EU accuses Apple of App Store antitrust violations after Spotify complaint

If the Commission ultimately concludes the company has broken bloc's competition law, the ruling can cost Apple up to $27bn

The US tech giant Apple illegitimately squeezes music-streaming competitors active on its App Store, the European Commission said on Friday, following an investigation triggered by a complaint from Spotify.

"Our preliminary conclusion is that Apple abused its dominant position for the distribution of music streaming apps through its App Store, and distorted competition in the music streaming market," European Competition Commissioner Margrethe Vestager told reporters in Brussels.

"Apple's App Store is a crucial marketplace for developers, but the company charges rivals to its own streaming service, Apple Music, high commission fees on subscription sales via the store," Vestager added.

Apple generally takes 30% commission on sales of digital items or services like subscriptions on its App Store. For subscriptions lasting longer than a year, this commission drops to 15%, and recently also for developers who earn less than 1 million dollars a year.

According to the commission's preliminary findings, Apple's App Store rules on subscriptions, however, choke competition in the music streaming sector and cause consumers to lose out.

“Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers,” Commission's statement read. “This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices.” 

The commission, which acts as the competition watchdog for the EU single market, has notified Apple of its objections. The company now has the chance to officially respond to the allegations it has violated EU antitrust rules, and present its case in an oral hearing within the next 12 weeks.

If the Commission ultimately concludes Apple has broken EU competition law, the company will faces a fine of up to 10% of its annual revenue, which could be as high as $27bn based on Apple’s annual revenue of $274.5bn last year. Apple could also be forced to change its business model, which has more damaging and lasting effects than a fine.

"Hopefully we can get to a situation where there is fair competition," Vestager said.

Apple, however, said the EU regulator's case was the "opposite of fair competition."

"Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that," the California-based firm said in a statement, accusing its competitor of wanting the benefits of the App Store without having to pay for them.

The commission's investigation was prompted by a 2019 complaint from hugely successful market leader Spotify. The Sweden-based firm argues that Apple effectively forces competitors like Deezer or Soundcloud to charge customers more for similar services to Apple Music.

Reacting to news, Spotify said that Commission's findings were an important step in holding Apple accountable for anti-competitive behaviour.

And while this specific case is limited to Apple’s App Store practices for music streaming, the EU is also investigating additional separate cases on ebooks and the App Store in general.

“This is not the last case we will have when it comes to the App Store,” said European commissioner Margrethe Vestager in a press conference this morning.

Vestager also revealed the Commission is taking an interest in Apple’s policies around games on the App Store.

“We also take an interest in the gaming app market,” said Vestager, responding to a question about the money involved in gaming apps on the App Store. “That’s really early days when it comes to that.”

Move comes after Microsoft called on regulators to investigate the App Store last year, just a couple of months before a public spat with Apple over its xCloud game streaming service.

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