Apple overhauls Europe app store fees to resolve payments clash

Apple on Tuesday announced that alternative, third-party app stores in the European Union will be charged a 5% commission on in-app purchases, which the iPhone maker said will "resolve" disagreements with regulators stemming from the implementation of Europe's Digital Markets Act.

Under the new rules, apps purchased through Apple's App Store using Apple's system will pay a commission of 26% on digital goods and services. Apps that use their own payment processing systems and take credit cards directly will pay Apple 20%. Apps that link out to a website to complete purchases will be charged 15%, and apps distributed through third-party app stores or the web will be charged 5%, which Apple calls a "Core Technology Commission." Some fees can be cut in half by participating in various Apple programs.

It's a replacement for a more complicated system that Apple proposed last year. The new fee tiers take effect on Oct. 1.

Historically, Apple charged either 30% or 15% on all iPhone in-app purchases, and required that all non-enterprise iPhone apps be installed through its App Store. But Apple's App Store model has been under attack around the world in the past decade from lawsuits and government regulators, as critics say it operates as a monopoly on iPhone software and squeezes developers and users with fees.

Apple has argued that its App Store and in-app purchase requirements are designed to increase trust and safety and enforce issues around security and inappropriate apps.

The European Commission passed the Digital Markets Act in 2022, requiring "gatekeepers" like Apple to open up its App Store — and other Apple services and products such as Siri — to third parties. But there has been friction between Apple and the EC over the company's App Store proposals, and Apple has faced large fines.

Only a handful of regions require Apple to enable third-party app stores that can sell iPhone apps and Europe is the only region where users can install iPhone software from the web. Japan and Brazil have also required third-party app stores.

In the U.S., Apple is fighting to restrict users from linking out to payments on the web as part of the lingering Epic Games litigation. It recently proposed a 15% commission on link-out payments in the U.S.

Apple said its proposal on Tuesday resolves its disagreements with the European Commission on the matter. It also said that it worked with the EC to implement child safety measures, including adding parental restrictions on some in-app purchases.

Apple generates significant revenue from its App Store, which is reported in its profitable Services division, but it didn't highlight the App Store as a top driver of services growth in the most recent quarter for the first time since 2023, according to a Morgan Stanley note. CFO Kevan Parekh noted slower mobile gaming and other factors affecting the performance of the App Store in a call with analysts in July.

"Keep in mind, we also made some changes to the App Store business model in certain countries," Parekh said.