Apple Music violates EU antitrust laws, $39 billion fine possible

Posted:
in iPod + iTunes + AppleTV edited February 2023
Apple is staring down a potential $39.4 billion fine, as the European Commission says that Apple Music has breached antitrust law concerning restrictions on developers advertising subscriptions.




In the same case back in 2021, the EC issued a statement of objections and also stated that Apple had broken antitrust regulations. That was a preliminary conclusion, however, and the Commission has now issued an update.

"Today's Statement of Objections clarifies that the Commission does no longer take a position as to the legality of the IAP [in-app purchasing] obligation for the purposes of this antitrust investigation," says the European Commission in a press release.

"[But it] rather focuses on the contractual restrictions that Apple imposed on app developers," it continues, "which prevent them from informing iPhone and iPad users of alternative music subscription options at lower prices outside of the app and to effectively choose those."

So Apple has effectively beaten the charge about requiring developers to use its in-app purchasing system, which was key to Spotify's original 2019 complaint to the EC.

However, Apple must now respond to the allegation about restrictions it previously placed on developers. Specifically, Apple originally forbade developers of services such as Spotify to mention or link out to alternative methods of subscribing.

"Today, the European Commission sent a clear message that Apple's anticompetitive behavior and unfair practices have harmed consumers and disadvantaged developers for far too long," said Eve Konstan, Spotify's general counsel, in a statement. "We urge the Commission to reach a swift decision in this case to protect consumers and restore fair competition on the iOS platform."

The European Commission's statement of objections will now be responded to by Apple. A final ruling, and a potential fine of up to 10% of Apple's annual worldwide turnover, will then follow.

Apple has not yet responded about the EC's update.

"There is no legal deadline for bringing an antitrust investigation to an end," notes the Commission. "The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the undertakings concerned cooperate with the Commission and the exercise of the rights of defence."

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Comments

  • Reply 1 of 46
    It was inevitable that somewhere, some day, a government was going to demand such immense fines, and such massive, "antitrust" changes to Apple's products, that Apple would have to bow out of that market until/unless things become viable again. Not sure if this is that breaking point, but I wouldn't be at all surprised if it was.
    rob53starof80williamlondon
  • Reply 2 of 46
    rob53rob53 Posts: 3,263member
    I agree. It’s time Apple tells the EU to take a hike. $39B is a joke. 

    Who would end up getting this money? Lawyers and EU management? Would any actually go to the "affected" people? Probably not. From what the article appears to say it's all about Apple preventing iOS users from knowing about alternative music subscriptions. That's not worth $39B. The EU needs to be investigated for frivolous lawsuits but of course they won't because they are the government monopoly in Europe. I think Apple, and the US, should challenge the validity of the EU instead dealing directly with the governments of each sovereign country. The EU is simply a cartel.
    edited February 2023 aaplfanboystarof80psliceTheSparklebloggerblogwilliamlondonlolliverdarelrex
  • Reply 3 of 46
    sdw2001sdw2001 Posts: 18,020member
    I'm sure Apple will get right on paying that.  Or they'll spend .5% of that on the best lawyers in the world.  I'd rather see Apple tell the EU to pound sand.  I'm not saying pull out of Europe. I'm saying they simply refuse to pay or defend the case any longer.  Piss off.  
    aaplfanboystarof80darelrexpsliceTheSparklewilliamlondon
  • Reply 4 of 46
    1) The inevitable fine won’t be $39B or anywhere close to that, it’s just a theoretical maximum. In actuality the number will probably be under $5B.

    2) The notion that Apple would leave the EU even if they were hit with a $39B fine is laughable. Check the 10-K. Apple’s revenue was over $95B in Europe in 2022 alone. The EU probably represents >80% of that. Apple isn’t giving up the $500B in revenue and $100B+ in net income they’d make there the rest of this decade alone just to “stick it” to politicians. Get real.
    starof80pslicesphericgatorguyScot1muthuk_vanalingamchutzpah
  • Reply 5 of 46
    avon b7avon b7 Posts: 7,837member
    rob53 said:
    I agree. It’s time Apple tells the EU to take a hike. $39B is a joke. 
    Well, Apple will now respond to the claims. 

    The fine is an 'up to...' figure, not a fixed $39B.

    The fact that Apple changed its ways to a degree will place it in a better situation if it comes to determining an amount for a fine. 

    Of course, your 'take a hike' claim could be applied to what the EU has done here too. 

    Take a hike if you don't like the laws. Just don't forget to pay the fine on your way out. 

    Or do you think that Apple placing its restrictions in the first place met the EU's idea of fair competition?

    If there is a fine, I expect Apple to pay it and move on. 
    ctt_zhmuthuk_vanalingam
  • Reply 6 of 46
    And queue the EU bashing. Maybe, just maybe Apple is very different from any other company that puts profits first. 
    aaplfanboypslice
  • Reply 7 of 46
    hagarhagar Posts: 132member
    rob53 said:
    I agree. It’s time Apple tells the EU to take a hike. $39B is a joke. 

