The European Commission wants to punish tech giant Apple for unfair competitive practices with one of the highest fines it has ever handed out. On Monday, European Commissioner Margrethe Vestager (Competition) announced the 1.8 billion euro sanction for preventing music streaming services such as Spotify from informing users about cheaper services outside the App Store, Apple's built-in app store.
According to Brussels, this practice has led to European consumers paying “significantly higher prices for music streaming services” over the past decade. The Commission on Monday banned Apple from continuing to create barriers to cheaper services outside the App Store.
In practice, this meant that consumers who wanted to take out a paid Spotify subscription, for example, were not aware that this could be done cheaper elsewhere on the internet (for example on Spotify's website) outside of the Apple-controlled app on their iPhone. Apple charges a 30 percent commission on all purchases made within the App Store.
According to Brussels, Apple prevented consumers from being informed that it could be cheaper outside the built-in Apple store. It also meant an advantage for Apple's own streaming service, Apple Music, which is not involved with the committee.
It is not yet certain whether the fine will last. Apple immediately announced that it would contest it. In a press release, the American tech company slammed Brussels' “inability” to substantiate its case with “credible evidence.” Spotify was also criticized, which according to Apple would wrongly benefit from the ruling. In the past, the Commission has not always been able to adequately defend fines for large tech companies before the European Court of Justice. In some cases, these fines then expired.
It is the first European competition fine for Apple and the third highest ever imposed by Brussels. Only Google received higher fines, which totaled approximately 8 billion euros. It is also the first time that the Commission has explicitly made the fine higher than previously expected, to have a 'deterrent effect' for a mega company like Apple.
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'Damage to millions of European users'
The fine, Vestager said in a press conference on Tuesday, “reflects both Apple's financial power and the damage that Apple's behavior has caused to millions of European users.” The Danish emphasized that Apple “has been abusing its dominant position in the music streaming app market for ten years. This is illegal and has affected millions of European consumers.”
Brussels began its investigation into Apple in 2020, in response to a complaint from Spotify. The originally Swedish streaming company objected to the 30 percent commission that Apple demanded on every purchase within its App Store. Those extra costs made competition with Apple's own streaming service Apple Music almost impossible and would also drive up prices for consumers.
The latter in particular now seems to be decisive for Brussels. Previous major competition cases against tech companies such as Google or Microsoft always focused on the impossibility for other smaller companies to get a foot in the door in a market controlled by a monopolist. In this case, that argument is more difficult to make: Spotify has been the largest streaming service worldwide for years, despite Apple's 'opposition'.
Nevertheless, according to Brussels, Apple's policies have been harmful because they mean that consumers could not, according to Vestager, “make an informed choice” that takes costs into account. For that reason, according to Vestager, it is not important that Spotify is now the largest streaming service. This does not detract from the damage that consumers have indeed suffered.
Hard swipe Apple
Yet Apple immediately responded harshly to Spotify. “Ironically, today's decision, in the name of competition, only strengthens the dominant position of a successful European company that leads the digital music market,” Apple said. According to Apple, the Commission's case “ignores” the reality of a market that is thriving, competitive and growing rapidly.
The company has two months to start an appeal procedure – something it announced immediately. Such a case can drag on for years, meaning that it will only become clear in the long term whether the fine will last. And although the fine is significant, it still pales in comparison to Apple's operating results. Last year the company made $97 billion in profit.
The fine comes at a critical time, just before new far-reaching European legislation comes into force that should curb the market power of tech giants. These rules, among other things, oblige Apple to allow more competition on its platforms, for example by allowing alternatives to the App Store. Although Apple has long and vociferously opposed the new rules, it announced earlier this year that it will comply with them: later this week, users will also be able to download apps outside the App Store. It will also be possible to pay with your iPhone outside of Apple Pay.
Vestager announced on Monday that he would review the planned changes “in detail” and would not hesitate to open a new investigation.
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