Nick Jacobson compares European and American enforcement to opening up the Apple App Store on Apple mobile phones, why European consumers and businesses are at an advantage, and if this advantage indicates that it is time for the United States to adopt legislation akin to the European Union’s Digital Markets Act.
iPhones in Europe can do things American ones can’t. Users in the European Union can download apps not available to Americans, such as UTM, which allows users to run Windows and other software on the iPhone, and they can search alternative app stores, like the business utility Mobivention, that American users cannot access. European app developers in many cases pay lower transaction fees to Apple than American entrepreneurs. Starting in January, the differences will grow.
These changes are the result of enforcement under the European Union’s 2022 Digital Markets Act. The law is the EU’s landmark regulation that enforces contestability and fairness in digital markets. It attempts to ensure that independent businesses whose products are sold through platforms controlled by large companies like Apple can reach their consumers and sell their products for competitive prices and earn fair returns.
As a consequence of DMA obligations, Apple now allows European consumers and developers to transact outside its own App Store both to distribute and sell applications and digital services. Whereas Apple charges a 30% fee in the United States for most digital transactions (or 15% for renewing subscriptions, the fraction of transactions that take place on qualified small business platforms, and a few other cases), Apple announced plans in June to allow alternative app stores on the iPhone in Europe that can additionally set their own fees and business models.
Apple will still collect a 5% fee on any purchase made through these stores. Apple has additionally reduced its standard fee in its own EU store to 20%. In Europe, Apple also lowered its rate from 27% to 10-17% on the revenue a developer earns from sending the user out of the Apple payment system for purchases, which developers could not do in the U.S. until last spring.
In the U.S., there has also been some fee reduction for app developers and consumers. This change has come due to private antitrust litigation from Epic Games, the developer of the popular video game Fortnite. Overall, this approach has introduced less competition to Apple’s iOS system in the U.S. than the DMA has in the EU because it has imposed lower fees without enabling rival business entry. In April, a California judge ordered Apple to allow developers to link users from the iPhone to external purchasing platforms for free (down from the pre-existing standard 30% fee). While this ruling gives some app developers a way around commission fees on the iPhone, it does not change Apple’s monopoly in app stores on iOS.
The reason we are seeing changes around the globe is simple: Life in the 21st century is increasingly digital, and mobile handsets have become bottlenecks and tollbooths for economic activity of all kinds. New businesses have created jobs, entertainment, and communication opportunities for people worldwide. But these entrepreneurs enter a market dominated by platforms that control access to consumers, service functionality, visibility, user data, and a host of critical components that businesses rely on to function. These constraints limit opportunities to grow, innovate, and challenge dominant platforms. They have prompted sectoral regulation in the EU and a string of public and private antitrust litigation in both the U.S. and EU.
Given the ever-growing importance of digital activity, policymakers and regulators from around the world should follow these attempts to introduce competition in the iOS system. The sheer enormity of profits at stake gives companies like Apple strong incentives to resist more open markets. Although DMA-style regulation might not be the right solution for every jurisdiction, countries that sit on the sidelines and may find themselves watching new waves of digital innovation rising elsewhere.
The growth and consequences of Apple’s market power
Apple’s control of iOS, one of the world’s two dominant mobile operating systems alongside Google’s Android, gives it significant ability to control the interactions between businesses on iOS and consumers, and hence the ability to control the nature of, and remuneration from, those interactions. In both the EU and the U.S., Apple has come under scrutiny in particular for using control of app distribution and purchases on iPhones to block competition and appropriate the surplus of billions of transactions on its platform.
Before enforcement actions began in the EU and U.S., there was only one way to download software on an iPhone: the Apple App Store. Other computers, including Apple’s own MacBooks and Macs, allow users to download software from a range of locations, including the internet and other software stores like Steam that users can download onto their devices. In addition, there was only one way to pay for purchases in apps that were themselves used on the iPhone: Apple’s App Store payment system. And from every such transaction for a digital product (excluding things like ecommerce or taxis), Apple took a 15 or 30% cut.
In the earliest days of the App Store in the aughts, these restrictions posed little competitive problem. For one, the App Store and iPhone competed with (in retrospect, out-competed) other hard- and software products. Apple’s handsets were expensive products with a market share very far from monopoly. At the end of 2009, Apple’s share of the U.S. smartphone market was only 25%, well below that of the BlackBerry. In addition, much less economic activity ran through apps because they were new. Businesses still primarily communicated and transacted through websites accessed through desktops, email, or offline. App Store income from fees was minor, as many apps did not sell digital content and there was relatively little (though fast-growing) traffic in the app stores. Even by 2010, App Store transactions totaled only $1.8 billion worldwide, of which Apple took no more than 30%, or $540 million (at the time not even 1% of its annual global revenue). At its launch, the App Store was of such little consideration to the company that during the recent Epic litigation, as well as a recent class action case in the United Kingdom, judges found that Apple seemed to have no particular science underlying its original (or very similar contemporary) fee structure. Observers have traced the origin of the 30% fee Apple charges on its App Store to Apple’s similar take on a $0.99 song purchase in the iTunes Store, which Apple launched several years prior in 2003.
