CEO Tim Cook speaks at an Apple event at corporate headquarters in Cupertino, California on September 10, 2019.
Stephen Lam | Reuters
LONDON – Apple has “abused its dominant position in the distribution of streaming music apps through its app store,” the European Commission said on Friday.
“The European Commission has informed Apple of its preliminary view that it has distorted competition in the music streaming market by abusing its dominant position in the distribution of music streaming apps through its app store,” it said in a “Statement of Objections” to Apple.
The European Commission, the executive branch of the EU, launched an antitrust investigation into the App Store last year after the music streaming platform Spotify complained about Apple’s licensing agreements in 2019. This means that app developers have to pay a commission of 30% on all subscription fees incurred through the App Store.
On Friday, the EU announced that it had problems with the “mandatory use of Apple’s in-app purchase mechanism for music streaming app developers to distribute their apps through the Apple App Store”.
App developers are also unable to inform users of alternative ways to purchase the same apps elsewhere – another issue the Commission has been looking at.
In response, Apple said the EU’s case was the “opposite of fair competition,” according to a statement quoted by Reuters.
“Spotify has become the largest music subscription service in the world and we are proud of the role we have played in it,” Apple said in the statement. “Once again, they want all the benefits of the App Store but don’t think they have to pay for them.”
Submitting an objection is part of the formal process of an antitrust investigation, but does not complete the investigation. Apple must now respond in writing or orally to the Commission’s concerns.
“Apple is a gatekeeper”
It comes after an e-book and audiobook distributor filed a similar complaint against Apple in March 2020, while Epic Games – which is already banning a US lawsuit with Apple – previously filed an antitrust complaint against the European Commission iPhone maker had filed year.
Margrethe Vestager, head of competition policy in the EU, said app stores play a “central role” in today’s digital economy.
“Our preliminary finding is that Apple is a gatekeeper for users of iPhones and iPads through the App Store. With Apple Music, Apple also competes with music streaming providers,” she said in a statement on Friday.
“By imposing strict rules on the App Store that penalize competing music streaming services, Apple is depriving users of cheaper music streaming options and distorting competition by charging high commission fees to competitors for every transaction in the App Store and these will be banned from informing their customers about alternative subscription options, “she added.
This is not the first investigation that the European Commission has launched against Apple. The Commission decided in September to bring Apple and the Irish government to the European Union’s Supreme Court because Brussels considers this to be unfair tax practice.
The EU ruled in 2016 that Apple will have to repay unpaid taxes of 13 billion euros (US $ 15.7 billion) to the Irish government after granting “undue tax breaks”. Apple and the Irish government have appealed the decision and the case is still in court.
Hoping to overcome lengthy legal disputes and make markets fairer, the European Union is working on new regulations that could ultimately affect many of the US tech giants.
The digital markets law is likely to end what is known as self-preference – if, for example, app search leads to an Apple product that prioritizes the one developed by the tech giant. The idea is to give smaller app developers an equal chance of being found and selected by consumers.
The legislation is still being discussed by the European legislator. Aside from enforcing practical changes, it will also have the ability to penalize companies up to 10% of their annual global sales.