Apple's decision to open the App Store was not voluntary but to comply with a new European regulation – the Digital Markets Act (DMA), which forced major tech companies to open their platforms by March this year.

This could threaten the lucrative App Store business, especially if developers like Spotify and Microsoft take advantage of the new rules to escape Apple's 30% in-app purchase fee and release their own app marketplaces for iPhones.

However, Apple has taken precautions by announcing a new fee structure in Europe, including an annual fee for each installation of popular apps outside the App Store, so many developers will end up paying the equivalent amount to the “bitten apple”.

The iPhone maker believes the new European rules put users at risk of fraud and abuse because apps that do not go through the App Store will not be rated for content and may contain malicious code. The company also warned that some new browser apps that do not use Apple's "engine" will affect device battery life.

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Apple is famous for its closed ecosystem, similar to a garden with no entrance. (Photo: Slate)

App developers in general can rejoice at the news, having argued for years about Apple’s fees and its strict app review program, which routinely rejects app updates. While regulators around the world are trying to force Apple to open up its platform, the January 25 change is the most drastic yet and offers a glimpse of what could happen if the US adopts similar rules.

The change is limited to Europe and accounts registered in that region, rather than globally. It will come into effect in March in a new iOS update.

Details of changes to the App Store

Apple said it would allow other companies to offer iPhone app stores in Europe, but only if they were authorized by Apple. The company would know which companies were running which stores and could revoke their licenses if they were full of fraudulent apps or malware.

For users, this means apps installed from outside the App Store will show up in settings, along with information about where and when they were downloaded. When developers publish an app in Europe, they get to choose which store to upload it to. Apple will “notarize” the apps, scanning them for malware or programming problems.

For companies like Spotify or Microsoft – which have expressed interest in distributing apps outside the App Store in Europe – the new regulations do not conflict with their plans, but Apple has put up barriers to make this more difficult.

Apple is also allowing app developers to collect money directly from users. Previously, users could only buy virtual items like in-game coins through Apple's billing system, which typically charged a fee of 15% to 30%. Now, developers can include credit card numbers in their apps or choose to link to their websites for users to pay.

However, Apple still has ways to collect fees and commissions from apps even if they have their own payment systems or are distributed through external marketplaces. If a developer chooses one of the external systems, Apple will automatically reduce its commission in Europe but add an installation fee for popular apps.

Specifically, the company will collect 0.50 EUR for the first install of applications with over 1 million users to cover the costs of software development and distribution of Apple applications. Core technology fees apply if the application is downloaded through a third-party marketplace or the App Store.

The DMA has been years in the making. Spotify was among the companies that lobbied hard for the law. Other areas of Apple could come under scrutiny as the European Commission continues to examine its business practices, particularly around iMessage interoperability with rivals. Apple has also made changes to its digital wallet and web browser technology.

Epic Games CEO Tim Sweeney criticized Apple's new plan as a "case of malicious compliance," arguing that the new business terms entail "garbage" fees. Epic Games sued Apple for exclusivity in the US in 2020 and lost.

(According to CNBC)