Apple : EU Commission fines €1.8 bn for breaching music streaming rules

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The European Commission announced on Monday (4 March) a €1.8 billion fine for Apple, saying the tech giant abused its dominant position for music streaming providers.

According to the European Commission, Apple exploited its dominant market position by distributing music streaming applications to iPhone and iPad users via its App Store.

With €1.8 billion, this is the third-biggest fine imposed against a company for breaching the EU rules. The first two places go to Google, which was hit with a €4.34 billion fine by the EU in 2018 and a €2.42 billion fine in 2017.

The Commission found that due to Apple’s restrictions, app developers were prohibited from informing iOS users about alternative and more affordable music subscription services outside the app, called ‘anti-steering provisions’. This violates EU antitrust rules.

“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store. They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem,” Margrethe Vestager, the Commission’s executive vice president in charge of competition policy, said on Monday.

According to Apple’s statement on Monday, however, “the primary advocate for this decision — and the biggest beneficiary — is Spotify”, believing that the popular Swedish platform benefits from this decision.

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The fine for Apple

The anti-steering provisions ban app developers from informing iOS users about prices available to iOS users on the internet outside of the app and about price differences between in-app subscriptions sold through Apple’s in-app purchase mechanism and those available elsewhere.

Moreover, the developers could also not include links in their apps directing iOS users to the app developer’s website where alternative subscriptions can be purchased. Developers could also not reach newly acquired users via email or other means to inform them about alternative pricing options after they set up an account.

Based on the decision, Apple’s anti-steering provisions constitute unfair trading conditions, violating the Treaty on the Functioning of the European Union. The Commission believes these provisions harm iOS users’ interests and are not necessary or proportionate to Apple’s commercial interests.

Apple’s conduct, spanning nearly a decade, potentially resulted in numerous iOS users paying elevated prices for music streaming subscriptions due to the substantial commission fees enforced by Apple on developers, consequently passed on to consumers through inflated subscription rates on the App Store for identical services.

iOS users either had to navigate through a “cumbersome search” process to locate relevant offers outside the app or refrained from subscribing to any service altogether because they could not find suitable options independently.

The Commission levied the fine against Apple taking into account the duration and severity of the infringement, as well as Apple’s turnover and market capitalisation. Additionally, it required Apple to remove anti-steering provisions and avoid similar infringements in the future.

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According to Spotify, the Commission’s fine made clear that “people’s behaviour limiting communications to consumers is unlawful. This decision sends a powerful message—no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers”, its statement reads.

Apple pointed out that the App Store has contributed to Spotify’s success yet the music streaming app does not pay Apple because Spotify, along with many other developers, opts to sell subscriptions on their website rather than within their app, thereby bypassing Apple’s commission fee.

Apple says that Spotify has the option to link users to a webpage for subscription management. In Apple’s App Review Guidelines, it is also stated that “developers can send communications outside of the app to their user base about purchasing methods other than in-app purchase”.

Yet, as mentioned, the Commission said that developers could not include “links in their apps leading iOS users to the app developer’s website on which alternative subscriptions can be bought”.

Apple said that in 2015, Spotify collaborated with the European Commission for an investigation and complained that the digital music market was stagnating and Apple was impeding competitors’ progress.

Yet, Apple said Spotify continued to expand and surpassed all other digital music enterprises globally, which Apple believes was partly thanks to the App Store.

According to Spotify, Apple’s regulations have restricted music streaming services from directly informing users within their apps about upgrades, subscription prices, promotions, or other benefits while Apple Music, a direct competitor, is not subject to such limitations.

While appreciating the Commission’s action, Spotify highlighted the necessity for a comprehensive resolution against Apple’s persistent unfair practices in various global markets.

“Apple will have to comply with the full list of do’s and don’ts under the DMA [the EU’s Digital Markets Act]”, which will be enforced on 6 March, Vestager said during a press conference on Monday.

The company will not be able to “impose rules such as the anti-steering obligations. […] This holds for any app on the App Store, not just music streaming apps”, Vestager noted.