The European Commission, the executive arm of the European Union, announced on Monday that it has fined Apple €1.8 billion ($1.95 billion) for violating antitrust laws by leveraging its dominant position in the market for distributing music streaming apps.
According to the commission, Apple imposed restrictions on app developers that prevented them from informing iOS users about alternative and more affordable music subscription services available outside of the official App Store. Additionally, Apple prohibited developers from providing instructions on how users could subscribe to these alternative services at lower prices.
This marks the first antitrust fine imposed on Apple by the European Commission and is among the largest fines ever levied against a technology company by the EU. Following the announcement, Apple’s shares experienced a decline of approximately 2.5% during morning trading in the United States.
The investigation into Apple was initiated by the European Commission in response to a complaint filed by Spotify in 2019. The focus of the probe narrowed down to contractual restrictions imposed by Apple on app developers, specifically those preventing them from informing iPhone and iPad users about alternative music subscription services offered at lower prices outside of the official App Store.
The commission alleges that Apple’s conduct persisted for nearly a decade and may have resulted in higher prices for music streaming subscriptions for iOS users. This was due to the high commission fees imposed by Apple on developers, which were passed on to consumers in the form of increased subscription prices on the App Store.
In response to the fine, Apple issued a strong statement asserting that Spotify would be the primary beneficiary of the European Commission’s decision.
Apple emphasized Spotify’s significant presence in the music streaming industry, highlighting its position as the largest music streaming app globally and its numerous interactions with the European Commission throughout the investigation process.
According to Apple, Spotify holds a commanding 56% share of the music streaming market in Europe, more than double that of its closest competitor. Additionally, Apple pointed out that Spotify pays nothing to Apple for the services and support it receives through the App Store, which has contributed to Spotify’s status as one of the world’s most recognizable brands.
Apple attributed a substantial portion of Spotify’s success to the tools and technology provided by the App Store, which enable Spotify to develop, update, and distribute its app to Apple users worldwide.
Regarding payment arrangements, Apple clarified that Spotify does not pay any commission for subscriptions sold via its website rather than through the iOS app. This distinction exempts Spotify from Apple’s standard commission fees on in-app purchases. The statement from Apple echoed sentiments expressed by developers over the years, who have criticized the 30% commission fee imposed by Apple on in-app purchases.
Meanwhile, Spotify welcomed the European Commission’s decision, describing it as a significant step in advocating for a more open internet for consumers. Spotify criticized Apple’s rules, stating that they restricted the music streaming service and other similar platforms from directly communicating with users within their apps about various benefits, upgrades, subscription prices, promotions, discounts, and other perks. Notably, Spotify highlighted that Apple Music, as a competitor to these services, does not face similar restrictions.
The European Commission outlined Apple’s actions, stating that the tech giant prevented developers of music streaming apps from informing iOS users about subscription prices or offers available outside of the App Store. The commission alleges that app developers were prohibited from including links within their apps that directed iOS users to their websites, where alternative subscriptions could be purchased.
Additionally, Apple reportedly prevented app developers from contacting their users, such as through email, to inform them about alternative pricing options. During a press briefing, EU antitrust chief Margrethe Vestager described the fine imposed on Apple as “quite small” relative to the company’s scale, likening it to a “speeding ticket, or a parking ticket.”
She emphasized that when Apple imposes these anti-steering provisions on music providers, developers have no choice but to either accept them or abandon the App Store, where Apple currently holds a monopoly.
Vestager stated that the commission has instructed Apple to remove the anti-steering provisions and to avoid similar practices in the future. The imposition of the fine is likely to escalate tensions between major tech companies and the European Commission, particularly as the EU intensifies its scrutiny of these firms.
In the preceding year, the commission categorized Apple, along with other tech giants such as Microsoft and Meta, as “gatekeepers” under the Digital Markets Act, a significant regulatory measure that became effective broadly last year. The term “gatekeepers” refers to massive internet platforms that the EU believes are limiting access to essential platform services like online search, advertising, messaging, and communications.
The Digital Markets Act aims to address anti-competitive behaviors by tech players and compel them to open up some of their services to other competitors. Smaller internet firms and other businesses have raised concerns about being adversely affected by the business practices of these larger companies.
These regulations have already influenced Apple’s decisions. Earlier this year, the company announced intentions to allow alternative app stores on its iPhone and iPad platforms, in response to criticisms from developers regarding the 30% fee Apple charges on in-app purchases.
Margrethe Vestager, the EU’s antitrust chief, issued a warning to Apple regarding compliance with the Digital Markets Act. She stated, “In a couple of days on the 7th of March, Apple will have to comply with the full list of dos and don’ts under the DMA. Among others, Apple can no longer impose rules such as the anti-steering obligations…”