    Who would end up getting this money? Lawyers and EU management? Would any actually go to the "affected" people? Probably not. From what the article appears to say it's all about Apple preventing iOS users from knowing about alternative music subscriptions. That's not worth $39B. The EU needs to be investigated for frivolous lawsuits but of course they won't because they are the government monopoly in Europe. I think Apple, and the US, should challenge the validity of the EU instead dealing directly with the governments of each sovereign country. The EU is simply a cartel.
    You seem to be living in a dreamworld. First, in the EU it’s very common to put consumers before profit and companies. So this (possible) fine was a long time coming. 

    Second, If Apple does business in the EU then the “validity of the EU” (whatever that means) is obvious and it’s not up to foreign companies to choose whether they want to deal with countries or the union. 

    Third, fines are usually added to the EU budget, directly and indirectly impacting the lives of millions of EU citizens. 
    edited February 2023 ctt_zhsphericmuthuk_vanalingamwilliamlondon
  • Reply 8 of 46
    mike1mike1 Posts: 3,316member
    "We urge the Commission to reach a swift decision in this case to protect consumers and restore fair competition on the iOS platform."

    They act like the iOS platform is public domain or free use. It's Apple's platform!
    darelrexwilliamlondonJanNLdanox
  • Reply 9 of 46
    The EU's position is laughable. Pricing information is available to consumers in a lot more places than an app downloaded from the App Store. How did Spotify achieve 99% of its iOS subscribers paying on the internet instead of in the App Store without ever having the links that the EU is claiming are critical to competition? Obviously it's not the barrier that it's made out to be. Consumers can get info online, from social media, from texts/emails, from broadcast/print advertising etc. Why doesn't the EU think an iPhone user is capable of opening a web browser and typing in "best price for (name of app)" and reading the information that comes up? The whole thing is inane. 
    darelrexwilliamlondonJanNL
  • Reply 10 of 46
    avon b7avon b7 Posts: 7,837member
    As a UK citizen I am so relieved we left the ghastly EU. They overreach on everything they do - it’s almost as if they are trying to prove to all other countries that they are the dominant force in world affairs. 
    That does not make any sense. 

    You do realise that a US official went to the UK, stood in front of MPs and proceeded to shout US demands on 5G infrastructure to them for five hours. 

    https://www.thetimes.co.uk/article/5g-wars-the-us-plot-to-make-britain-ditch-huawei-mcqdld8sx

    The EU has done nothing of the sort. The EU is tackling issues within its borders.

    All of my family, except one, voted for Brexit. They all openly regret it and blame UK politicians for lying their way through the process. 

    As for Brexit regret in general, it looks like it is pretty widespread.

    If the EU has any dominance over world affairs it is through leading by example. 
    sphericmuthuk_vanalingamchutzpah
  • Reply 11 of 46
    tmaytmay Posts: 6,418member
    EU based Spotify is acknowledged to be the largest music subscription service worldwide, is well known to music afficionados, and is barely, if ever, profitable. 


    (EUR)Sep 2022Y/Y
    Revenue3.04B21.39%
    Net income-166M8400%
    Diluted EPS-0.99141.46%
    Net profit margin-5.47%6937.5%
    Operating income-226M401.33%
    Net change in cash65M9.72%
    Cash on hand--
    Cost of revenue2.29B24.71%

    "Spotify transformed music listening forever when it launched in 2008. Discover, manage and share over 100 million tracks and 5 million podcasts titles, for free, or upgrade to Spotify Premium to access exclusive features for music including improved sound quality and an on-demand, offline, and ad-free music listening experience. Today, Spotify is the world’s most popular audio streaming subscription service with 489 million users, including 205 million subscribers in more than 180 markets."

    Maybe the EU should conclude that streaming music isn't a viable business model, (especially for Spotify and its Joe Rogan exclusive podcast}, and certainly isn't going to get profitable by punishing Apple.

    Heck, even Apple subsidizing Spotify's losses is a couple of orders of magnitude less than the $39B Euro potential fine.
    williamlondondanox
  • Reply 12 of 46
    venomxxr said:
    The notion that Apple would leave the EU even if they were hit with a $39B fine is laughable. Check the 10-K. Apple’s revenue was over $95B in Europe in 2022 alone. The EU probably represents >80% of that. Apple isn’t giving up the $500B in revenue and $100B+ in net income they’d make there the rest of this decade alone just to “stick it” to politicians. Get real.
    When Apple was highly profitable in the EU, in 2022 and for many years before, did they make that money selling a flea-market, free-for-all, uncontrolled hardware product, spec-dictated by EU regulators, and while paying $40 billion, then $80 billion, then more, in massive, accelerating fines? Um, no. Just because the EU has been a fertile market for iOS for the past fifteen years, doesn't mean it will be in the future.
    edited February 2023 JanNLdanox
  • Reply 13 of 46
    tmay said: Maybe the EU should conclude that streaming music isn't a viable business model, (especially for Spotify and its Joe Rogan exclusive podcast}, and certainly isn't going to get profitable by punishing Apple. 
    Possibly the EU thinks Spotify would become profitable if Apple surrendered their 88 million Apple Music subscribers. 
    tmaywilliamlondonJanNL
  • Reply 14 of 46
    sphericspheric Posts: 2,614member
    As a UK citizen I am so relieved we left the ghastly EU. They overreach on everything they do - it’s almost as if they are trying to prove to all other countries that they are the dominant force in world affairs. 

