The European Commission issues antitrust fees against Apple due to concerns about the company’s App Store practices, and the Commission found that Apple had violated EU competition rules with its app store policies, following an initial complaint against Spotify again in 2019, specifically , The Commission believes that Apple has a “dominant market position to distribute streaming music apps through the App Store,” the Verege reported.
The European Union has focused on two rules that Apple imposes on developers: mandatory use of Apple’s in-app purchase system (on which Apple charges a 30% discount), and a rule that prevents app developers from informing users of other outside-app purchase options.
The panel found that the 30 percent commission fee, or “Apple Tax,” as it is often referred to, led to higher prices for consumers. According to the European Commission, “most broadcasters have passed on these fees to end-users by raising the prices”.
“Apple’s rules distort competition in the music streaming services market by increasing costs for competing music-streaming app developers,” says a statement from the committee. “This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices.” The European Union has also sent Apple a statement of objections, which is essentially a list of how the commission believes Apple has violated competition rules.
This is the official initial stage of antitrust action against Apple, and the company will have the opportunity to respond to the Commission’s list of objections within the next 12 weeks. This specific case is limited to Apple’s music streaming app store practices, and the European Union is investigating additional separate cases on e-books and the app store in general. “This is not the last case we will face when it comes to the App Store,” European Commissioner Margaret Westager said at a press conference.
Vestager also revealed that the committee takes care of Apple’s policies around games on the App Store. “We also care about the game app market,” said Vestager, in response to a question about the money contained in game apps on the App Store. “These are really early days when it comes to that.” Microsoft called on regulators to investigate the App Store last year, just two months before a public spat with Apple over its xCloud game streaming service.
Apple now faces a fine of up to 10 percent of its annual revenue if found guilty of breaking European Union rules, which could be as high as $ 27 billion based on Apple’s annual revenue of $ 274.5 billion last year. Apple may also have to change its business model, which has more damaging and lasting effects than the fine.
Spotify welcomed the initial fee. “Ensuring that the core iOS system works fairly is an urgent task with far-reaching implications,” says Horacio Gutierrez, Spotify’s chief legal officer. “The statement of objections by the European Commission is a critical step towards holding Apple accountable for its anti-competitive behavior, ensuring meaningful choice for all consumers and a level playing field for application developers.”
Apple also responded to the European Union findings in a statement to The Verge:
Central to this entire case is the 30 percent discount that Apple is getting from subscriptions. Companies like Netflix and Spotify have long opposed this so-called Apple tax, but Apple has argued that the revenue contributes to the costs of maintaining the App Store and enforcing its various content, privacy and security policies.
Spotify previously claimed that Apple is using its app store to stifle innovation and limit consumer choice in favor of its Apple Music service. This complaint was followed up with a similar complaint by Rakuten, claiming that it is anti-competitive that Apple takes a 30 percent commission on e-books sold through the App Store while promoting its Apple Books service.
Epic Games also joined several developers and companies opposing Apple’s App Store policies, and filed an antitrust complaint with the European Union earlier this year. It’s part of an ongoing dispute with Apple, after the Fortnite developer publicly criticized Apple’s app store policies around distribution and payments. This led to Epic trying to circumvent Apple’s 30 percent cut in in-app purchases at Fortnite, and Apple quickly removed the game from its app store.
Apple has relaxed some of its policies over the past year, as voices of opposition against the App Store have grown. Apple is now allowing some video streaming apps to bypass the App Store cut, and it has lowered the App Store commission rate to 15 percent for any developer earning less than $ 1 million in annual revenue.