The European Commission has announced that it has issued formal antitrust charges against Apple, saying today that its preliminary view was that Apple’s App Store rules distort competition in the music streaming services market. by increasing the costs of competing music streaming application developers.
The Commission started investigating competition concerns related to the iOS App Store (and also Apple Pay) last summer. But today’s fees are only for music streaming apps and the App Store’s role as a gatekeeper for those apps to access iOS users. It is also a market where Apple competes, with its eponymous offer (Apple Music).
“The Commission is contesting the compulsory use of Apple’s in-app purchase mechanism imposed on developers of music streaming applications to distribute their applications through the Apple App Store,” he wrote today. “The Commission is also concerned that Apple is applying certain restrictions on application developers, preventing them from informing iPhone and iPad users of alternative and cheaper shopping possibilities.”
The Statement of Objections focuses on two rules that Apple imposes in its agreements with developers of music streaming applications: namely the mandatory requirement to use its proprietary in-app purchase system (IAP) to distribute music. paid digital content (the Commission noting that it charges a 30% commission on all these subscriptions purchased through IAP); and “anti-directional provisions” that limit the ability of developers to inform users of alternative purchase options.
“The Commission’s investigation showed that most streaming providers have adopted these charges [Apple’s 30% cut] to end users by increasing prices, ”he wrote, adding:“While Apple allows users to use music subscriptions purchased elsewhere, its rules prevent developers from informing users about these purchasing options, which are usually cheaper. The Commission is concerned that users of Apple devices will pay significantly higher prices for their music subscription services or may not be allowed to purchase certain subscriptions directly in their apps. “
Commenting in a statement, Executive Vice President and Chief Competition Officer Margrethe Vestager added: “App stores play a central role in today’s digital economy. Now we can shop, access news, music or movies through apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper for iPhone and iPad users through the App Store. With Apple Music, Apple also competes with music streaming providers. By setting tough rules on the App Store that put competing music streaming services at a disadvantage, Apple is depriving users of cheaper music streaming choices and skewing the competition. This is done by charging competitors a high commission fee on every transaction in the App Store and prohibiting them from telling their customers about alternative subscription options. “
Apple sent us this statement in response:
“Spotify has grown into the world’s largest music subscription service, and we’re proud of the role we’ve played in that regard. Spotify does not pay Apple any commission on more than 99% of its subscribers and only pays a 15% commission on the remaining subscribers they have acquired through the App Store. At the heart of it is Spotify’s demand that they should be able to advertise alternative offers on their iOS app, a practice no store in the world allows. Again, they want all the benefits of the App Store but don’t think they have to pay anything for it. The Commission’s argument on behalf of Spotify is the opposite of fair competition. “
Spotify founder Daniel Ek also responded to the news of the Commission’s accusations against Apple with a jubilant tweet – writing: “Today is a big day. Fairness is the key to competition… we are on the verge of creating a level playing field, which is so important for the entire European developer ecosystem. “
Vestager is due to hold a press conference shortly – so stay tuned for updates.
This story is developing …
A number of complaints against Apple’s practices have been lodged with the EU’s competition division in recent years – including by the music streaming service Spotify; video game maker Epic Games; and the Telegram messaging platform, to name a few of the complainants that have been made public (and have been among the loudest).
The main objection concerns Apple’s reduction (by up to 30%) of sales made through third-party apps – which critics denounce as an “ Apple tax ” – as well as how it can force developers to not notify users on how to do this. bypass its in-app payment infrastructure, that is, by purchasing subscriptions through its own website rather than through the App Store. Other complaints include that Apple doesn’t allow third-party app stores on iOS.
Apple, meanwhile, argued that its App Store is not a monopoly. IOS’s global mobile device market share is just over 10% compared to Google’s rival Android operating system, which accounts for the lion’s share of global mobile hardware. But monopoly status depends on how a market is defined by regulators (and if you look at the iOS app market, Apple has no competition).
The iPhone maker also likes to point out that the vast majority of third-party apps don’t pay it any commission (as they don’t monetize through in-app payments). While arguing that restrictions on native apps are needed to protect iOS users from threats to their security and privacy.
Last summer, the European Commission said its investigation of the App Store focused on Apple’s mandatory requirement that app developers use its proprietary in-app purchase system, as well as restrictions applied on developers’ ability to notify iPhone and iPad users of cheaper alternative shopping opportunities outside. applications.
He also said he was investigating Apple Pay: looking at the terms and conditions and other conditions Apple imposes for integrating its payment solution into other apps and websites on iPhone and iPad, as well as the limitations that it requires others to access NFC (contactless payment) on iPhones for in-store payments.
The EU antitrust regulator also said at the time that it was investigating allegations of “denial of access” to Apple Pay.
In March of this year, the UK also joined the antitrust investigation fray on Apple’s App Store – announcing a formal investigation to determine whether it has a dominant position and whether it imposes unfair terms or conditions. anti-competitive to developers using its App Store.
US lawmakers, meanwhile, have also drawn attention to plural app stores – and competition in digital markets in general – calling on Apple and Google to question how they tap into their respective markets. mobile applications in recent years.
Last month, for example, representatives of the two tech giants were pressed to find out whether their app stores were sharing data with their product development teams – lawmakers digging into complaints against Apple, especially the fact that Cupertino frequently copies the applications of others, “ sherlocking ” their businesses by publishing native copiers (as the practice has been dubbed).
In July 2020, the House antitrust subcommittee took testimony from Apple CEO Tim Cook himself – and went on, in a voluminous report on competition in digital markets, to accuse Apple of shooting. used its control on iOS and the App Store to “ create and apply barriers. to competition and discriminate and exclude rivals while preferring its own offers ”.
“Apple is also using its power to exploit app developers by hijacking competitively sensitive information and to charge app developers super-competitive prices in the App Store,” the report continued. “Apple has maintained its dominance due to the presence of network effects, high barriers to entry, and high switching costs in the mobile operating system market.”
The report did not single out Apple – also criticizing Alphabet, Amazon and Facebook, owner of Google, for abusing their market power. And the Justice Department filed a lawsuit against Google later that same month. So in the United States the stage is being set for further action against big tech. Although, if any, the federal charges Apple could face remain to be seen.
At the same time, a number of state-level tech regulatory efforts are growing around big tech and antitrust – including a push in Arizona to relieve developers of Apple’s sharp cut in profits. and Google in the app stores.
While an antitrust bill introduced by Republican Josh Hawley earlier this month targets acquisitions, proposing an outright blockage of big tech’s ability to effect mergers and acquisitions. While this bill seems unlikely to succeed, a wave of antitrust reform bills is about to be introduced as U.S. lawmakers on both sides of the aisle grapple with how to shrink big tech to a favorable size. to competition.
In Europe, lawmakers are already drafting bills with the same overarching goal.
In the EU, the Commission recently proposed an ex ante regime to prevent big technologies from abusing their market power. The Digital Markets Law is intended to impose conditions on intermediation platforms that are seen as “gatekeepers” of other people’s market access.
In the UK, which now sits outside the bloc, the government is also drafting new laws in response to the market power of tech giants. He said he intended to create a “ pro-competition ” regime that will apply to platforms with what is called “ strategic market status ” – but instead of ‘a fixed list of requirements, he wants to target specific measures by platform.