European Commission says Apple is in breach of EU competition law

AppleInsider

30 April 2021 The European Commission has announced its "preliminary conclusion" that Apple is in breach of EU competition laws over the App Store.

As previously predicted, the European Commission has concluded that the App Store is in breach of European Union laws.

Ahead of the formal announcement, EU antitrust chief Margrethe Vestager tweeted the broad outline of the investigation's conclusions.

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

"App stores play a central role in today's digital economy," added Vestager in a statement. "Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store."

"With Apple Music, Apple also competes with music streaming providers," she continued. "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."

"This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options," she said.

EU says Apple has an effective monopoly

In an EU press briefing, Vestager added that the way app stores work, the ones with most users are the most attractive to developers. "That in turn leads to more apps being available for consumers on that app store," she said.

"Due to these network effects, an app store can become a gatekeeper, in particular, is there's only one app store, available in a mobile ecosystem, as is the case for Apple's App Store," she continued. "[Owners] of Apple devices are not likely to switch to another device, such as the Google Play Store, just because music streaming is more expensive on the Apple App Store."

"So, Google Play Store is not an effective alternative to reach the millions of Apple device owners," concluded Vestager. "Apple has a monopoly."

The preliminary conclusion is that Apple has infringed Article 102 of the Treaty on the Functioning of the European Union (TFEU) which specifically prohibits the abuse of a dominant market position.

Executive Vice-President Margrethe Vestager, in charge of competition policy, announcing the EU's conclusion

Apple responds to EU conclusions

In a statement to AppleInsider, Apple has responded that it believes the EU's position ignores how the App Store has helped competition.

"Spotify has become the largest music subscription service in the world, and we're proud for the role we played in that," said an Apple spokesperson. "Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store."

"At the core of this case is Spotify's demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows," continued the spokesperson. "Once again, they want all the benefits of the App Store but don't think they should have to pay anything for that. The Commission's argument on Spotify's behalf is the opposite of fair competition."

Apple prevents developers reaching customers

The European Commission also criticised how Apple limits third-party developers contacting customers in what Vestager described as "anti-steering provisions."

"Apple's anti-steering rules limit the ability of music streaming providers to inform their users about different ways in different ways," she said. "Not only are they not allowed to mention their websites, or any link to them in their own apps. They are also not allowed to send emails to users that created an account in the app in order to inform them about cheaper alternatives."

Vesteger emphasized that the EC's concerns are not limited to Spotify's complaint. The EC objects to how Apple prevents rival companies reaching customers.

"Apple steps in between these competitors, and their customers," she said. "With access to valuable data from the in app payments system. Apple gets insights that music streaming providers don't get. For example, they may no longer be in a position to understand the reasons of termination of a subscription, and communicate with their customers about them."

Apple will be called before the commission to defend its actions. If found guilty, it could be fined up to 10% of its annual revenue from the App Store. Not only is the process likely to take years, but it can appeal any decision made.

Background to the EU antitrust probe

In 2019, Spotify lodged the original complaint with the European Commission. It alleged Apple, through its App Store, put Apple Music competitors at a disadvantage.

In its complaint, Spotify pointed instances like when Apple rejected multiple Apple Watch app submissions in 2015 and 2016. Apple later added third-party API for music streaming apps on Apple Watch with watchOS 5, which has been used by popular services like Pandora.

Spotify also complained about Apple's 30% cut of App Store purchases, a fee levied on all third-party developers. For subscriptions, the rate drops down to 15% after one year of continual payments.

Apple responded to this later, pointing out that none of Spotify's subscribers were paying the 30%. The company's response said that the 680,000 users paying 15% were out of the company's self-reported 100 million paying users world-wide, and there were zero Spotify users paying 30%, which was and is the main thrust of the complaint.

Apple collects the fee on any sales of any digital items. That could be premium in-game currencies, or in this case, a subscription to Spotify. The collected fees are used for Apple's hosting fees, development of the platform and developer resources, payment infrastructure and other expenses.

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foregoneconclusion

Per the "forbids them to inform of alternative subscription options", that's an industry standard for e-commerce. Try and name a retail web site or digital download store that allows sellers to advertise alternate ways of purchasing the product within the store or site itself. It just doesn't happen. Amazon, eBay, WalMart...they all have clauses that forbid that type of communication. That has never been unique to Apple at any time. 

stuke

No one forced you to buy an iPhone nor iPad since 2007. No one also forced you to purchase any smartphone application on the App Store if you did buy an iPhone or iPad.  Get off your high horse and innovate something out of the EU that the rest of the world finds useful, helpful, and or impactful, and is willing with their one free will to pay for that value. 

@Apple, quit selling in the EU Block. It will last for 3-6 months before the findings are negated. . 

avon b7

stuke said:

No one forced you to buy an iPhone nor iPad since 2007. No one also forced you to purchase any smartphone application on the App Store if you did buy an iPhone or iPad.  Get off your high horse and innovate something out of the EU that the rest of the world finds useful, helpful, and or impactful, and is willing with their one free will to pay for that value. 

@Apple, quit selling in the EU Block. It will last for 3-6 months before the findings are negated. . 

