The European Union is running a massive regulatory and economic experiment. In information technology, a key sector where the region is lagging, the EU has adopted several pieces of prescriptive legislation — including the Digital Markets Act (DMA) — designed to change the behavior of the most successful tech companies (none of which are European).
In response to the DMA, Apple has just announced a massive restructuring of its App Store infrastructure in Europe, including provisions for alternative app stores and changes in pricing schemes. Apple has made a good faith effort to comply with the DMA, while still creating a safe haven for developers and consumers who prefer the current system.
The question is, what will be the impact of all of these changes? First, implementing the new regulations will mean more uncertainty for developers and consumers. App Economy workers are not likely to be helped, either. We note that before the DMA went into effect, PPI’s latest analysis shows that the iOS ecosystem accounted for 2.1 million jobs in the European Union in 2023, up 52% since 2019. Additional uncertainty could slow down that growth.
Another issue is the safety of the new app stores. Apple will be “notarizing” apps downloaded from the new app stores, using a combination of automated checks and a basic human review to guard against malware or collection of “private, sensitive data without a user’s knowledge.” Apple notes that while notarization “includes basic protections designed to reduce some of the new risks created by alternative app distribution,” the notarization process does not set the “same high bar for privacy and security as the App Store.”
As a result, alternative app stores pose the danger of a race to the bottom, both for app stores and developers. Security is expensive. Each update or version has to be extensively tested, and the data protections maintained in operation. Developers have an incentive to spend less on security and more on flashy new features. Alternative app stores may have an incentive to be more hospitable to developers who invest less in security.
For other countries that are considering DMA-type bills, it’s a good time to step back and see how the EU regulatory experiment plays out. Will the new regulations make a positive difference to consumers and developers? Or will the massive new rules get in the way of innovation and growth?
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