Apple Now On The Hook For 637 Million Euros In Antitrust Damages In A Dutch Court

Another week brings another antitrust headache for Apple, replete with hundreds of millions of euros in potential damages. The legal wranglings are now set to unfold in a Dutch court, following the EU's top court's decision to settle the jurisdictional question, allowing the case to proceed.

Two foundations accused Apple in a Dutch court of abusing its dominant position by charging app developers excessive fees; the Court of Justice of the European Union (CJEU) has now ruled that the Dutch court has "international and territorial jurisdiction" 

Here are the key points in this drawn-out legal battle:

1. Two Dutch consumer foundations - Right to Consumer Justice and ‌App Store‌ Claims - accused Apple back in 2022 of abusing its dominant position to charge third-party app developers excessive fees, to the tune of 30 percent.
2. The foundations claimed that these fees inflated prices for apps and in-app purchases.
3. Apple argued that the Dutch court did not have jurisdiction as the Apple App Store in the EU is operated from Ireland, and that the case should be litigated in an Irish court.
4. Apple also argued that if the District Court of Amsterdam could litigate this case, it would lead to inevitable fragmentation, with numerous similar cases popping up in various EU jurisdictions.
5. The District Court of Amsterdam then sought guidance from the Court of Justice of the European Union (CJEU).
6. The CJEU has now ruled that the Dutch court has "international and territorial jurisdiction" in the matter as the pertinent App Store was designed for a Dutch audience, and offers Dutch apps to people with an Apple ID associated with the Netherlands.
7. The case can now proceed in the District Court of Amsterdam, where Apple is on the hook for around 637 million euros ($743 million) to rectify the potential damages suffered by 14 million Apple iPhone and iPad users in the Netherlands.

Do note that, while arguing for repealing the Digital Markets Act (DMA) in the Luxembourg-based General Court of the European Union, Apple recently cited an interesting study that showed:

1. Apple's modified terms for developers reduced the average App Store commissions by 10 percent, resulting in cumulative savings of EUR 20.1 million, with 86 percent of these savings going to non-EU developers.
2. Around 90 percent of the developers, however, either maintained the same pricing for end-users or charged a higher amount.
3. Developers reduced prices just 9 percent of the time, but in a manner that was "consistent with usual patterns in price changes."

The study went on to note:

"Developers’ decision not to pass on commission savings to EU users mirrors Apple’s past experiences following the launch of multiple initiatives that reduced commission rates."

For the benefit of those who might not be aware, the EU's DMA has established a ring-fence around some tech giants, including Apple, for being "gatekeepers" - a designation that signifies that a particular entity has enough market dominance to block competition.

Apple was classified as a gatekeeper for surpassing the DMA's minimum user threshold and for retaining a monopoly over its App Store. Under the ensuing remedies, the EU has forced Apple to allow third-party app stores on its devices.

Under concerted pressure, Apple modified the terms for app developers in the EU in March 2024, allowing those who enrolled in the modified program to pay a lower percentage of their overall app-derived revenue to Apple.

Apple's other antitrust travails

Do note that the EU's "gatekeeper" designation applies to entities that possess enough market dominance and heft to block competition.

The designation requires an expansive qualifying criteria:

1. A market capitalization of 75 billion euros ($79 billion) or EU-derived revenues of at least 7.5 billion euros in each of the last 3 business years.
2. 45 million monthly active end users and over 10,000 yearly active business users in the last financial year.
3. The candidate entity fulfilled the second criterion in each of the last 3 financial years.

Critically, an entity must inform the EU as soon as it meets the qualifying criteria for a "gatekeeper" designation.

Accordingly, as per a recent report from Reuters, Apple has now informed the EU that its Maps and Ads services have hit the required threshold for a formal determination.

The EU now has 45 days to decide whether to impose additional antitrust remedial measures on these two services. If the designation status is approved, Apple will have 6 months to take appropriate antitrust remedial measures. Do note that the EU has already bestowed a gatekeeper status on Apple's App Store, iOS, and iPadOS.

Separately, Poland's anti-monopoly watchdog, the UOKiK, has now initiated a formal investigation against Apple for supposedly subverting its own ATT rules to deliver personalized ads on its bespoke platforms, including the App Store.

Under the ATT framework, Apple attaches an anonymized identifier - bereft of personal details - to each device. Third-party app developers can then seek consent from users to track their activity using this identifier.

However, the Polish antitrust watchdog recently contended that Apple does not seek such consent under the ATT framework from users for its own apps and platforms. The contention is quite simple: if Apple's bespoke apps and platforms, including the App Store, are not subject to the ATT framework, the Cupertino giant can theoretically use the anonymized identifier to display personalized ads to users, that too without the hassle of seeking outright consent.

According to UOKiK President, Tomasz Chrostny, this situation potentially increases "Apple’s competitive advantage over independent publishers."

Do note that Apple has previously clarified that it does not misuse the anonymized device identifier to display personalized ads on its bespoke apps and platforms. Nonetheless, the Polish authorities appear skeptical, and so do their counterparts in Germany, Italy, and Romania, all of whom have already launched separate investigations into the tech giant's supposed use of app tracking data.

Meanwhile, in the US, Apple was recently compelled by a court in the Epic case to allow access to external payment methods and to enable the return of Epic's Fortnite app. While Apple has complied with the verdict, it still vows to charge a commission on those payments, prompting the judge in the case to call on Apple to cease doing so or face contempt proceedings, and even possible criminal charges.

This situation has created a legal precedent, where consumers in other markets are also asking for similar privileges. For instance, in Australia, Epic recently asked the court to allow its apps to be sideloaded onto Apple devices without any associated commission.

Moreover, a group of around 55 Chinese consumers has now filed a formal antitrust complaint against Apple with China's market regulator, arguing that Apple maintains a monopoly over app distributions and payment methods in China while allowing off-App Store payments as well as third-party app stores in other markets.

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