Regulators Must Target the Centre, Not the Peripheries, of Market Power

Within a week of each other, two different companies reached settlements in two different jurisdictions. In the European Union, Apple announced changes to its business terms in the EU with the aim of resolving an ongoing non-compliance investigation under the Digital Markets Act (DMA). Over in the US, Meta settled a case over claims it endangered children with the company's addictive social media platforms with 47 states, the District of Columbia and U.S. territories, agreeing to pay up to $17.1 billion in penalties and make changes to its products directed at teens and kids.

While one case concerns competition within the Apple mobile ecosystem, and the other focusing on children's safety on Meta’s social networking sites, both illustrate the pitfalls of enforcement treating the symptoms and not the illness. Both companies are highly dominant in their sectors, with Apple comprising one half of a global duopoly in mobile operating systems, and Meta being the long-standing dominant firm globally for social networking. While both cases focus on improving terms for business and end users within each platform, neither attempt to structurally challenge their dominance, leaving both firms to continue to set the rules.

Apple’s new business terms

Background

Apple has fought particularly hard against DMA enforcement, as the regulation sets out to break apart its core business model and corporate identity. Apple, long regarded a "walled garden", sold itself on the premise of closed, yet perfected ecosystem. Apple products only worked with Apple products. Apple's hardware only worked with Apple software and Apple did not license out its operating systems to work on competing hardware. This meant that users could not mix and match their digital devices, and were actively encouraged to buy products within the ecosystem. Apple continues to make most of its revenue in hardware sales, with 50% of revenue coming from iPhones alone, though apps and services make up a growing revenue segment, currently 27%. Keeping users within that ecosystem is highly important for this business model.

The DMA came into force in March 2024, directly seeking to break this walled garden apart. Obligations placed on Apple as a designated gatekeeper includes allowing interoperability of third parties with Apple's hardware and software, allowing sideloading of apps, alternative app marketplaces, and allowing developers to steer users to alternative distribution and subscription methods. This meant Apple needed to create completely new terms for developers in the EU, as many of these new rights contradicted Apple's existing developer policies.

Apple has made changes to the company's EU business terms to bring it within compliance of the DMA, most iterations being found continually non compliant. On 24 June 2024, the Commission told Apple that it was preliminarily non- compliant for its steering restrictions and fees, which continued to constrain developers from communicating better offers within their apps. Separate to this, the Commission also launched a non-compliance investigation over concerns that the company's new contractual requirements for alternative app distribution fell short of ensuring effective compliance the DMA. The Commission was investigating Apple's Core Technology Fee, under which developers of third-party app stores and third-party apps must pay a €0.50 fee per installed app; the multi-step user journey to download and install alternative app stores or apps on iPhones, which was reportedly around 15 steps for the end user; as well as the strict eligibility requirements for developers related to the ability to offer alternative app stores or directly distribute apps from the web on iPhones.

On Apr 23, 2025, the Commission fined Apple €500 million for its steering restrictions, which include onerous "in app disclosure screens", dubbed "scare screens" alongside the steering fees imposed on transactions. For instance, Apple initially charged a fee of up to 17% on apps linking out to a developer's webpage, which Apple later updated to allow app developers more freedom to promote offers within the app, but imposed a 5% “initial acquisition fee” and an ongoing 10% “store services fee” on purchases made via link-outs. Alongside the fine, Apple was ordered to remove the technical and commercial restrictions on steering and allow developers to communicate external offers.

Separately, the Commission informed Apple that they found the gatekeeper preliminarily non-compliant for the contractual requirements for alternative app distribution. The Commission stated in its preliminary findings on these contract terms:

Developers wanting to use alternative app distribution channels on iOS are disincentivised from doing so as this requires them to opt for business terms which include a new fee (Apple's Core Technology Fee). Apple also introduced overly strict eligibility requirements, hampering developers' ability to distribute their apps through alternative channels. Finally, Apple makes it overly burdensome and confusing for end users to install apps when using such alternative app distribution channels.