    The amusing thing is that most of UK antitrust law is based on the EU law, so you can bet your arse that UK antitrust officials are watching very closely what is happening here — ready to file their own case, should Apple be convicted of unfairly disadvantaging competitors (and not change its rules globally as a result). 

    And the idiocy is that, due to Brexit, the UK will end up running completely redundant investigation and legal proceedings, rather than just having the EU ruling apply to their jurisdiction. A waste of time and money for the British taxpayer. 
     
    williamlondoncropr
  • Reply 15 of 46
    davidwdavidw Posts: 2,075member
    The EU's position is laughable. Pricing information is available to consumers in a lot more places than an app downloaded from the App Store. How did Spotify achieve 99% of its iOS subscribers paying on the internet instead of in the App Store without ever having the links that the EU is claiming are critical to competition? Obviously it's not the barrier that it's made out to be. Consumers can get info online, from social media, from texts/emails, from broadcast/print advertising etc. Why doesn't the EU think an iPhone user is capable of opening a web browser and typing in "best price for (name of app)" and reading the information that comes up? The whole thing is inane. 

    Not only that, Subscription services also have the email addresses of all their subscribers. Apple is not forbidding them to send an email to their subscribers informing them of any rate differences if payments were done at their web sites. I get email all the time from Netflix informing me of rate changes and movies I might be interested in based on my viewing habits. There is no reason why they have to advertise it their apps, in order to inform their subscribers.

    And if these developers were to advertise on their apps that subscription prices are lower if they pay on their websites, then they should also be required to inform their subscribers that iTunes is not accepted at their site and that they will have to provide the developer their credit info.

    Of course this might be all moot if Apple still ends up charging a commission for payments done outside the app. A commission to cover the use of iOS to profit from but minus payment transaction fees. iOS is Apple IP and Apple have the right to charge for its commercial use. 
    tmayforegoneconclusion
  • Reply 16 of 46
    bluefire1bluefire1 Posts: 1,304member
    "Today, the European Commission sent a clear message that Apple's anticompetitive behavior and unfair practices have harmed consumers and disadvantaged developers for far too long," 

    Harmed consumers? If Apple products harm consumers, they have a funny way of showing it.
    The world’s most admired company sells hundreds of millions of dollars of products a year. 
    Harmed developers? No wonder that comment came from a music competitor’s legal team.
    It’s time for the European Commission to get off Apple’s financial back and let the company continue to innovate and set its own course without interference.
    edited February 2023 darelrex
  • Reply 17 of 46
    sphericspheric Posts: 2,614member
    tmay said: Maybe the EU should conclude that streaming music isn't a viable business model, (especially for Spotify and its Joe Rogan exclusive podcast}, and certainly isn't going to get profitable by punishing Apple. 
    Possibly the EU thinks Spotify would become profitable if Apple surrendered their 88 million Apple Music subscribers. 
    If Apple Music is only profitable by not charging the 30% that it demands of competing subscription services, then it is indeed probably not a viable business model. 

    The question whether streaming is at all a viable business model is a good one, but one that's secondary to this investigation. 

    I can tell you that in its current form, streaming is certainly devastating to working musicians and really, really needs to die. 

    There's also a valid question in whether Apple Music needs to be profitable, given that it can be cross-financed by the other branches of Apple's business. THAT alone is a serious competitive advantage over other streaming services that actually need to be profitable off streaming alone — and worth investigating. 
  • Reply 18 of 46
    spheric said: If Apple Music is only profitable by not charging the 30% that it demands of competing subscription services, then it is indeed probably not a viable business model. 
    Apple's commission model for subscriptions is 30% in 1st year, 15% after that. But if users pay via the internet then Apple gets 0%. Spotify's own financial records show that 99% of their iOS subscriptions are in the 0% category. So Spotify's financial problems don't have anything to do with Apple's commission structure. Does Apple turn a profit on Apple Music? IMO, it seems more likely than less likely. The amount of revenue generated by Apple's services section is quite large overall ($78 billion in 2022) and the music part of it doesn't have as much 1st party investment for content as something like Apple TV+.  
    tmaydarelrexsphericwilliamlondon
  • Reply 19 of 46
    EU is a joke, but at least we know that Apple will just add €100 to the price of each iPhone in EU to cover the cost of doing business their way.



    williamlondon
  • Reply 20 of 46
    Way to go EU! Time for change.
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