The European Commission has found Apple to be in breach of EU competition law in its preliminary findings of an investigation into the company’s App Store. The Commission outlined its concerns on Friday, in response to an antitrust complaint made by Spotify back in 2019 about Apple’s policy for handling in-app payments.
For the past year, the EU has beenby charging Spotify and other subscription-based companies a 30% fee — often referred to as the “Apple Tax” — for in-app purchases. Spotify claimed in its complaint that Apple was stifling competition by charging companies that compete with its own services — in this case Apple Music.
The EU has been trying to establish whether Apple’s fees are preventing or dissuading other music streaming services from offering people affordable subscriptions within their own apps. Even though the complaint was brought by Spotify, it’s also been examining the impact on smaller streaming services including Deezer and Sound Cloud.
European Competition Commissioner Margrethe Vestager announced in a tweet on Friday morning that the investigation found “consumers losing out” as a result of Apple’s policies. The preliminary findings constitute a Statement of Objections to Apple’s behavior, and do not equate to a final judgment.
In a statement, Vestager described Apple as a “gatekeeper” because users of iPhones and iPads have no choice but to download apps through the company’s own App Store. “By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition,” she said. “This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”
Apple will now have an opportunity to respond to the Commission’s objections ahead of a final judgment on the matter. If it fails to assuage the Commission’s concerns, it could be slapped with a fine of up to 10% of its annual revenue and be required to change how it applies fees to streaming services — at least within the EU.
Apple protested Friday’s announcement, saying that the Commission’s argument on Spotify’s behalf was “the opposite of fair competition.” In a statement, a spokesman for Apple said it was proud of the role it had played in helping Spotify becoming the largest global music streaming service, and pointed out that it doesn’t pay commission on over 99% of its subscribers (and paying only 15% commission on the remaining subscribers acquired through the App Store.
“At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows,” said Apple. “Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that.”
For Apple, this isn’t the first run-in with Europe’s Competition Commission or Vestager. In 2016, Apple CEO Tim Cook responded to a $14.5 billion tax penalty handed out by Vestager by calling it “political crap.”
Following the announcement, Spotify’s CEO Daniel Ek tweeted: “we are one step closer to creating a level playing field.”
In a further statement, the company’s Head of Global Affairs and Chief Legal Officer Horacio Gutierrez said that ensuring the iOS platform operates fairly is “an urgent task with far-reaching implications.”
“The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers,” he said.
The Commission will likely not announce whether formal charges and a subsequent penalty will be issued for at least another year. Fines can stretch intowhen wealthy tech companies break EU competition law — as has happened to Google in the past few years. If the Commission decides Apple has broken competition law and a fine is issued, the company will be able to appeal the decision.