No one forced anyone to buy an iPhone or iPad.

But then again why is that even relevant here? 

This case is about a possible instance of abusing a dominant position. 

[Deleted User]

I just love it when bullies like Ek turn themselves into victims. History is full of those characters.

Performers did quite well when users bought songs and albums to their iPods, the technological basis of the Spotify concept. 

foregoneconclusion

avon b7 said: This case is about a possible instance of abusing a dominant position. 

Can Apple stop someone from using the internet browser on their phone to query "what's the best way to subscribe to Spotify" or "what are the pros and cons of Spotify versus Apple Music"? Weren't consumers expected to shop around for the best prices or deals prior to the internet? It seems completely obvious that the App Store isn't the only way a consumer could get information about competing products when the phone also provides internet search. 

The_New_tonton

Better to read the story first huh? This is not the big one. The big one is the general App Store monopoly.

fred1

So what’s the alternative to the App Store as it is? To let developers sell on their own? To let others set up their own app stores? No thanks. I prefer to pay a very small premium for the quality and compatibility assurance I get through the Apple App Store. 

mbdrake76

The EU Commission apparently wants to do people's thinking for them.  I was never under the impression there wasn't any competition.  Everybody knows about Spotify, and I'm fully aware that I subscribe via the web site and pay there and not the App Store.   I know this because of the articles on the web site and I know how to look things up and pay attention as to what's going on. What a load of old twaddle from the EU commission.

xyzzy01

stuke said:

No one forced you to buy an iPhone nor iPad since 2007. No one also forced you to purchase any smartphone application on the App Store if you did buy an iPhone or iPad.  Get off your high horse and innovate something out of the EU that the rest of the world finds useful, helpful, and or impactful, and is willing with their one free will to pay for that value. 

@Apple, quit selling in the EU Block. It will last for 3-6 months before the findings are negated. . 

Innovation? Spotify invented the music streaming service as we know it today - just as Apple was the catalyst of the generation before, the digital music store. My first Spotify receipt is from 2009, Apple launched their service more than 6 years later. (Disclosure: I'm a customer at both - or rather, I have the Apple family membership and my wife has the Spotify family membership due to needing playlists at her job)

A platform owner using a dominant position to enter a new market and give themselves a large advantage is pretty much as clear cut anti-trust as you can get. I have no sympathy for Epic, but I think Spotify has a good case as Apple has entered the market Spotify created 6-7 years earlier. Giving themselves a 30% competitive advantage when entering a market is not a good thing. 

ppietra

Apple is not free of criticism but this is crap!
Any company is able to advertise and sell subscriptions outside the App Store.
Just because there are some costumers that don’t know about it, is no reasonable excuse to go after a store that sells something at an higher price...

Mephisdogoles

mbdrake76 said:

 What a load of old twaddle from the EU commission.  Almost everybody hates them.

I don't think it is necessarily twaddle "as such," but I do think it is inconsistent. At its best, the European Commission functions as any good market regulator does: through the adoption of a regulatory framework that applies without exception, a level playing field is created wherein no one company can function as a de facto monopoly. Via its App Store, and the vertical integration of iOS itself, Apple is arguably in such a position. If that is the view of the Commission, then provided the framework applies across the sector or industry as a whole (any App Store, in other words, including on Android, PlayStation, XBox, and et cetera), then I don't really see what exactly is wrong with it.

From a consumer's point of view, the more transparency about the available products and services, the better, since it is the availability of information which best enables a consumer to make an informed purchasing decision. This is the ideal in any capitalistic system. Think of it this way: in a game of football (European not American), there are two teams to play the game (Let's say "Apple" vs "Spotify"), some rules (the regulatory and legal environment), and a referee (the Commission). Whilst both teams play the same game, clearly it would not be a fair game if the referee wasn't there to ensure the rules were being adhered to, in which case Apple would win in a free-for-all –– as well as making for a very one-sided, hence boring, game. It is the contest that is interesting. With the referee officiating, the rules are enforced equally, in which case both teams have a fair and equal chance –– more or less –– to compete in the hope of getting the win. I say "more or less" because in sport, there is also such a thing as home advantage, so I don't think anyone should be surprised if the EU's institutions act in the self-interest of European companies (Does anyone seriously expect the United States, or its institutions, to act or function any differently?). As with the big clubs of European football (bastards!), Apple could still expect to win most of the time. However, and this is really the key point, by being clever and nimble, as well as resilient, sometimes the smaller and less well-resourced team wins. That is the very definition of a fair contest and if Apple gets to decide upon the rules as well as play the game, then clearly it is no such thing.

Whether or not this initial ruling is definitive still needs to be decided in court; if the ECJ determines that there is a case to answer, then it becomes enforceable. This is a vital step since there remains the possibility, however remote, that the European Commission may have made a category-object error, i.e., that they have confused the effect with the cause. By my reading, they haven't, but it is for the European Court of Justice to determine. You might hate them, and big corporations also, but whatever else they might be, for a capitalist system to function without distortion (because there is no such thing as a perfect capitalist system, still less a self-regulating one; that's a myth), regulators such as the European Commission are an absolutely required and necessary evil.

dewme

The operative phrase here is:

"Not only is the process likely to take years, but it can appeal any decision made."

