech sovereignty and more on allied tech partnership.
The Android verification system exemplifies the sad irony of European tech regulation. If the developer verification is successful, Google will be pilloried for being exclusive. If it is lax, Google will be negligently abetting fraud. It is derided by the same people who advocate for breaking Apple open. The EC has backed itself into a corner by necessitating and despising gatekeepers at the same time. Europe can say it hates walled gardens all it wants—but its countrysides are still dotted with castles.
