The European Commission has today announced that it will be probing Apple over charges of antitrust violations over abusing its dominant market position via App Store. Responding to a complaint filed by Spotify alleging Apple of crushing the competition and limiting the consumer choice, the EC has concluded that Apple indeed exploited its dominant market position when it comes to the distribution of apps – specifically music streaming services – via the App Store.
Why is Apple at the center of an antitrust investigation?
The main argument is that Apple’s 30% App Store fee forces rival services to pass the high cost of their service to end-users, something that puts them at a disadvantage compared to Apple’s own service – Apple Music. Here’s what the European Commission said in an official statement:
Aide from taking a hefty 30% cut, Apple’s strict policy around in-app payments – one of which prevents developers from telling users about alternative methods of purchasing a subscription – has also been brought under the scanner. The European Commission highlights that Apple owns the only gateway for distributing apps that run on iPhones and iPads, and the company controls every aspect of it – including payments.
We have informed Apple of our preliminary view that it is in breach of EU competition law.
By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition.
— European Commission ?? (@EU_Commission) April 30, 2021
Apple is the gatekeeper to its app ecosystem, and is abusing its dominant position
Apple is strictly against apps using any other mode of payment to let users buy subscriptions or virtual items (especially in games), and takes a strict 30% cut from the in-app payments. The European Commission argues that this policy has led to developers passing those costs to end-users, which results in the price of their services going up. As a result, their services are put at a relative price disadvantage, while Apple’s own service – Apple Music in this case – is exempt from these rules.
Our preliminary conclusion: @Apple is in breach of EU competition law. @AppleMusic compete with other music streaming services. But @Apple charges high commission fees on rivals in the App store & forbids them to inform of alternative subscription options. Consumers losing out.
— Margrethe Vestager (@vestager) April 30, 2021
Apple has, in the past, threatened to kick apps off the App Store if they violate the App Store’s in-app payments rules. Just a few months ago, Fortnite – which is one of the most popular games on the planet right now – was kicked off the App Store for the same reason, leading to a very public war of words between Apple and Epic Games.
What the European Commission has to say?
Here’s what Executive Vice President and lead of the ongoing investigation, Margrethe Vestager, said regarding Apple’s antitrust violation:
Our preliminary view is that Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers.
More on our statement of objections to Apple → https://t.co/b2yb8ubTVd
— European Commission ?? (@EU_Commission) April 30, 2021
Spotify founder and CEO, Daniel Ek tweeted that the European Commission’s ruling brings it one step closer to creating a level playing field that is of critical importance to developers in Europe. Spotify’s Chief Legal Officer and Head of Global Affairs, Horacio Gutierrez, called it great news for consumers and developers around the world. “Apple’s actions are damaging not only to Spotify, but to the entire ecosystem of app developers,” he tweeted.
Apple’s actions are damaging not only to Spotify, but to the entire ecosystem of app developers. That’s why we filed a complaint against Apple with the @EU_Commission, and that’s why today’s Statement of Objections is great news for consumers and developers around the world. https://t.co/felakvGw7U
— Horacio Gutierrez (@horaciog) April 30, 2021
Independent non-profit organization, Coalition for App Fairness, also welcomed the European Commission’s findings called it an important step in curbing what it calls harmful behavior on behalf of Apple. “These anticompetitive practices hurt European consumers, app developers, and entrepreneurs and underscore the need for App Store Principles. Sound guardrails will prevent monopolistic gatekeepers from controlling consumer access, self-preferencing, and charging exorbitant fees,” it said in a statement.
Apple could be charged a hefty fine of around $27 billion
If the case proceeds and Apple is found guilty, the EU could levy a hefty fine of up to 10% of Apple’s worldwide turnover – which amounts to approximately $27 billion. However, the body rarely hits the guilty party with the maximum penalty, if the previous high-profile antitrust violation cases in the past are anything to go by.
What Apple has to say?
Apple, on the other hand, argues that it played a key role in helping Spotify become the largest music streaming service in the world. However, the Swedish company apparently wants to reap all the benefits of the App Store without having to pay for it. Here’s the full statement that an Apple spokesperson shared with Reuters:
However, this is far from the end of the case. Apple has around three months to respond and share its side of the story before the case proceeds further. However, music streaming is just one side of the anti-trust allegations leveled against Apple. The European Commission is also looking at the distribution of games via the App Store.
If the company’s own financial reports are anything to go by, games are the highest-grossing category of apps, raking in hundreds of millions of dollars each year in the form of App Store revenue which is collected as the standard 30% in-app payments fee. If the EC proceeds with an investigation in the gaming segment too, we are looking at another showdown with Epic Games at the center of the story, one that could also see Microsoft testify against Apple following the recent dispute around its cloud-based game streaming service.