But the launch of the App Store was almost 20 years ago. Today, somewhere around 55-60% of Americans (and more among high-income consumers) own an iPhone, and Apple is the largest smartphone maker in Europe. Smartphones are a staple of modern life and a critical access point for a range of markets. Because users typically own only one (“single-home”) handset, Apple’s control of all of its users’ transactions in applications on the iPhone gives it great power in the mobile marketplace. Apple can use that power to block and discourage competitors. It can also use its power to extract surplus by taking a greater-than-warranted share of proceeds from developers of applications who have no option but to distribute through Apple.
Low returns to developers dissuade market entry, resulting in less innovation, fewer products for consumers, and higher prices and lower quality (e.g., in the form of more and worse ads) for products on the market. Innovation in stores is blocked entirely. Innovation by developers that conflicts with Apple’s plans for its technology is not distributed.
Meanwhile, Apple generates large revenues through the App Store—an estimated $27 billion in 2024 on purchases in apps and on the App Store, likely around half from games and much of the remaining from subscriptions such as to dating apps. (Apple’s revenue in 2024 was approximately $390 billion.) Since 2010, then, App Store revenues as a share of Apple’s total revenues have increased around 800%.
Beyond these profits, though, the great contribution of Apple’s restrictive distribution and transaction policies to its business is shutting down potential sources of competition in related markets like mobile operating systems. Rival app stores are a particular competitive threat to Apple because they act as “middleware”: they can be designed to host many of a user’s favorite apps and operate on multiple operating systems. Such a store drastically lowers the cost to a user to change operating systems, which in turn encourages entry and competition in operating systems. The absence of such middleware helps to lock users into the broader Apple ecosystem.
Enforcement efforts
As mobile operating systems have become a locus for productive interactions worldwide, governments have increasingly focused on protecting competition and innovation on these platforms. The European Parliament enacted the DMA in response to increasing evidence that European antitrust enforcement could not protect competition in digital markets. Many jurisdictions around the world, including the U.S. and the UK, have similarly increased enforcement efforts either through existing laws or new ones.
In the U.S., the enforcement path has exclusively comprised antitrust litigation. Epic Games sued Apple in 2020 over Epic’s attempt to have its own app store on iOS. The trial in 2021 resulted in a near total victory for Apple except for one item: the gag rule. Apple had forbidden developers from telling users that they could buy content more cheaply on the web and giving them the URL where those purchases could be made. The judge in California ruled that Apple must allow developers the option to present users with links to buy their products outside Apple’s payment system that charges 30%. Apple’s response was to create the ability for developers to link out, but charge them a 27% commission on any sales made through the link out (which did not include payment processing, which industry experts say is at least 3%). Linking out under these rules would be more expensive than staying in the Apple App Store. In addition, Apple mandated that developers display a series of consent screens product-tested to be maximally off-putting to users. The extent to which Apple all but ignored the requirement that it allow developers to link users to less expensive online purchasing sites—and lied and hid documents to obscure the extent of its defiance—emerged at an evidentiary hearing on compliance in 2024, three years after the initial ruling.
In April of 2025, the California judge issued a bruising opinion, castigating Apple’s executives for willful noncompliance with her ruling and referring one executive to federal prosecutors for a criminal contempt investigation for lying under oath. She also imposed an injunction requiring Apple to allow link-outs with no fees within 24 hours and mandated a pre-approved user interface in the U.S.
Private litigation in the U.K. has also recently pressured Apple’s fee structure. In October 2025, the U.K.’s competition court ruled in a collective claim case (similar to a U.S., class action case for an antitrust claim) that Apple had overcharged consumers with fees in the App Store and for in-app purchases. The plaintiffs sought compensation for 36 million consumers at 1.5 billion pounds (approximately $2 billion USD). It is unclear how Apple will respond or what the broader ramifications of the ruling will be (though Apple already has said it will look to appeal).
Meanwhile, in the EU the DMA required Apple to allow not only third-party payment options but also third-party app distribution (e.g. rival app stores). In response, Apple designed a pricing system that for the first time in the company’s history charged even free apps fees if they did not remain exclusive to Apple’s store, while maintaining other high fees. In May 2025, the EU issued Apple a 500 million euro fine for noncompliance with the DMA. It gave Apple a window to change its rules to comply, or it would accrue even more fines.
