European Union smacks Apple with $2 billion fine over music streaming
The European Union has levied a massive fine against Apple for anticompetitive behavior in a market that it does not hold the dominant position -- music streaming.
Spotify's App Store icon (left), Apple Music (right)
The fine was announced live by The European Commission's competition head, Margarethe Vestager. In levying the fine, she said that Apple violated antitrust rules by not allowing developers to tell users in the App Store that there were other options other than Apple Music.
"For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store," Vestager said. "They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over [2 billion euro]."
Apple Music is either the third or fourth largest streamer in the European Union. Spotify holds the lead position with about 56% of the European streaming market.
Spotify has made a statement, and is clearly pleased with the fine.
Apple's rules muzzled Spotify and other music streaming services from sharing with our users directly in our app about various benefits-- denying us the ability to communicate with them about how to upgrade and the price of subscriptions, promotions, discounts, or numerous other perks. Of course, Apple Music, a competitor to these apps, is not barred from the same behaviour.By requiring Apple to stop its illegal conduct in the EU, the EC is putting consumers first. It is a basic concept of free markets-- customers should know what options they have, and customers, not Apple, should decide what to buy, and where, when and how.
Beyond saying that it will appeal, Apple has already made a statement regarding the matter.
Today, the European Commission announced a decision claiming the App Store has been a barrier to competition in the digital music market. The decision was reached despite the Commission's failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast.The primary advocate for this decision -- and the biggest beneficiary -- is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation.
Today, Spotify has a 56 percent share of Europe's music streaming market -- more than double their closest competitor's -- and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world. A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world.
We're proud to play a key role supporting Spotify's success -- as we have for developers of all sizes, from the App Store's earliest days.
Later on in the statement, Apple makes a clear point about Spotify's market position in the EU.
"The reality is that European consumers have more choices than ever," Apple says. "Ironically, in the name of competition, today's decision just cements the dominant position of a successful European company that is the digital music market's runaway leader."
The entire statement spells out Apple's fee structure, Spotify's use of the App Store, and what Spotify gets from Apple being on the App Store.
Back in 2019, Spotify complained to the EU that Apple was abusing its monopoly by forcing developers to use the App Store's payment system. At the same time, the music streamer claimed that Apple was also unfairly denying it the ability to inform users of lower prices on its website.
In response, the EU began an investigation, and in 2021 issued a preliminary report. That report did say that Apple was in breach of EU laws over the promotion restrictions, or anti-steering measures.
Perhaps in response to these probes, Apple changed the payout structure of the App Store, with a new 15% tier for subscriptions that extend over a first year, instead of the blanket 30% that Spotify still claims Apple demands on all subscriptions.
Apple also made a new free reader tier of apps to deal with complaints such as this from Spotify and others.
Read on AppleInsider
Comments
"Today's decision concludes that Apple's anti-steering provisions amount to unfair trading conditions, in breach of Article 102(a) of the Treaty on the Functioning of the European Union (‘TFEU'). These anti-steering provisions are neither necessary nor proportionate for the protection of Apple's commercial interests in relation to the App Store on Apple's smart mobile devices and negatively affect the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device.
Apple's conduct, which lasted for almost ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission fee imposed by Apple on developers and passed on to consumers in the form of higher subscription prices for the same service on the Apple App Store.
... "
Apple makes no reference to its anti-competitive behaviour in its statement and instead tries to put the spotlight on Spotify, its European nature and music streaming.
I hope these costs are directly passed along to purchasers of Apple products in Europe.
Apple wilfully used anti competitive practices. Those practices went on for ten years and were brought to the attention of the authorities. An investigation was launched. The fine is the result.
Can you at least see why anti-steering is seen as harming competition?
It's irrelevant that Apple 'changed its ways' not too long ago.
What is relevant is that someone at Apple sat down and pushed that rule through in the first place.
Perhaps the EU should dig further to see if there was any red flag raised at the mere thought of it. That is the kind of thing the US DoJ would do.
Apple’s response is the 'bonkers' bit.
The most recent news on it was not in Apple's favor. Yup, you even read it here.
https://appleinsider.com/articles/23/11/09/apples-14-billion-tax-trial-should-start-over-says-eu
Now back to the regularly scheduled program.
One of my old clients (plastics industry) received and invite to a meeting of the main industry players (worldwide players) in the field. I think the meeting took place in Germany.
Once there it quickly became clear that the agenda was an attempt at price fixing. My client quickly pulled out, not wanting anything to do with it.
The company proposing all this was from the US.
That same company (probably seeing the risks) reported the meeting to the EU and my client got a multi million euro fine - just for being there.
The US company escaped a fine as it was the whistleblower. Isn't that ironic!?
The fine stood. However the client did not hold a dominant (or even near dominant position in the industry).
Which part of anti-steering within the context of a multi billion dollar app store business was not anti-competitive?
Perhaps that $2B will be used to mitigate some of the issues plaguing farmers, now rioting against both EU regulations, cost of operation, and competition from other countries where EU farmer inefficiencies are pronounced.
While that is going on, the EU is a dangerous crossroads with its auto manufacturing, as Chinese imports are poised to expand into the EU.
Spotify has 56% of the EU market. Next is YouTube and Amazon with Apple in 4th place at 11%.
Same with consumers. Where’s the harm? Spotify hasn’t had in-App subscriptions since 2016. There was a brief period of overlap from 2015 to 2016 where Apple Music and Spotify competed unfairly, and if anything the fine should reflect that period of time only. And where does Vestager get off claiming this has been going on for 10 years when Apple Music has only been around 8 years?
Apple won the Irish tax case on appeal. This case will be easier to overturn as the EU can’t prove harm to…anyone.
BTW, the tax case is not over. In fact it's likely it will be retried, with several Judicial errors affecting the appeal ruling. You've forgotten that AppleInsider had an article about it back in November.
Apple flying engineers in or taking phone calls to help Spotify will be over, I didn't realize Apple helped behind the scenes so much for free.
https://www.apple.com/newsroom/2024/03/the-app-store-spotify-and-europes-thriving-digital-music-market/ The small developers certainly didn't get that red carpet treatment.