By Stephen Nellis
(Reuters) -Apple on Thursday outlined its plans to allow software developers to distribute their apps to users in the European Union outside of Apple (NASDAQ:AAPL)'s own App Store.
The move is in response to a new EU law called the Digital Markets Act (DMA), which requires companies with more than 45 million monthly active users and a 75 billion-euro ($82 billion) market capitalization to, among other things, make their apps compatible with those of rivals and let users decide which apps to pre-install on their devices.
Starting in March, developers will be able to offer alternative app stores on iPhones and opt out of using Apple's in-app payment system, which charges commissions of up to 30%. However, developers will still have to submit apps to Apple for review for cybersecurity risks and obvious fraud, and Apple will charge a "core technology fee" to major app developers even if they do not use any of Apple's payment services.
Tim Sweeney, chief executive of "Fortnite" creator Epic Games, which pursued an antitrust case against Apple in the United States, criticized Apple's planned changes as "hot garbage" and said he does not believe the moves are legal under the DMA.
"Apple proposes that it can choose which stores are allowed to compete with their App Store," Sweeney said in a series of posts on social media platform X. "They could block Epic from launching the Epic Games Store and distributing 'Fortnite" through it, for example, or block Microsoft (NASDAQ:MSFT), Valve, Good Old Games, or new entrants."
Apple released tools on Thursday for developers to begin making changes to their business arrangements, and consumers will see the changes with an update to the iOS operating system in March.
Firms such as Epic and Spotify (NYSE:SPOT) Technology have for years said that Apple's commissions and restrictions impeded their businesses. But in recent years, Apple's once-monolithic App Store approach has become a patchwork of rules as the tech company responds to legal and regulatory challenge.
For example, earlier this month, Apple said it would alter rules around linking out of apps to third-party websites for payment in the United States to comply with a ruling in an antitrust suit brought by Epic. But Apple also said it will charge a 27% commission on proceeds of those link-outs, which, when combined with a typical 3% payment processing fee, means developers will receive few economic benefits.
In the EU, by contrast, developers will be able to use a third-party payment processor inside an App Store app free of charge. Apple will also let EU iPhone users select a default web browser and contactless payments app, which means EU users can make contactless payments without using the Apple Pay system.
But even if developers opt not use Apple's App Store or payment system, they will still be required to pay a "core technology fee" of 50 euro cents per user account per year.
Apple said that only large developers will pay the fee, though it did not specify how many users will trigger the fee. The company said the first 1 million user accounts will be exempt and that it will not charge the fee to nonprofits, schools or governments.