At the end of June 2025, just as its compliance window closed, Apple announced substantial plans to lower fees on app distribution on the iPhone. Although this announcement was met with little media attention, it could transform the developer market on iPhones in Europe.
The details of Apple’s plans are as follows. Starting in January of 2026, it will eliminate fees for free apps to distribute themselves on third-party platforms and charge a flat 5% fee for eligible purchases made on iOS but outside of Apple’s store. Developers who want to mix user experience (such as downloading an app from the Apple App Store but then making purchases in it through the developer’s own platform) will pay a fee ranging from 5-20% depending on how much they rely on Apple’s distribution and payments. Fees for linked-out transactions will be 10-17%, higher than in the U.S. The surprisingly strict zero fee imposed by the U.S. federal court ruling was itself a punishment for Apple’s noncompliance, and the judge noted that Apple had had an opportunity to propose a reasonable fee, which it declined by its defiance.
The best evidence that Apple considers these changes in Europe to be meaningful is that the company announced it will also reduce the fees it charges to developers who continue to sell their products in the App Store, down from 30% on most purchases to 20%, and as low as 13% for renewing subscriptions. As a consequence of this change, even developers who choose only to distribute their apps in Apple’s app store will pay less in fees to Apple in the EU than in the U.S.
Does the U.S. need a DMA?
Although these new changes in Europe will not go into effect for another two months, some evidence of competition for app distribution is already appearing. A few third-party app stores are deploying different models to Apple’s store. Examples include a subscription-based store where users subscribe to access the entire library of games (similar to the Apple Arcade), a business store for companies to create libraries of internal applications for employees, and a store for users who want to add apps themselves. These stores were all launched under Apple’s far less favorable terms prior to June 2025. How developers will respond to the new terms remains to be seen.
Even with these new terms, the success of competition for app distribution on the iPhone will depend on continued enforcement efforts. While the basic fee structure of the new terms should leave room for rival stores to compete with the App Store, many technical problems remain. These include what data Apple allows rival stores to collect, how easily payments work in the stores, whether users will have access to rival stores during travel abroad, and whether Apple otherwise degrades user experience of rival stores and distribution.
Because the company controls the platform on which the stores will compete, it has numerous tools at its disposal to privilege its own store. These include unilateral access to rival app store transaction and distribution data, control of APIs essential to product function, and substantial influence in the user experience and design of acquisition and payments at rival sites.
As the market adjusts to new terms in 2026, Americans should watch Europe for signs of success and for challenges. If the European Commission is successful, Europeans will have more innovation as well as more competition for their business on the iPhone than ever before. Indeed, opening competition for distribution on the App Store could increase the value of the iPhone, too, if entrants deliver valuable products for users even while Apple’s store remains popular. The risk to Apple in Europe is less about lost revenue from the EU store, and more about its long-run ability to maintain its monopoly in distribution around the world if other countries see successful regulation in the EU.
Indeed, other jurisdictions around the world are considering DMA-style regulation, including Japan (which passed the Mobile Software Competition Act in 2024), the U.K. (Digital Markets, Consumers, and Competition Act of 2024), and Brazil (legislation proposed). Differences in broader legal frameworks and regulatory strategy may mean that one jurisdiction’s solution is ill-suited to another. For example, the DMA relies mostly on a noncompliance fine structure rather than injunctive relief, while the U.S. has historically favored the latter over the former in government antitrust enforcement. In the end, the law itself is secondary to its desired outcomes: a more open and competitive digital marketplace. The U.S. has been the leading source of the digital innovation that has come to define the early 21st century, but it currently has less to say about the future of digital marketplaces.
Perhaps recognizing that successful regulation in Europe (and, to some extent, U.S. litigation) could set a global standard for competition on mobile operating systems, Apple has resisted and delayed compliance for as long as it has been able to get away with it. While noncompliance has now grown increasingly costly, last month, Apple submitted a comment to the European Commission (and a public statement) advising the EU to repeal the DMA. This seems unlikely to occur. Rather, the ultimate success or failure of DMA enforcement and antitrust litigation will be measured by how innovative entrepreneurs and established businesses respond to newly competitive markets. It is new choices and more innovation that will convince consumers that making markets more open and free is a good policy.
Author Disclaimer: Nick Jacobson is the associate program manager at Yale’s Tobin Center for Economic Policy. The views expressed in this article are solely his and do not necessarily reflect hose of the Tobin Center.
Author Disclosure: The author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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