Preliminary findings are announced by the Commission in order to give the gatekeeper being investigated a chance to respond and change any practices deemed non compliant. When found non compliant, the gatekeeper must comply with the Commission's decisions within 60 days, otherwise they risk periodic penalty payment. Since both of the above decisions, little has been communicated by the Commission, either regarding the non-compliance decision or the preliminary findings. In its review of the DMA, the Commission merely stated that dialogue was ongoing and, regarding the non-compliance decision and fine issued to Apple, that Apple was appealing. The review also summarised stakeholder feedback, which highlighted the lack of transparency into this regulatory dialogue. The lack of stakeholder engagement in the process is particularly peculiar, as the review also pointed out that:

Third parties have relevant insights into technicalities relating to a [core platform service], product, and/or service. This input can be helpful to assess and monitor a gatekeeper’s compliance with the DMA as well as to counterbalance input received by gatekeepers.

Indeed, as van den Boom, Hinck, Podszun, and Andriychuk put it:

Without the active involvement of market participants reflecting on-the-ground realities, enforcement agencies have limited capacity to assess effective compliance with the laws.

Thus, ongoing regulatory dialogue, without the ability to test compliance solutions with the stakeholders directly affected by compliance changes, may not reap the best outcomes. Without the "counterbalancing" input, how do regulators expect to improve contestability and fairness, the stated aims of the regulation itself?

Finally, a larger question looms over these interventions: how far do they go to break the "walled garden"? Is this even the goal of the DMA, or is it content to only promote and improve within platform competition rather than facilitating challengers which might weaken the market power of gatekeepers. Arguably, if third parties remain reliant on gatekeepers platforms, the DMA risks "cement[ing] the power of gatekeepers like Apple as the judge and jury of its ecosystem."

A final outcome?

Announced on August 18, 2026, Apple has once again made changes to its terms for apps in the EU, "following close collaboration with the European Commission." Bloomberg reported that the Commission stated it “welcomes Apple’s changes to their business terms." Politico also reported that the Commission has "indicated it would close its biggest outstanding DMA case (against Apple) with no penalty," including period penalties for the non-compliance decision for which Apple was previously fined. Such changes include:

• Unified business terms. Apps distributed in the EU are now subject to a single set of terms, under which Apple charges a commission on the sale of digital goods and services. The Core Technology Fee, a per-install fee for developers who achieve extraordinary scale, will be replaced by the Core Technology Commission, a simple 5% commission on digital transactions in apps distributed outside the App Store. The new terms also eliminate the Initial Acquisition Fee and Store Services Fee.
• Alternative payments and Apple In-App Purchase. Apps distributed in EU storefronts can now offer alternative payment methods and offers alongside Apple In-App Purchase. To help ensure a consistent user experience, developers must maintain their choice of payment options for 12 months.
• Child safety protections. New child safety requirements apply to apps that use alternative payment options on the App Store.
• Eligibility for operating an alternative app marketplace and Web Distribution. Eligibility requirements for both have been expanded to include additional options. Companies are no longer required to have a legal entity or be established in the EU to operate an alternative app marketplace or use Web Distribution.

Reactions from stakeholders have been somewhat mixed.

While some welcomed the fee changes and expanded eligibility for alternative app stores, many see little change between Apple's non compliant terms and the new proposals. Alba Ribera Martinez, Assistant Professor in Law & Tech at VU Amsterdam, broke down the new terms and fees, finding that most of the announced changes are not much different to what had previously been announced, and in some cases, fees had actually been increased. Her main concern regarded the fact that "the European Commission is ready to negotiate behind closed doors to settle how the DMA should be interpreted, without factoring in the input of third parties." The Coalition for App Fairness, whose members comprise those very third parties, expressed disdain for the "excessive fees" being accepted by the Commission, stating that if "allowed to stand, these terms will continue to stifle alternative marketplaces and lock developers into anticompetitive costs."

