Topline
The European Union’s competition regulator preliminarily concluded Friday that Apple violated antitrust laws by charging “high commission fees” on music streaming rivals in the app store, a move that comes two years after Spotify filed a complaint against Apple and its App Store practices.
SAN FRANCISCO, CA - JUNE 10: Apple CEO Tim Cook speaks during the keynote address during the 2013 ... [+]
Key Facts
The EU said Apple is in “breach” of competition laws because while Apple competes with other streaming services like Spotify, the company requires non-Apple products to use Apple’s in-app purchase system and then takes 30% of all revenue made from the in-app system.
The investigation stemmed from a complaint Spotify issued to the EU in 2019—at the time Spotify CEO Daniel Ek said Apple’s “30% tax on purchases made through Apple’s payment system” would force Spotify to “artificially inflate the price of our premium membership well above the price of Apple Music.”
Responding to the EU’s findings, Ek said the decision was “one step closer to creating a level playing field” and that “fairness is the key to competition.”
The EU said Apple’s rules “distort competition in the market for music streaming services.”
Apple will have a chance to respond to the regulator’s claims before a final decision is made by the competition commission.
Crucial Quote
“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,” EU competition commission vice president Margrethe Vestager tweeted.
Key Background
In 2019, Spotify alleged that Apple’s App Store structure levied high commission fees and unfair rules on non-Apple products. Apple responded to Spotify’s claim alleging Spotify was “demanding” to “keep all the benefits of the App Store ecosystem—including the substantial revenue that they draw from the App Store’s customers—without making any contributions to that marketplace.” Now that the EU’s antitrust regulator has preliminarily ruled in Spotify’s favor, the commission will send a “statement of objections” to Apple with specific App Store practices Apple will need to address with the commission before a final ruling is determined. If found guilty of breaking the EU’s antitrust regulations, Apple could face a fine of up to $27 billion, or 10% of its annual revenue, according to The Verge.
Chief Critic
Apple responded to the EU’s findings in a statement to Reuters. The company said: “Spotify has become the largest music subscription service in the world, and we’re proud of the role we played in that" but “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.”
Tangent
Spotify’s complaint isn’t the only looming antitrust problem for Apple in the EU. Epic Games, the developer of Fortnite, filed a complaint against Apple with the competition commission in February for Apple’s practice of taking 30% of in-app revenues of non-Apple products. Epic Games said the practice has “not just harmed but completely eliminated competition in app distribution and payment processes.” Apple removed Fortnite from the App Store in 2020 after the company tried to evade the 30% processing fee by offering discounts to customers who purchased items through Epic Games.
Big Number
53.7%. That’s how much Apple’s sales were up on last year, the company announced in stellar second-quarter earnings earlier this week.
Further Reading
Apple agrees to testify before U.S. Senate on app store antitrust concerns (Reuters)
