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Apple Forced Into iPhone 16 Downgrade Due to the Digital Markets Act
Apple has found itself in the crosshairs of the European Union’s ever-tightening regulatory framework, particularly with the introduction of the Digital Markets Act (DMA). The company, which recently unveiled its new iPhone 16 Pro featuring a range of AI-powered tools under the banner of “Apple Intelligence,” has been forced to delay the launch of this innovative technology in Europe. The delay stems from Apple’s concerns over compliance with the stringent provisions of the DMA, which has introduced significant new obligations for large digital platforms, colloquially known as “gatekeepers.”
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The iPhone 16 Pro, introduced at Apple’s latest product event, represents a leap forward in Apple’s AI ambitions. Its new “Apple Intelligence” functionality includes enhanced voice recognition via Siri, real-time image processing, and features that allow users to point their cameras at locations or objects and receive immediate reviews or information. These tools are designed to personalise the iPhone experience by learning from user behaviour and integrating various real-time functionalities that, according to Apple, would enhance the efficiency and interactivity of daily tasks.
The core appeal of these new AI-driven features is that much of the processing is conducted locally on the device, rather than in the cloud. Apple has repeatedly emphasized its commitment to privacy, positioning the local processing capabilities as a safeguard against potential data breaches or misuse by external entities. This approach aligns well with the European Union’s GDPR, which champions data minimisation, transparency, and user consent, and requires companies to demonstrate a legitimate basis for processing personal data (Article 6).
Despite these assurances, Apple has opted not to immediately release the “Apple Intelligence” features in Europe. The company has cited the EU’s Digital Markets Act (DMA) as the primary cause for this decision. The DMA, which was enforced to regulate large online platforms, imposes several key obligations on tech giants like Apple, Google, and Amazon. These regulations include requirements that gatekeepers allow more freedom for third-party services and app stores, a significant departure from Apple’s traditionally closed ecosystem, where its App Store reigns supreme.
The DMA has pushed Apple into a difficult position. Apple traditionally controls which apps can be installed on its devices, ensuring security and streamlined functionality by prohibiting the installation of apps from unofficial sources, a practice known as sideloading. Under the DMA, such restrictions are prohibited. The law compels Apple to allow users to install apps from third-party sources, which the company argues could compromise the security of iPhones and make them more vulnerable to malicious software. Apple’s decision to delay the rollout of its AI features is a direct response to these new regulatory challenges.
The intersection of AI technology and the GDPR is another reason why Apple is treading cautiously in Europe. The General Data Protection Regulation (GDPR), implemented in 2018, imposes strict rules on how companies collect, store, and process personal data within the European Economic Area (EEA). Apple’s AI features, particularly those related to real-time information processing and personalization, would undoubtedly involve processing significant amounts of personal data.
Apple has attempted to navigate GDPR requirements by ensuring that most of the AI processing occurs locally on the device, rather than in the cloud. This approach minimizes data transfers to external servers, which is critical under GDPR’s Chapter V, which regulates international data transfers. However, the GDPR mandates transparency, user consent, and accountability when processing personal data, requiring Apple to be particularly careful in its design and implementation of AI features. Even with local processing, any sharing of data with third-party services or for further analysis could potentially trigger GDPR scrutiny.
The GDPR’s territorial scope, outlined in Article 3, applies to any entity that processes the personal data of individuals within the EU, regardless of where the company is based. This means that Apple must ensure that its AI-powered iPhones comply with European privacy regulations, even if the data is processed locally on the device. If Apple’s AI features involve any data that is transferred to data centers outside the EU, it would need to adhere to GDPR transfer mechanisms such as Standard Contractual Clauses (SCCs) or Binding Corporate Rules (BCRs).
For Apple, Europe has become a regulatory minefield. Beyond the GDPR and DMA, the company has faced fines and investigations over issues ranging from its App Store policies to tax disputes. In March 2024, Apple was fined €1.8 billion for allegedly anti-competitive behaviour within its App Store ecosystem. Furthermore, in September 2024, Apple lost an appeal over a €13 billion tax bill, adding to its list of ongoing regulatory woes in Europe. These mounting challenges suggest that Apple’s business model is under significant pressure from European regulators, who are increasingly seeking to curb the power of Big Tech firms.
Despite these difficulties, Apple has shown some willingness to comply with EU regulations. Earlier this year, Apple added an EU-mandated charging port to its devices, a move that it had previously resisted. However, its AI technology poses a new layer of complexity, and Apple’s ability to meet the strict requirements of both the DMA and GDPR remains to be seen. The company has been working on a compliance plan for the DMA, but given the scale of the changes required, it is unclear when – or if – Apple will feel confident enough to launch its AI features in the European market.
Apple’s delayed introduction of AI-powered features in Europe highlights the growing tension between technological innovation and regulatory compliance. While Apple is keen to roll out its new features, the company must first navigate the complex landscape of European data protection and competition laws. The DMA’s requirements for openness, combined with the GDPR’s stringent data privacy rules, create a unique challenge for Apple as it seeks to balance its commitment to user privacy with the need to comply with evolving EU regulations.
As Apple continues to engage with European regulators, the company’s future in the region will depend on its ability to adapt to these new legal frameworks while maintaining its core business model. The broader question remains whether these regulations will stifle innovation or push Apple and other tech giants to develop more privacy-focused, user-friendly technologies that can comply with both GDPR and the DMA.
