Following a Spotify complaint, the European Commission plans to punish Apple for imposing ‘unfair trading conditions.’
Apple faces a €500m (£427m) fine for allegedly impeding rivals in the music streaming sector. The European Commission, as reported by the Financial Times, will impose this penalty following an extensive investigation.
What has led to Apple facing a fine?
Following a 2019 complaint by Spotify, the EU has been investigating Apple’s role in the music streaming app market. The focus of the investigation has narrowed to specific restrictions that Apple imposes on app developers. These restrictions prohibit developers like Spotify from informing iPhone and iPad users about cheaper music subscription options outside the App Store. Spotify contends that this favors Apple Music, its competitor.
The situation highlights the ongoing legal battles surrounding Apple’s App Store, a crucial digital platform that has faced criticism from companies utilizing it.
Spotify has consistently opposed Apple’s App Store policies, including its 30% fee on apps and in-app purchases. In response to pressure from the EU’s Digital Markets Act (DMA), Apple recently announced changes to address some of these concerns. This includes allowing EU customers to download apps without using the App Store.
What is the EU’s opinion on Apple’s behavior?
The EU chose not to comment but hinted at its intention to penalize Apple in February last year. This indication came when the EU issued a new statement of objections regarding the case, formally outlining its concerns about the company’s actions. The commission described the restrictions as “unfair trading conditions” that violate article 102 of the Treaty on the Functioning of the European Union, which prohibits abuse of a dominant market position.
The commission expressed concern that these restrictions hinder developers from “informing consumers about where and how to subscribe to streaming services at lower prices.”
What is the next step in this situation?
According to the FT, the commission is set to announce the fine in early next month. The maximum penalty for anti-competitive behavior is limited to 10% of the company’s global turnover. For Apple, this could mean a potential fine of $30 billion (£24 billion), although the actual amount is expected to be significantly lower, as per the FT. Apple will have the opportunity to appeal any decision made by the commission.
What are the statements from Apple and Spotify?
Both Apple and Spotify declined to comment on Monday. Apple had previously stated that its store had contributed to Spotify becoming Europe’s leading music streaming service and expressed hope that the commission would “end its pursuit of a complaint that has no merit.” However, according to the FT, this outcome appears improbable.
In contrast, Spotify has maintained that its complaint against Apple is aimed at establishing a “level playing field.” The company has argued that the restrictions imposed by the App Store provide an advantage to Apple’s own streaming service, Apple Music.
What is the expert opinion on this matter?
Anne Witt, a professor of antitrust law at EDHEC Business School in France, suggests that Apple is already facing a more challenging regulatory landscape due to the introduction of the DMA, which covers major digital “gatekeepers” like Apple. The DMA has prompted Apple to increase competition within its App Store. Witt believes that if Apple is penalized following the Spotify complaint, it would demonstrate that the commission does not intend for the DMA to overshadow EU competition procedures.
Witt explains, “The commission has emphasized from the outset that the DMA was not meant to replace but to complement the competition rules. This decision is likely intended to reaffirm this commitment. However, whether this approach will be effective in the long run remains to be seen, as the DMA is expected to be a much more powerful (albeit less nuanced) tool.”
The Open Markets Institute, a research organization studying the effects of corporate monopolies, argues that the reported fine will not significantly affect Apple.
“The fine is too insignificant to provide Apple with a substantial motivation to adhere to the rules – €500m is roughly equivalent to what it earns in revenue in about half a day,” says Max von Thun, the OMI’s Europe director.
