The European Commission has fined Apple more than €1.8 billion ($2 billion) for allegedly abusing its dominant position in the market for the distribution of music streaming apps to iPhone and iPad users (“iOS users”) through its App Store. Apple drew the fine by restricting app developers from informing iOS users about alternative and cheaper music subscription services available outside of the app. Anti-steering policies violate the European Union’s antitrust rules.
Apple is the sole provider of an App Store where developers can distribute their apps to iOS users throughout the European Economic Area. Apple controls every aspect of the iOS user experience and sets the terms and conditions that developers need to abide by to be present on the App Store and be able to reach iOS users in the EEA.
Announcing the fine on March 4, the Commission said:
“Today’s decision concludes that Apple’s anti-steering provisions amount to unfair trading conditions, in breach of Article 102(a) of the Treaty on the Functioning of the European Union … These anti-steering provisions are neither necessary nor proportionate for the protection of Apple’s commercial interests in relation to the App Store on Apple’s smart mobile devices and negatively affect the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device ….
“Apple’s conduct, which lasted for almost ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission fee imposed by Apple on developers and passed on to consumers in the form of higher subscription prices for the same service on the Apple App Store. Moreover, Apple’s anti-steering provisions led to non-monetary harm in the form of a degraded user experience: iOS users either had to engage in a cumbersome search before they found their way to relevant offers outside the app, or they never subscribed to any service because they did not find the right one on their own.”
Apple’s Retort
Apple responded by saying, among other things, that it has helped a European company become the largest music streaming app in the world.
“The decision was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast. The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation.Today, Spotify has a 56 percent share of Europe’s music streaming market — more than double their closest competitor’s — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world. A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world. We’re proud to play a key role supporting Spotify’s success — as we have for developers of all sizes, from the App Store’s earliest days.”
Spotify hailed the decision as “an important moment in the fight for a more open internet for consumers.”
“Apple’s rules muzzled Spotify and other music streaming services from sharing with our users directly in our app about various benefits—denying us the ability to communicate with them about how to upgrade and the price of subscriptions, promotions, discounts, or numerous other perks. Of course, Apple Music, a competitor to these apps, is not barred from the same behaviour. By requiring Apple to stop its illegal conduct in the EU, the EC is putting consumers first. It is a basic concept of free markets—customers should know what options they have, and customers, not Apple, should decide what to buy, and where, when and how. While we appreciate the EC addressing this important case, we also know that the details matter. Apple has routinely defied laws and court decisions in other markets. So we’re looking forward to the next steps that will hopefully clearly and conclusively address Apple’s long-standing unfair practices.”
See previous coverage of Spotify’s complaints against Apple. Read commentary about other antitrust-related developments involving Apple on the MoginRubin Blog, and other Apple news items in the MoginRubin Competition Law News section.
Edited by Tom Hagy. Photo by Harry Cunningham on Unsplash.