A bad date: Dutch competition authority orders Apple to adjust its unreasonable app. store conditions for dating-app developers
In a decision of 24 August 2021, the Netherlands Authority for Consumers and Markets (the ACM) ordered Apple to adjust the unreasonable conditions in its Apple App Store (the “App Store”) that apply to dating-app developers. A summary decision was not published until 24 December 2021, after Apple first started interim relief proceedings to block the publication of the decision and to suspend the penalties in case of non-compliance. These requests were (largely) denied by a Christmas Eve judgment of the Rotterdam District Court of 24 December 2021. And as summarized below, there have been additional developments since that judgment was entered.
App Store conditions
App developers pay Apple an annual program fee of 99 US dollars in local currency for use of the App Store. In addition, if an app developer offers digital content or services within the app for a fee, the app developer is required to agree to additional contractual conditions imposed by Apple. Under these conditions, it is mandatory for the app developer to use Apple’s App Store Payment Processing System for the processing of payments for apps and in-app purchases (IAP). App developers are prohibited from referencing within their apps alternative payments options potentially available outside Apple’s App Store-- anti-steering.
The ACM decision concerns providers of dating services that offer their services through an app that is made available in the App Store. According to the ACM, offering an app is critical for these developers because consumers use dating services primarily on their smart mobile devices, and consumers prefer using apps for functionalities specific to smart mobile devices (e.g. push notifications, data storage, GPS, the speed of the service) which is very important for a dating app.
Abuse of dominance decision
According to the ACM’s decision, dating-app developers have no substitutes for Apple’s App Store as a result of which Apple is able to act independently from dating-app developers. The ACM took into account the fact that most Dutch consumers only have access to one mobile operating system with a corresponding app store (single-homing): either Apple’s iOS operating system with the App Store or Google’s operating system Android with the Google Play Store. Therefore, in order to widen the reach of their app, dating app developers must be present in both the App Store and the Google Play Store (multi-homing). In its decision, the ACM pointed out that multi-homing is critical to dating-app developers because dating apps heavily rely on network effects. The greater the chance of a successful match, the more attractive it becomes to use the app. For this reason, dating-app developers need to be present in both the App Store and the Google Play Store; considerably more than the average app developer.
As Apple does not allow alternative app stores on its iPhones and iPads, and websites are not seen as realistic alternatives for dating-app developers, the ACM determined that Apple enjoys a dominant position in the relevant market for app store services on the iOS mobile operating system for dating-app developers. Apple can act with a high degree of independence from the dating-app developers in this market, and can dictate the terms of access to the App Store. ln sum, dating-app developers have no realistic alternative to the App Store, and consumers do not take into consideration the conditions for dating-app developers when selecting a smart mobile device.
Although having a dominant position is not illegal, abusing such dominance is. According to the ACM, that is what happened when Apple imposed unreasonable conditions on dating-app developers with regard to Apple’s App Store Payment Processing System, and its anti-steering requirement that applies to developers that offer digital content or services for a fee within their app. The ACM concluded that these conditions are abuses in two respects. First, because Apple restricts dating-app developers’ freedom of choice with regard to the processing of the payments for the digital content and services they sell. Second, because Apple does not give access to data concerning customers that have made purchases, app developers are also not able to contact their app users directly for customer service purposes. This also makes it difficult to do background checks, which is of significant importance to dating-app developers. Furthermore, the ACM found the restrictive conditions unnecessary to Apple’s operation of its App Store. That is why the ACM considered these conditions to be unreasonable and in violation of Dutch competition law.
Imposed adjustments and Apple’s (lacking) implementation
The ACM ordered Apple to adjust the conditions for access to the Dutch App Store so as to allow dating-app developers to use payment systems other than Apple’s ASPPS. Dating-app developers must also have the ability to refer users to payment options outside the app (i.e. no anti-steering provision is permitted). The order imposed on Apple was made subject to a penalty, which has been set by the Rotterdam District Court at 5 million euro per week up to a maximum of 50 million euro if Apple does not adjust the unreasonable conditions within two months.
Shortly before the expiration of the two-month deadline imposed by the order, Apple announced that it would amend its conditions to allow dating-app developers to use alternative payment systems. According to the ACM, however, Apple failed to satisfy the requirements of the order on several points. Most importantly, dating-app developers could merely express their ‘interest’ to use other payment systems but were not actually permitted to do so. Also, Apple raised several barriers for the use of third-party payment systems by forcing app developers to make a choice: either refer to payment systems outside of the app or to an alternative in-app payment system. The ACM had made it clear that this is not allowed. Developers must be afforded both options.
In another compliance action, Apple offered dating-app developers one of the following three options: 1) continue using the App Store Payment Processing System, 2) use a third-party payment system within the app, or 3) include an in-app link directing users to the developer’s website to complete a purchase. As to the first option, Apple will continue to charge its regular commission of 30%, and a reduced commission of 27% will apply to the other two options.
However, options 2 and 3 are only available for dating apps in the Dutch version of the App Store, and purchases made through a third-party payment system (option 2) or through an in-app link (option 3) will only be available in the Netherlands. As a result, dating app developers will be forced to develop a new app for the Netherlands in order to be able to use these options. For this reason, the ACM considered these changes as not complying with the order. Accordingly, due to the lacking implementation of the ACM order, Apple has already forfeited penalties in the total amount of € 20 million. As Apple remains reluctant to unconditionally and fully comply with the ACM order, these penalties are likely to increase further until the maximum amount of € 50 million has been reached. It appears to be unprecedented for a company to keep refusing to comply with an ACM order even after having forfeited severe penalties. Therefore, it is uncertain what will happen after the € 50 million maximum has been reached. Most likely, the ACM will request the court to set new penalties with a higher maximum amount. But with the very deep pockets of Apple – and also taking into account what is at stake for Apple (see also below for ‘the broader picture’), it remains to be seen whether this will force Apple to finally comply with the ACM decision.
The ACM decision is illustrative of the increase in European competition law scrutiny of Big Tech conduct claimed to be abusive of market dominance. In this respect it is noteworthy that not only competition enforcement authorities are involved, but there also are a rising number of private enforcement initiatives. With respect to Apple’s App Store, a collective action for damages was recently announced in the Netherlands by the Stichting app store. This collective action is being brought under the new Dutch collective action regime, and is broader in scope than the ACM action. This action goes beyond the abuse of dominance in the context of dating-apps, but applies generally to Apple’s alleged abuse of dominance in the App Store, in particular the practice of imposing restrictive terms which require app developers to distribute iOS apps exclusively via the App Store, and require that purchases are to be made only using the App Store Payment Processing System, and by charging excessive and unfair prices in the form of a 30% commission. At its core, Apple's App Store business model is at stake. To sum it up, this date isn’t over yet.
*Rogier Meijer and Sander Timmerman are Partners in the Amsterdam office.
 Rotterdam District Court, 24 December 2021, ECLI:NL:RBROT:2021:12851 https://deeplink.rechtspraak.nl/uitspraak?id=ECLI:NL:RBROT:2021:12851