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Apple faces App Store EU antitrust charges and potentially huge fines

The European Commission has accused Apple of antitrust, claiming that the App Store rules depend on its “dominance” to squeeze streaming music rivals like Spotify. The charges say that Apple’s policies – in particular the 30 percent cut it takes in in-app subscriptions to competing streaming services – have led to an increase in prices paid by users in Europe. If found guilty of antitrust behavior, Apple will face the potential of billions of dollars in fines.

Apple, CE said today, “has distorted competition in the music streaming market” by leaning on its position as guardian of iOS and iPadOS devices. Apple Music’s rivals faced limitations and rules that Apple’s own service did not, with the end result being that many competitors raised their subscription fees, passing on costs to end users.

“The Commission questions the mandatory use of Apple’s own in-app purchase mechanism imposed on developers of streaming music apps to distribute their apps through the Apple App Store,” said the EC today. “The Commission is also concerned that Apple will apply certain restrictions to application developers, preventing them from informing iPhone and iPad users about alternative and cheaper purchasing possibilities.”

Apple allows services like Spotify and TIDAL to accept new signups for their streaming services in their iPhone and iPad applications. However, a 30 percent cut in that revenue is needed – usually, though not officially, referred to as the “Apple tax” – as a commission. Developers are only allowed to use Apple’s purchase system, not a third-party option, as they can use outside the App Store.

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There were several reactions to the approach. Some companies choose to charge higher prices through the App Store to accommodate Apple’s commission. Others raise prices in all areas, whether the subscriptions are established on the App Store or otherwise. In any case, European Commissioner Margrethe Vestager argues: “Apple deprives users of cheaper music streaming options and distorts competition”.

“Our investigation showed that this fee was passed on to end users as prices increased,” said Vestager, “typically from 9.99 to 12.99 euros.”

At the same time, the EC also questions what is known as “anti-steering provisions”. Apple does not allow app makers to announce alternative offers within apps on the App Store: that is, Spotify – which filed the initial complaint to the EC about Apple – is not allowed to promote a cheaper subscription outside of the version available through Apple Purchase Process.

“Not only are they not allowed to mention their websites or any link to them in their own applications,” said Vestager. “They are also not allowed to send emails to users who have created an account on the app to inform them of cheaper alternatives.”

Apple’s argument: This is how stores work

Unsurprisingly, Apple has long been unimpressed by the accusations. In a statement today, he points out that Spotify is already the biggest music subscription service. He also points out that stores typically do not allow offers from other stores to be advertised there.

“Spotify has become the largest music subscription service in the world and we are proud of the role we play in this. Spotify pays Apple no commission on more than 99% of its subscribers and only pays a 15% commission on the remaining subscribers that they purchased through the App Store. At the heart of this case is Spotify’s demand that they should be able to advertise alternative offers on their iOS app, a practice that no store in the world allows. Again, they want all the benefits of the App Store, but they don’t think they should pay for it. The Commission’s argument on behalf of Spotify is the opposite of fair competition ”Apple

Spotify, meanwhile, welcomed the EC’s Statement of Objections – which effectively submits a list of its complaints to Apple – with founder Daniel Ek tweeting about the news. “Today is a great day,” said Ek. “Justice is the key to competition.”

In a statement by Horacio Gutierrez, head of global affairs and legal director at Spotify, the company said it saw “blaming Apple” as “a critical step” in offering fairer prices:

“Ensuring that the iOS platform operates fairly is an urgent task with far-reaching implications. The European Commission’s Statement of Objections is a critical step towards holding Apple accountable for its anti-competitive behavior, ensuring a meaningful choice for all consumers and a level playing field for application developers ”Horacio Gutierrez, Head of Global Affairs and Legal Director, Spotify

Apple’s potential fines are vast

It is not just Spotify that concerns the European Commission. While Spotify may have filed the original complaint, and it will undoubtedly benefit more financially if the EC forces Apple to change its policies, it also highlights smaller players in the streaming space that are affected, and in addition to the application makers that offer subscriptions. in general.

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“Apple’s conditions affect all music streaming services that compete with Apple Music, particularly smaller ones like Deezer and Soundcloud,” said Vestager today. “And, of course, the rules of the App Store are a concern for many app developers in addition to streaming music. Because they rely on the Apple App Store as a gatekeeper to access users of Apple iPhones and iPads. This significant market power cannot be left unchecked, as the conditions of access to the Apple App Store are fundamental to the success of application developers ”.

Apple now has twelve weeks to respond to the EC’s accusations. Fines for antitrust behavior can be considerable, as they are based on a percentage of annual revenue. Specifically, the European Commission can charge a fine of up to 10% of Apple’s annual revenue, which would mean more than $ 27 billion based on its performance in 2020.

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