Apple’s App Store breaks competition rules after Spotify complaint

EU Commissioner Margrethe Vestager, suitable for the digital age, gesticulates during an online press conference on the Apple antitrust proceedings on April 30, 2021 at EU headquarters in Brussels.

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LONDON – Apple has “abused its dominant position in the distribution of streaming music apps through its app store,” the European Commission said on Friday.

“Our preliminary determination is that Apple has significant market power in the distribution of streaming music apps to Apple device owners. Apple has a monopoly in that market,” said Margrethe Vestager, EU director of competition policy Press conference.

The European Commission, the EU’s executive branch, launched an antitrust investigation into the App Store last year after the music streaming platform Spotify complained about Apple’s licensing agreements in 2019. The agreements mean that app developers will have to pay a 30% commission 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 that the commission has been addressing.

“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,” she concluded in a “Statement of Objections” to Apple.

In response, Apple said the EU’s case was the “opposite of fair competition”.

“Spotify has grown to become the largest music subscription service in the world, and we’re proud of the role we’ve played in it,” Apple said in a statement. “Once again, they want all the benefits of the App Store but don’t think they have to pay for it.”

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.

Spotify welcomed the news on Friday. “The Statement of Objections from the European Commission is a critical step in holding Apple accountable for its anti-competitive behavior and ensuring sensible choice for all consumers and a level playing field for app developers,” said Horacio Gutierrez, Spotify’s chief legal officer , in a statement.

“Apple is a gatekeeper”

The decision was made after an e-book and audiobook retailer filed a similar complaint against Apple in March 2020, while Epic Games – which is already banging its horns in a US lawsuit with Apple – filed an antitrust complaint with the European Commission the iPhone maker filed earlier this year.

At the press conference, Vestager emphasized that app stores play a central role in today’s digital economy.

“(Apple) not only controls the only access to apps on Apple devices, but also offers a music streaming service, Apple Music, which competes with other apps available in the Apple App Store such as Spotify or Deezer,” said Vestager.

She added that App Store rules are a problem for many app developers “because they depend on the Apple App Store as the gatekeeper to access users of Apple’s iPhones and iPads.”

“This significant market power cannot go unchecked as the conditions of access to the Apple App Store are critical to the success of app developers,” said Vestager.

The commission is also examining Apple Pay, but Vestager has not said when that investigation will be completed.

Margrethe Vestager, Vice-President of the European Executive.

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Litigation

This is not the first investigation that the European Commission has launched against Apple. The Commission decided in September to refer 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 had to repay unpaid taxes of 13 billion euros (US $ 15.7 billion) to the Irish government after it granted “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 power to penalize companies up to 10% of their worldwide annual sales.

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