The EU accused Apple of breaking antitrust laws with its App Store rules

Margrethe Vestager Tim Cook
The European Commission’s antitrust chief Margrethe Vestager (left) and Apple CEO Tim Cook.

  • The EU’s antitrust chief accused Apple of breaching competition law with its App Store rules.
  • The accusation centers around music streaming apps, and the investigation was prompted by a complaint from Spotify.
  • Apple takes a commission on in-app payments while simultaneously competing with them through Apple Music.
  • See more stories on Insider’s business page.

The EU has accused Apple of breaking European antitrust law.

The European Commission, in a preliminary finding, said Apple illegally disadvantaged music-streaming developers it competes with on two fronts: By charging commission on in-app payments, and by blocking them from showcasing alternative ways to subscribe outside the App Store.

If Apple is found guilty, regulators could hit it with a fine of up to 10% of its annual revenue or order the company to change its business practices, though the case is likely to take many years working its way through the courts. Apple recorded revenue of $274 billion for its 2020 financial year.

“Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store,” EU antitrust chief Margrethe Vestager said in a statement.

“With Apple Music, Apple also competes with music streaming providers. 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.”

The case is the result of an investigation first launched by the European Commission in June 2020, which was prompted by music-streaming giant Spotify lodging an official complaint against Apple in March 2019.

To place an app on the App Store, developers must agree to use Apple’s payment system for in-app purchases, which automatically takes a 15% to 30% levy.

Spotify’s complaint was that by forcing developers to pay a commission on in-app payments, (e.g. a Spotify subscription) Apple artificially inflates prices, while simultaneously competing with Spotify through Apple Music.

Vestager indicated during a news conference on Friday that, if Apple is eventually found guilty of breaking competition law, it could pave the way for consumers or rivals to bring private cases.

“If there is a decision that there has been a breach of European Commission competition law, then there is access to seek for private damages if one feels one has been damaged by the behavior of the company in question,” she said.

Spotify and Apple respond to the EU

Spotify’s head of global affairs and chief legal officer, Horacio Gutierrez, said in a statement to Insider: “Ensuring the iOS platform operates fairly is an urgent task with far-reaching implications.

“The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers,”

An Apple spokesperson responded to the Commission’s finding: “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.”

Although this preliminary finding focuses on music-streaming apps, it could have much broader implications for Apple. Other major developers have accused Apple of monopoly abuse with its in-app purchase tax, and the tech giant is due to appear in court next week alongside “Fortnite” maker Epic Games.

Vestager has a history of hitting US tech giants with big antitrust fines. In 2018 she imposed a record-breaking $5 billion fine on Google after accusing it of abusing the dominance of its Android platform.

Read the original article on Business Insider