EU Issues Stern Warning to Apple: Potential 20% Global Revenue Fine for Not Opening iOS

On September 19, Apple confirmed it has received a warning from European regulatory authorities, demanding that the company open its highly protected iPhone and iPad operating systems to competitors. Failure to comply could lead to substantial fines under the EU's flagship digital antitrust regulations, the Digital Markets Act (DMA).

EU Mandates Apple to Open Operating System Under New Regulations with Potential $76.6 Billion Fine

According to reports from Bloomberg, the EU has mandated that Apple must adhere to new stringent regulations requiring its closed operating system to be fully interoperable with other technologies. The company has been given a six-month deadline to comply.

One of the EU's primary objectives is to compel Apple to redesign its operating system to allow competitors and other developers access to key features such as Siri voice commands and payment chips. This could mean that Apple will have to officially enable third-party app "sideloading" and open its API interfaces for broader developer access, relinquishing its exclusive control over certain functionalities.

If Apple does not comply with the DMA, the EU may initiate a formal investigation, which could result in fines of up to 10% of the company's global annual revenue. Given Apple's estimated global revenue of $383.3 billion for the fiscal year 2023, this could amount to over $76.6 billion. Additionally, the company is already facing parallel investigations regarding app store regulations, and repeated violations could see penalties rise to 20%.

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Apple's Response

Margrethe Vestager, the EU's executive responsible for competition law, stated, “Today marks our first use of the DMA’s regulatory framework to guide Apple in effectively complying with its interoperability obligations.” Apple, headquartered in California, has responded by noting that it has created various ways for developers to request additional interoperability with its iPhone and iPad operating systems while maintaining user security. However, the company cautioned that undermining its built-in protections could pose risks to European consumers.

Apple Faces Regulatory Challenges in the EU Amid Product Changes and Stock Surge

In recent years, under regulatory pressure, Apple has switched its charging interface from the proprietary Lightning standard to USB Type-C. The company also recently lost a legal battle with the EU, which ruled that it must pay €13 billion in back taxes to the Irish government.

Notably, despite these challenges, Apple has announced that certain features of its newly released iPhone 16, including the upcoming AI feature, will not be available in the EU due to DMA requirements for compatibility with third-party apps.

Read more: Why Apple iPhone 16 Could Lose the Smartphone Battle to Huawei in China

In the context of ongoing legal battles with the EU, observers are curious whether Apple will concede to the demands to protect its significant market share in Europe. Despite the negative implications of this news, Apple's stock (AAPL) rose by 3.71% to $228.87 amid a broader market surge, nearing its historical closing high of $234.82 set on July 16, reflecting a year-to-date increase of 23.29%.

Source: Google Finance