Maybe we can revisit this topic in 2028 or so to see how things are going. By then there will probably be a few more very large players in this problem domain, not to mention a plethora of new customers in other parts of the world, and a lot of global companies won't really care a whole lot about what the EU and its shrinking economy thinks about much of anything.

At some point the cost of doing business in the EU with its parasitic taxation schemes, intrusive oversight, and blatant protectionism may inspire global players to simply take a pass on dealing with any of it at all. The clock is ticking on EU's relevancy if they don't become a competitive producer in more parts of the world's economy. If Apple was based in France would the tick we call Spotify be granted any special privileges to try to bolster its ability to compete by attaching itself to a French based Apple? I don't think so. 

[Deleted User]

xyzzy01 said:

stuke said:

No one forced you to buy an iPhone nor iPad since 2007. No one also forced you to purchase any smartphone application on the App Store if you did buy an iPhone or iPad.  Get off your high horse and innovate something out of the EU that the rest of the world finds useful, helpful, and or impactful, and is willing with their one free will to pay for that value. 

@Apple, quit selling in the EU Block. It will last for 3-6 months before the findings are negated. . 

Innovation? Spotify invented the music streaming service as we know it today - just as Apple was the catalyst of the generation before, the digital music store. My first Spotify receipt is from 2009, Apple launched their service more than 6 years later. (Disclosure: I'm a customer at both - or rather, I have the Apple family membership and my wife has the Spotify family membership due to needing playlists at her job)

A platform owner using a dominant position to enter a new market and give themselves a large advantage is pretty much as clear cut anti-trust as you can get. I have no sympathy for Epic, but I think Spotify has a good case as Apple has entered the market Spotify created 6-7 years earlier. Giving themselves a 30% competitive advantage when entering a market is not a good thing. 

What you effectively saying is that a shop owner (Harrods or anyone else) cannot sell it's own brand in his own shop without being forced to sell other brands without profit. In addition you are effectively saying that the shop owner must promote the non profitable brand and keep it in the best selling spot of the shop. 

Spotify is the dominant actor in the music market.

Forcing Apple to dance to the Spotify tunes makes as much sense as forcing the US military forces to buy Russian or Chinese nuclear submarines, tanks and jets.

crowley

dewme said:

At some point the cost of doing business in the EU with its parasitic taxation schemes, intrusive oversight, and blatant protectionism may inspire global players to simply take a pass on dealing with any of it at all. 

Of course it won't.  Money talks and bullshit walks and there's too much money to be made in the EU for Apple or any other company to give even passing consideration to quitting it altogether.  This is a fantasy that far too many people on this board indulge in.  It won't happen.

bshank

Margrethe Vestager: the hand that will feed Baby Ek

9secondkox2

At the minimum, users should be allowed to opt in to apples tightly guarded ecosystem. 

I for one don’t want the chaotic circus that is the windows and android world to invade my devices. 

there is a ton of competition. If the market didn’t favor this model then Apple wouldn’t be on top

people WANT what Apple is doing. They are willing to pay more to get it. 

It’s no different than Nintendo guarding the switch store. Or so t with the ps5. 

It’s great. Don’t Mess it up. 

Let’s not forget that it was models like this that literally saved the music industry from the Wild West of the internet. 

lkrupp

Well, so far the EU hasn’t scored a big hit to Apple. Remember the $15 billion tax controversy involving Ireland’s tax deal with Apple? The EU’s highest court ruled against them but they’re tenacious when it comes to extorting money from corporations.

asdasd

stuke said:

No one forced you to buy an iPhone nor iPad since 2007. No one also forced you to purchase any smartphone application on the App Store if you did buy an iPhone or iPad.  Get off your high horse and innovate something out of the EU that the rest of the world finds useful, helpful, and or impactful, and is willing with their one free will to pay for that value. 

@Apple, quit selling in the EU Block. It will last for 3-6 months before the findings are negated. . 

Why would that benefit Apple? People will just move to Android or not move to Android, Apple's sales will collapse for 3 months in the best case scenario, or there will be a longer term effect in the worst. The EU will in the same position as before. 

Of course they should try and argue back against this if possible. 

dewme

crowley said:

dewme said:

At some point the cost of doing business in the EU with its parasitic taxation schemes, intrusive oversight, and blatant protectionism may inspire global players to simply take a pass on dealing with any of it at all. 

Of course it won't.  Money talks and bullshit walks and there's too much money to be made in the EU for Apple or any other company to give even passing consideration to quitting it altogether.  This is a fantasy that far too many people on this board indulge in.  It won't happen.

Wishful thinking perhaps, but let’s see what 6 or 7 more years of shrinkage and decline yields. Having traveled on business around the world there is definitely an air of growth in some parts of the world and an air of decline in others. Hopefully publicly owned global companies will continue to focus on growth markets and growing economies. 

pulseimages

I’d rather pay a premium for quality. Spotify’s user interface pales in comparison to Apple Music and the Google Play Store is the Wild West.