Home News Can’t escape EU fine? - Apple Status

Can’t escape EU fine? - Apple Status

2024-07-08

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At last month's WWDC conference, Apple launched Apple Intelligence, intending to stage a "Return of Concubine Xi" in the global mobile phone market and teach all major mobile phone brands what an AI phone is.


01 EU's action towards Apple

This hasn't even been implemented yet, but the EU has already taught Apple a lesson: After preliminary 

investigation, it was determined that Apple's App Store in the United States is suspected of violating the EU's Digital Markets Act (hereinafter referred to as DMA).

If Apple is ultimately found to have violated the regulations, it will face a fine of up to 10% of its global annual revenue; in the case of repeat offenses, the maximum proportion of this fine can reach 20%.

In other words, Apple's revenue last year was $383 billion, and it had to pay a fine of $38.3 billion to the EU, or $76.6 billion.

At first glance, this matter has nothing to do with Apple AI, but Apple said: "We are concerned that the interoperability requirements of the DMA may force us to compromise the integrity of our products in a way that endangers user privacy and data security."


A lot of incomprehensible words, but it doesn't matter, in fact, it expresses an attitude: If we can't meet the requirements of the DMA, our Apple AI will probably not enter Europe! Good guy, China has a way to enter, but the EU can't handle it.

What exactly does this DMA stipulate that makes Apple so uncomfortable? Silicon Base Jun carefully read this bill and tell you about it.

In general, this bill focuses on nitpicking.


First, the EU said that this bill only targets a specific type of company, namely large technology companies that provide platform services, such as Google's search engine, Apple's app store, Facebook's advertising, etc., and gave them a name: Gatekeepers. It probably means that these technology companies actually play the role of gatekeepers on their own platforms, allowing only things they approve to pass through, thus forming a monopoly effect. This bill clearly stipulates what these gatekeepers can and cannot do, so as to prevent monopoly and affect the entry of competitors. For example, Apple has always only allowed users to download apps from the Apple Store, not to allow users to install third-party app stores, and Apple will charge a maximum commission of 30% for digital consumption in apps. This is the "Apple tax" that has been criticized by the outside world for a long time, and it has been identified by the EU as a violation of DMA. For example, Meta also violated the rules because Meta asked users to choose between "paying to remove ads" and "free but accepting personalized ads". In fact, both options can make Meta money, resulting in "the platform's own services taking priority over other services." At the same time, due to Meta's large user base, the "free user-exclusive advertising service" it provides is extremely cost-effective for advertisers, which in turn leads to possible monopoly, which is also a violation of DMA.


However, the regulated technology companies have already established a mature business ecosystem and solid competitive barriers in the European market. The so-called "prevention" is nothing more than a reckoning, that is, fines, fines, or fines. No fines are fine, just split the business. Of course, it is not that easy to be targeted by the EU. The bill specifically points out seven "gatekeepers": Alphabet (Google's parent company), Amazon, Apple, Booking, ByteDance, Meta and Microsoft.


These companies all have one thing in common:

They are foreign platforms with a huge user base in the EU and very high income. In other words, these companies earn money from Europeans, but contribute taxes to other countries. What is the difference between this and the loss of state-owned assets?

So either they have to pay a fine (tax) or split up and keep their European business as a branch in Europe.

Just in March this year, the DMA Act just came into effect, and Apple was caught and severely killed the chicken to scare the monkey: the EU announced that because of the "Apple tax" that Apple has been levying for many years, it intends to fine Apple 10% of its global total revenue.

The sound of this abacus was heard by Silicon King in China. Even if the revenue in Europe has not changed, if Apple earns 100 yuan more in China, 10 yuan of it will be paid to the EU.

However, the EU also said that this is only a "warning punishment", and if it is a second offense, the fine may be increased to 20%. Although the fine has not been finalized, Silicon King can only wish Apple good luck in making money on someone else's territory.

Europeans are quite good at using yin and yang. When talking about Apple, the EU leader started with a rainbow fart: "We are dealing with the largest and most valuable company on the planet. DMA is not an excessive request."


However, he changed the subject and said with regret: "I find it surprising that some of the most valuable and respected large companies on the planet do not regard compliance as a badge of honor." The EU always has ways to fine. For example, just a few days before this punishment, Apple was fined 1.84 billion euros by the EU for its monopoly in the streaming music business.

Note that this fine is not based on the bill mentioned above.

That's fine. The new DMA of the EU is just one of various regulatory bills, such as DSA, the full name of which is the Digital Services Act.

Simply put, DMA monitors a company's competitive behavior in the market and whether it bullies its peers. DSA monitors whether a large platform or search engine product spreads false information or violates user privacy during the service it provides. Like DMA, DSA also identifies key regulatory targets, and the scope is even larger: a total of 17 large platforms and 2 search engines are under key observation.

Poor Google, a bunch of products take up five slots in these two bills, and the EU can get five benefits from the same action. What's even funnier is that DSA will also charge enforcement fees to these big companies. Take Meta as an example. Even if it has done nothing wrong in 2024, it will have to pay 11 million euros in protection fees to the EU to reward the EU leaders for their efforts to supervise and manage Meta's legal and compliant behavior.

In order to ensure that DSA has a strong enough deterrent effect, the Europeans also found a target with a greater public opinion effect than Apple - Musk.

In June last year, eight months before DSA officially came into effect (it came into effect on February 17 this year), an EU leader named Thierry Breton went to San Francisco to convey regulatory instructions to a circle of technology company bosses, including Musk.

He even proposed the idea of "exercising" the bill before it officially came into effect.

According to reports, Musk's cooperative attitude was extremely positive, and he soon received a public letter of praise from Breton: Twitter was the first platform to undergo a "stress test" and the company took this "exercise" very seriously.


The treatment of this "number one model student" is indeed extraordinary - Twitter was the first to receive a lawsuit.


Last December, DSA listed a series of crimes of X (Twitter), including: too few people in the content review team, resulting in high content security risks; possible information manipulation by external groups; condoning the rampant spread of false information; using deceptive designs to guide users to pay; researchers' data access rights issues, etc.


On February 19 this year, just two days after DSA came into effect. The EU launched a formal investigation procedure against Twitter, and this time also brought Tik-Tok.

Silicon Base Jun went to the EU website to take a look, and the columns of these two bills are basically a wanted notice board now.

Both bills came into effect this year, but the EU has been fined foreign technology companies for years, using charges such as monopoly and information security to impose data taxes on them.


Another EU policy that scares major technology giants is the General Data Protection Regulation (GDPR). Since it came into effect in 2018, more than 2,000 fines have been issued, totaling more than 4.5 billion euros. Meta alone has contributed more than 2 billion euros.

Google has been fined more than 8 billion euros by the EU for various antitrust reasons.


After all, the US tech giants mainly provide Internet-based software services, and it is very likely that US employees are developing new products in their headquarters offices in San Francisco. There are no factories or assembly line workers in Europe, only a small service team.

In other words, these companies have not brought much tax revenue and employment to the European government, but have made a lot of money from European netizens.

As early as 2013, Reuters exposed the tax avoidance of large US technology companies. At that time, 37 of the 50 largest US technology companies did not declare their tax residence in the European market.

There are also some tricks, such as setting up the company in Ireland, where the tax rate is relatively low. In 2017, Meta's sales in the UK reached 1.3 billion pounds, and the tax paid was only 7.4 million pounds, less than 0.006% of sales.



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