EU Fines Apple €1.84 Billion Over Spotify's Antitrust Complaint

Following a comprehensive investigation prompted by Spotify's complaint, the European Union has fined Apple €1.84 billion (approximately $2 billion) for anti-competitive practices within its App Store. The EU's decision targets Apple's restrictions on music streaming services, mandating transparency about alternative subscription options.

The Financial Times had previously reported on the news of today's sanction, which coincides with Apple's imminent overhaul of the iPhone's app distribution regulations in response to the EU's Digital Markets Act.

EU Hits Apple with Historic Fine Over App Store Music Streaming Restrictions

The European Union Commission stated in a press release on Monday that its investigation revealed the following: "Apple prohibits developers of music streaming apps from providing iOS users with complete information regarding cheaper alternative music subscription services that are available outside the app." App providers are also prohibited from disclosing instructions on subscribing to such offers.

"For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store," said Margrethe Vestager, Executive Vice-President in charge of competition policy. "They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over €1.8 billion."

As well as Apple's total revenue and market capitalization, the Commission considered the "duration and gravity of the infringement" and "incorrect information" that Apple submitted throughout the administrative procedure when determining the fine.

Apple has since issued a vehement response to the ruling, asserting that the Commission's investigation did not unearth any "credible evidence" of anti-competitive conduct or harm to consumers. Furthermore, the organization asserts that to attain a competitive edge, Spotify intends to "rewrite the rules of the App Store" without compensating Apple, notwithstanding Apple's assertion that the App Store was indispensable to Spotify's present market dominance. The decision will be appealed, Apple says.

According to The Verge, the European Union initiated its inquiry in 2020 after Spotify filed an antitrust complaint concerning Apple's purported "Apple Tax." In addition to expressing dissatisfaction with the 30 percent commission, Spotify also criticized App Store regulations that, according to the company, limited its ability to market and promote bargains and restricted communications with customers.

EU Scrutinizes Apple's App Store Policies, Spurs Changes Amidst Digital Markets Act Compliance

As time passed, the Commission's inquiry focused on regulations within the App Store that restrict developers from disclosing alternative payment methods to their users other than those offered by Apple. The Commission stated in February 2023 that its initial assessment suggested Apple's "anti-steering obligations" constituted "unfair trading conditions." It further contended that the company's App Store policies were "not proportionate or necessary," potentially leading to increased user fees and restricted consumer options.

Apple has made certain concessions in the past. It was stated in 2021 that developers could promote payment methods via email and other channels outside the iOS application. Then, in early 2022, it became possible for iOS app developers to incorporate links to their websites.

However, this second modification was restricted to "reader apps" for digital content-accessible services such as Netflix, Kindle, and Spotify, and developers were required to request an "entitlement" before including an external link. According to Bloomberg, which previously reported on the antitrust sanction imposed by the EU, Spotify deemed Apple's proposed rule changes to be "fake."

The sanction imposed by the European Union coincides with Apple's preparations to revise its app distribution regulations in the EU on March 7 to comply with the Digital Markets Act (DMA), which will permit third-party app marketplaces on the iPhone for the first time. However, Apple's approach has faced criticism from app developers.

The company imposes a commission of up to 17 percent on developers who link to their website or use their payment method, in addition to an annual charge of €0.50 per app install beyond the initial million. Spotify stated that the proposed modifications" immediately stifle [developers'] businesses and an unworkable alternative."

Global Pressure Mounts on Apple Over Payment Practices and DMA Compliance

Additionally, on March 1, 33 other organizations and businesses, including Spotify, issued an open letter that raised concerns regarding Apple's DMA compliance. Spotify asserted in the correspondence that the European Union's reaction to the proposal would "act as a litmus test for the DMA and its ability to provide for the citizens and economy of Europe."

In the interim, US courts have also ruled that Apple must permit developers to link to alternative payment methods in response to Epic Games' legal challenge against the company. However, once Apple began permitting developers to link out, it insisted it would retain a 27 percent cut on all digital purchases, a marginal decrease from its customary 30 percent cut.

The modifications were criticized by Apple's detractors, including Spotify, which stated that they demonstrated the company's "unwavering determination to safeguard the profits they exact from consumers and developers via their monopoly on the app store."

The European Commission has been examining Apple's policy of restricting the iPhone's tap-top-pay NFC (near-field communication) to its own wallet and payment services and investigating the company's App Store policies. Apple has invited third-party mobile wallet and payment providers to utilize the NFC functionality of the iPhone for payment purposes in light of the investigation.

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