Apple Faces EU Regulatory Heat Over App Store Policies
European Union regulators made headlines on Monday as they levelled accusations against tech giant Apple (AAPL) for allegedly breaching the EU’s Digital Markets Act with its stringent App Store policies. Despite an initial market dip, Apple’s stock managed to recover during later trading hours.
Allegations and Response
The European Commission formally notified Apple of its preliminary view that the company’s rules within the App Store violate the Digital Markets Act. The primary concern revolves around how these regulations restrict app developers from directing consumers to potentially cheaper purchasing options external to the App Store. Apple now has the opportunity to respond to the commission’s findings.
Additionally, the commission initiated a noncompliance procedure against Apple, focusing on recent contractual demands imposed on third-party app developers and app stores. Notably, this includes the introduction of a “core technology fee” wherein developers are required to pay 0.50 euros (54 cents) for each app download and installation originating from sources outside Apple’s App Store.
The Digital Markets Act was established by the 27-nation bloc to foster equitable competition within European digital marketplaces. Among the designated “gatekeepers” mandated to adhere to the DMA are tech giants like Alphabet (GOOGL), Amazon (AMZN), ByteDance, Meta Platforms (META), Microsoft (MSFT), and Apple.
Market Performance and Impact on AI Strategy
In the wake of these regulatory challenges, Apple’s stock demonstrated resilience, closing at 208.14 with a marginal increase of 0.3%. Despite reaching an all-time high of 220.20 on June 12 following the disclosure of its artificial intelligence strategy, Apple faces delays in implementing AI features within the EU due to the DMA guidelines, as per reports by the Financial Times.
Beyond the EU scrutiny, Apple is contending with legal issues domestically. In March, the Justice Department filed a lawsuit against Apple, alleging antitrust violations related to its iPhone and App Store policies. The lawsuit asserts that Apple’s practices hinder consumer choice, stifle app innovation, and burden developers and consumers with excessive costs.
Looking ahead, Melius Research analyst Ben Reitzes remains optimistic about Apple’s prospects, reaffirming a buy rating on the stock and raising the price target to 260 from 227. Reitzes anticipates that Apple’s forthcoming AI advancements will drive a surge in iPhone upgrades, particularly with features like enhanced AI capabilities, Siri improvements, and heightened privacy measures compelling consumers to opt for newer iPhone models.
