Apple is under fire in Europe.
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The European Commission has found that Apple is violating EU competition law in its preliminary results of an investigation into the company’s App Store. The commission set out its concerns on Friday in response to a 2019 antitrust complaint from Spotify about Apple’s guidelines for processing in-app payments.
The EU has been in for a yearBy charging Spotify and other subscription-based companies a 30% fee – often referred to as “Apple Tax” – for in-app purchases. Spotify claimed in its complaint that Apple suppressed competition by charging companies that compete for their own services – in this case, Apple Music.
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The EU has been trying to determine whether Apple’s fees are preventing or preventing other music streaming services from offering affordable subscriptions to their own apps. Although the complaint was filed by Spotify, the impact on smaller streaming services like Deezer and Sound Cloud was also investigated.
The EU Competition Commissioner Margrethe Vestager announced in a tweet on Friday morning that the investigation found that “consumers lose because of Apple’s guidelines”. The preliminary results constitute a statement of objections to Apple’s behavior and do not constitute a final judgment.
Our preliminary conclusion: @Apple violates EU competition law. @AppleMusic compete with other music streaming services. However, @Apple charges high commission fees for competitors in the App Store and forbids them to inform about alternative subscription options. Lose consumers.
– Margrethe Vestager (@vestager) April 30, 2021
In a statement, Vestager described Apple as a “gatekeeper” given that iPhone and iPad users have no choice but to download apps through the company’s own app store. “By setting strict rules in the App Store that penalize competing music streaming services, Apple is depriving users of cheaper music streaming options and distorting competition,” she said. “It does this by charging rivals high commission fees for every transaction in the App Store and by prohibiting them from informing their customers of alternative subscription options.”
Apple will now have the opportunity to respond to the Commission’s objections before reaching a final judgment on the matter. If the Commission’s concerns are not addressed, it could be fined up to 10% of its annual revenue and change the way streaming services are charged – at least within the EU.
Apple protested Friday’s announcement, saying that the Commission’s argument on behalf of Spotify was “the opposite of fair competition.” In a statement, an Apple spokesperson said it was proud of the role it played in making Spotify the largest global music streaming service, noting that it pays over 99% of its subscribers no commission ( and only pay) 15% commission on the remaining subscribers purchased through the App Store.
“At the heart of this case is Spotify’s request to advertise alternative offers for their iOS app, a practice that does not allow any business in the world,” Apple said. “Once again, they want all the benefits of the App Store but don’t think they have to pay for them.”
This is not the first time Apple has encountered the European Competition Commission or Vestager. In 2016, Apple CEO Tim Cook responded to a $ 14.5 billion tax penalty imposed by Vestager by calling it “political crap.”
Following the announcement, Spotify CEO Daniel Ek tweeted: “We’re one step closer to creating a level playing field.”
Today is a great day. Fairness is the key to competition. With the Statement of Objections from @EU_Commission, we have taken a step closer to creating a level playing field that is so important to the entire ecosystem of European developers. https://t.co/dOw1K0Qo1W
– Daniel Ek (@eldsjal) April 30, 2021
In a further statement, the company’s head of global affairs and chief legal officer Horacio Gutierrez said that ensuring the fair operation of the iOS platform was “an urgent task with far-reaching implications.”
“The Statement of Objections from the European Commission is a critical step in holding Apple accountable for its anti-competitive behavior and ensuring sensible choice for all consumers and a level playing field for app developers,” he said.
The Commission is unlikely to disclose whether formal charges and a subsequent sentence will be imposed for at least another year. Fines can extendwhen wealthy tech companies break EU competition law – as has happened at Google in the past few years. If the commission decides that Apple has violated competition law and a fine is imposed, the company can appeal the decision.