The outcome of Apple's non compliance investigation leaves all the power in the gatekeepers hands. All apps, even those distributed as a web app, must still undergo app notarization (review), and all apps, regardless of distribution, still pay various fees to Apple. Though the concept of alternative app distribution seeks to threaten some of the peripheral points in Apple's ecosystem, even those continue to be tightly controlled and regulated by the gatekeeper, which retains final approval over application requests and even dictates the process to download apps and stores. Indeed, rather than threatening gatekeeper power, Apple merely maintains more gates. This governance role further strengthens Apple's control over its ecosystem in the ways I have previously articulated:

Larouche and de Streel, argue that the DMA ‘has little to do with the contestability of core platform services; rather, it is about containing gatekeeper power and preventing it from adversely affecting neighboring markets in the ecosystem of the core platform service.’ Indeed, rather than tackling the issue of concentration in the market for smartphone operating systems, essentially a duopoly comprised of Android and iOS, the DMA ‘mostly serve[s] to achieve competition on and around a platform’ by obliging such operating systems to allow some form of competition within its platforms.

...the DMA introduces new obligations for Apple to open up parts of its walled garden, but leaves control of potential new industry competitors within the hands of Apple, particularly in the case of third-party app stores and payment systems. Whether it is in the form of fees, app review policies, or privacy and security policies, Apple maintains an information, ecosystem, and monetary advantage over its competitors.

This outcome only leaves potential competitors stuck in the hands of their gatekeeper.

Meta’s settlement

How does Apple's case relate to the landmark settlement by Meta in a case regarding child safety in the US?

Meta's case was set to go to trial over claims that the company endangered children with addictive designs in its platform. However, only a few days after the trial began, Meta settled, agreeing to pay up to $17.1 billion (partly contingent on other social media platforms making similar child safety changes) while also making some changes to its platforms for teen users. As summarised by Tech Policy Press, changes include:

...nighttime limits on teen access and notifications; options for teens to switch to a non-personalized, chronological feed; hiding like and reaction counts for teens by default; barring certain “cosmetic procedure” filters; expanded parental tools; and “productive pause” prompts aimed at curbing excessive use. The settlement also requires that Meta implement an “age assurance” framework. Within a year, Meta is required to distinguish under-13, teen, and adult users and to meet certain thresholds for accuracy.

Much commentary on the settlement expresses dismay over the relatively minor financial penalty, with The Guardian noting that the payment will "hardly dent its profits (Meta plans to invest up to $145bn this year)," with many noting the safety changes as the more significant concession by the company. Even so, some are questioning the focus on fixing features over business model:

The danger lies not in this or that specific feature, but rather in the fundamental business model of social media: namely, tracking and surveilling individuals online, using the data gathered to construct a profile, which is then sold to advertisers eager to target potential consumers with extraordinary precision.

As Ravi Naik, the lawyer who acts for Wynn-Williams and others, told me: “The algorithm preys on you.” The trouble with this latest settlement, he explains, is that “it reaches the features of Meta’s platforms but not the engine that drives them. The recommendation algorithm is untouched.”

In my last post, I described the different digital policy levers available to European regulators, and the ways that each of them may (or may not) target the business model of Meta, its "engine", which is what is truly needed to force change. Focusing only on harmful features will do little if social networks remain concentrated. Indeed, like with Apple, it can create a perverse incentive, whereby dominant firms become the regulatory force, or are given more gates to guard as gatekeeper. In Meta's settlement, the company is instructed to act as an industry leader in child safety, and indeed leverages expanded protections for children on the basis of other apps employing the same features. Meta, then, writes the standard for others to follow, potentially blocking out better alternatives to children. Meanwhile, users and business users remain dependent on its platforms, with Meta remaining in control of the entire ecosystem and its incentives remain focused on increasing engagement and reaping ad revenue. Indeed, as Matt Stoller, Research Director for the American Economic Liberties Project, articulated in his newsletter:

Meta makes money by addicting and tracking kids, and then advertising to them. Nothing in this settlement changes that business model. So there just isn’t a financial alignment between the health of teens, and the financial health of Meta. Meta is structurally incentivized to violate this agreement.

In both the Apple and Meta cases, users need a credible alternative and ability to switch, creating real competitive pressure, weakening their roles as gatekeepers, not reaffirming it. To create changes we want to see in the digital economy, it is the market power, the centre, that need to change, not the peripheries.

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