The EU Turns Up the Heat on App Store Economics
Apple and Google are facing renewed regulatory pressure from European Union authorities over how they charge developers to distribute apps on their platforms. The European Commission has been scrutinizing the fee structures of both the App Store and Google Play for months, and the scrutiny has now moved beyond preliminary review into formal enforcement territory under the Digital Markets Act, the bloc’s sweeping legislation designed to rein in the market power of large technology platforms.
At the core of the dispute is a straightforward question with complicated answers: when a developer builds an app and sells it to consumers, how much of that transaction should the platform that hosts the app be entitled to take? Apple and Google have historically charged up to 30 percent on digital purchases made through apps on their platforms, a rate that smaller developers have long called punishing and that the EU now views as potentially anti-competitive.
What the Digital Markets Act Actually Requires
The DMA, which came into full effect in 2024, designates certain large tech platforms as “gatekeepers” – companies so dominant in their markets that they carry special obligations to ensure fair access for developers and consumers. Both Apple and Google were designated gatekeepers for their app distribution services. The law requires gatekeepers to allow third-party app stores on their platforms, to give developers access to core platform features, and to avoid forcing businesses into self-preferencing arrangements that disadvantage competitors.
Apple responded to the DMA’s third-party app store requirement by introducing an alternative fee model for EU developers – but the Commission was not satisfied. Apple’s revised structure introduced a “Core Technology Fee” of 0.50 euros per install per year for apps that exceed one million downloads. Critics argued this actually made things worse for large free apps with big user bases, because a developer with a free app and 10 million EU users could face a bill of nearly five million euros annually without generating a single euro in revenue through the App Store. The Commission opened a formal non-compliance investigation in March 2024 over exactly this concern.
Google’s situation is somewhat different but no less contested. The Android ecosystem already allowed sideloading – installing apps from outside the Play Store – before the DMA came into force, which Google has used to argue its platform is more open. The Commission has focused instead on whether Google’s fee structures and contractual requirements with device manufacturers effectively neutralize that theoretical openness. When third-party stores face technical friction and consumer distrust, the practical choice for most users remains Google Play, which means Google retains significant economic leverage regardless of the formal policy on sideloading.
Both companies have also drawn attention for how they handle “steering” – the practice of preventing developers from directing users to cheaper purchasing options outside the app. Apple long banned developers from even mentioning in-app that a subscription was available at a lower price on the web. A U.S. court ruling in the Epic v. Apple case required Apple to allow some steering in the American market, but the EU is now pressing for broader, cleaner implementation of the same principle across European users.
The Developer Perspective
For independent developers, the fee debate is not abstract. Building and maintaining an app is expensive, and the margin between a sustainable business and a failed one can hinge directly on the percentage a platform takes from each transaction. A 30 percent cut on a 9.99-euro-per-month subscription leaves a developer with 6.99 euros, out of which they still need to cover hosting, staff, and customer support. Apple and Google both offer reduced rates – typically 15 percent – for developers earning under one million dollars annually, but that threshold is crossed quickly for any app with real traction, at which point the full rate kicks in retroactively for the year.
Some developers have restructured their businesses entirely around the fee problem, routing subscription sign-ups through web pages rather than in-app purchase flows. This workaround is technically legal but involves user experience trade-offs that cost conversions. The EU’s push to formalize steering rights would allow developers to present that web option directly inside the app, potentially changing the economics of mobile software distribution in ways that the 30 percent rate has suppressed for years.
What Penalties Could Look Like
Under the DMA, the European Commission can impose fines of up to 10 percent of a company’s global annual turnover for a first violation, rising to 20 percent for repeat offenses. For Apple, which reported global revenue of over 380 billion dollars in its most recent fiscal year, a 10 percent penalty would be a sum large enough to concentrate executive attention. The Commission can also impose behavioral remedies – requiring specific changes to fee structures, contractual terms, or technical systems – that carry their own compliance costs and competitive consequences.
There is also a compounding factor: the DMA does not operate in isolation. Several EU member states have their own digital competition laws, and the UK’s Competition and Markets Authority has been running parallel investigations into Apple’s App Store terms since 2021. A finding of non-compliance under the DMA could provide legal footing for follow-on actions in multiple jurisdictions simultaneously. Google is already navigating pressure on multiple fronts in enterprise markets, which makes a prolonged regulatory fight over Play Store fees a drain on attention and legal resources at a sensitive moment.
The deeper tension is one neither company has resolved through incremental policy adjustments: the EU’s theory of the case is that any fee model designed and enforced unilaterally by a gatekeeper, without a genuine alternative distribution channel, is inherently suspect regardless of the specific percentage. Apple and Google have responded by modifying rates and adding options while preserving the basic architecture of platform control. The Commission’s view, increasingly clearly stated, is that cosmetic compliance is not the same as structural change – and the formal investigations that are already open suggest regulators are willing to make that argument in enforcement proceedings rather than just in policy papers. The next scheduled deadline for Apple to demonstrate DMA compliance falls before the end of this year.
