Apple Faces Anti-Trust Probe In Europe Over App Store Charges

European Competition Commission says it is opening an anti-trust investigation into Apple. It alleges that Apple has distorted the market.

Anti-trust regulators say they are opening an investigation into Apple. This over how Apple charges people in the Apple app store.

Competition has been increasingly a concern on regulators radar thanks to the overwhelming power some of the larger players in the tech sector have been getting. Critics note that some of the laws passed effectively helped cement the larger players position. Still, it doesn’t mean that regulators aren’t going after them. In 2019, Google was hit with a €1.49 billion fine for anti-trust violations surrounding its Adsense service. At the time, spokesperson, Margrethe Vestager, noted that that was the largest fine of its kind.

Now, that same spokesperson is commenting how regulators are going after Apple. From Yahoo! Finance:

The European Union is today moving forward with its case against Apple, saying that it is potentially in violation of EU law. Competition chief Margrethe Vestager said that her team believes there is enough evidence to open an antitrust case against the iPhone maker. Vestager tweeted that Apple Music “compete [sic] with other music streaming services, but Apple charges high commission fees on rivals in he App Store and forbids them to inform of alternative subscription options.”

The Commission has published its Statement of Objections, essentially a list of issues that officials feel warrant further investigation. The document says that Apple’s current policies ”distort competition in the market” by “raising the costs of competing music streaming.” It says that such an act, if found true, would count as a violation of Article 102 of the Treaty on the Functioning of the EU which prohibits “abuse of a dominant market position.”

The EU’s case hinges on two points: Apple’s 30-percent cut on the majority of in-app transactions made through the App Store, and the App Store’s “anti-steering provisions.” The former, officials claim, could force Spotify and other rival services to raise their prices or stop offering service, distorting the market. The latter, focuses on how Apple blocks developers from communicating to users about the option of cheaper deals.

In response, Apple issued a statement saying that “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.” It added that Spotify wants “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.”

“Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that. 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. 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.”

You can read the statement on the European government website. It reads, in part:

The European Commission has informed Apple of its preliminary view that it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store. The Commission takes issue with the mandatory use of Apple’s own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple’s App Store. The Commission is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.

The Commission preliminary finds that Apple has a dominant position in the market for the distribution of music streaming apps through its App Store. For app developers, the App Store is the sole gateway to consumers using Apple’s smart mobile devices running on Apple’s smart mobile operating system iOS. Apple’s devices and software form a “closed ecosystem” in which Apple controls every aspect of the user experience for iPhones and iPads.

The Commission’s concerns, as outlined in the Statement of Objections, relate to the combination of the following two rules that Apple imposes in its agreements with music streaming app developers:

  • The mandatory use of Apple’s proprietary in-app purchase system (“IAP”) for the distribution of paid digital content. Apple charges app developers a 30% commission fee on all subscriptions bought through the mandatory IAP. The Commission’s investigation showed that most streaming providers passed this fee on to end users by raising prices.
  • “Anti-steering provisions” which limit the ability of app developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to use music subscriptions purchased elsewhere, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper. The Commission is concerned that users of Apple devices pay significantly higher prices for their music subscription services or they are prevented from buying certain subscriptions directly in their apps.

Throughout 2019 and 2020, many were anticipating that the anti-trust actions taken on Google and Facebook would mark the beginning of a wave of anti-trust action taken on large tech giants – much of which occurred in the US. As mentioned, not all anti-trust action did occur in the US, but most of it did center around the US. The question is, when and where is the next large anti-trust domino going to fall? It does look like it finally fell in Europe recently and it fell on Apple this time.

Now, if some of these complaints sounds familiar, then you would be correct. Last year, in the US, Epic actually lodged a similar complaint against Apple during the tense standoff between those two companies. We haven’t heard much since because that court case is actually still ongoing. In fact, according to a report on The Verge, that court case is set to take place next week.

So, between the US court case and the European Union investigating Apple, it’s very possible to expect more scrutiny to fall on Apple’s practices revolving around their app store in the coming weeks.

Drew Wilson on Twitter: @icecube85 and Facebook.



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