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Exclusive-Apple faces 'strong action' if App Store changes fall short, EU's Breton says

The Apple Inc. logo is seen hanging at the entrance to the Apple store on 5th Avenue in New York

By Martin Coulter, Foo Yun Chee and Supantha Mukherjee

LONDON (Reuters) -Apple faces strong action if changes to its App Store do not meet incoming European Union regulations, the bloc's industry chief said on Friday.

In a move designed to comply with the EU's incoming Digital Markets Act (DMA), the company will soon allow software developers to distribute their apps to Apple devices via alternative stores.

From early March, developers will be able to offer alternative app stores on iPhones and opt out of using Apple's in-app payment system, which charges commissions of up to 30%.

However, critics have said the changes do not go far enough, arguing Apple's fee structure remains unfair, and that the changes may be in violation of the DMA.

Asked about Apple's plans, EU industry chief Thierry Breton exclusively told Reuters: "The DMA will open the gates of the internet to competition so that digital markets are fair and open. Change is already happening. As from 7 March we will assess companies' proposals, with the feedback of third parties."

He added: "If the proposed solutions are not good enough, we will not hesitate to take strong action."

Under Apple's new EU regime, developers will still have to submit apps to Apple for review for cybersecurity risks and obvious fraud.

Apple device users in the EU will also be able to choose their default web browsers and contactless payments apps, meaning they could make contactless payments without using the Apple Pay system.

But even if developers opt not to use Apple's App Store or payment system, they will still be required to pay a "core technology fee" of 50 euro cents per user account per year.

Apple said on Friday the core technology fee only applies to developers who choose to opt into the new business terms.

Under the new business terms for EU apps, Apple estimates that 99 percent of developers would reduce or maintain the fees they owe to Apple, the company said.

With millions of free users, companies such as Meta and Spotify are likely to get hit more than smaller developers. Neither company was immediately available for comment.

HIGH PRICE

Apple's critics have warned the trade-offs under Apple's new rules offer few benefits.

Andy Yen, founder and CEO of privacy-focused software firm Proton, said: "Allowing alternative payments and marketplaces seems positive on the surface, but the strings attached to Apple's new policies mean that in practice it will be impossible for developers to benefit from them."

Paulo Trezentos, CEO of alternative app store Aptoide, said: "We heard rumours some changes were coming, but we didn't expect them to be this thorough.

"This was definitely a good move, but the fees are still too high. We are preparing to send formal feedback to the European Commission."

Apple did not immediately respond to a request for comment.

A spokesperson for the European Commission said: "We take note of Apple's announcements ahead of the compliance deadline on 7 March. We do not comment on these announcements.

"We strongly encourage designated gatekeepers to test their proposals with third parties."

(Reporting by Martin Coulter, Foo Yun Chee, and Supantha Mukherjee; editing by Jason Neely and Ros Russell)