EU Slaps Apple With $2Bn Antitrust Fine 

Apple has been slapped a massive 1.84 billion euros (just under $2 billion) fine by the European Union for breach of its antitrust rules for streaming services on its iOS mobile platform. The penalty relates to provisions on music streaming apps’ abilities to inform consumers about cheaper options outside of the iPhone maker’s App Store. 

In a strong rebuttal, Apple claimed in a blog post that “the decision (by the EU) was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast.” The note also confirmed that Apple would be appealing the EU decision. 

EU says Apple did not allow free choice

The issue cropped up following arguments from Apple Music rivals such as Spotify that claimed the restrictions put them at a disadvantage compared to the iOS and the App Store operator. On its part, the EU claimed that this restriction prevented customers in Europe from making a free choice. “Apple’s rules ended up harming consumers by withholding critical information that stalled informed decision-making,” said the EU’s competition chief, Margrethe Vestager. 

“Some consumers may have paid more, because they were unaware that they could pay less if they subscribed outside of the app. And other consumers may not have managed at all to subscribe to their preferred music streaming provider because they simply couldn’t find it. The Commission found that Apple’s rules result in withholding key information on prices and features of services from consumers. As such they are neither necessary nor proportionate for the provision of the App Store on Apple’s mobile devices,” she said. “We therefore consider them to be unfair trading conditions as they were unilaterally imposed by a dominant company.”

The decision to penalize the iPhone maker follows a March 2019 antitrust complaint by Spotify that claimed the App Store purposely limited choice and stifled innovation at the expense of the user experience, which put other app developers at a deliberate disadvantage by “being both a player and a referee.” 

However, Apple claims it helped Spotify

The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation, says the blog post, while pointing out that the Spotify app has been downloaded, re-downloaded or updated more than 119 billion times on Apple devices.

“Today, Spotify has a 56% percent share of Europe’s music streaming market — more than double their closest competitors — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world. A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world,” the company has said. 

The entire post appears to reiterate one point that Spotify pays Apple nothing and still wants its services for free. It speaks of major investments that Apple made to create tools and technology as well as the marketplace that Spotify uses. “We’ve even flown our engineers to Stockholm to help Spotify’s teams in person,” the company says and notes again that Spotify pays nothing. 

“When it comes to doing business, not everyone’s going to agree on the best deal. But it sure is hard to beat free.But free isn’t enough for Spotify. They also want to rewrite the rules of the App Store — in a way that advantages them even more,” the Apple blog post says while obliquely suggesting that Spotify’s European origins led it to hobnob with the EU antitrust body. 

When and where did this originate?

The case began in 2019 though it was only in June 2020 that the EU announced a formal probe into the App Store over conditions and restrictions imposed by the tech giant. A formal set of objections were issued in April 2021 where EI said Apple operated its App Store in a way that distorts competition in the music streaming market. 

Two years thereafter, the EU issued a revised statement of objections that dropped an earlier charge related to Apple’s insistence on music streaming apps using its payment processing tech. Instead it focused on anti-steering provisions only with the EU regulator stating that had it not been for the 30% App Store fee, Spotify could have grown even bigger. 

Media reports last month indicated that Apple could face a 500 million euro antitrust penalty but the figure that came out is considerably higher.  “The fine we impose today reflects both Apple’s financial power and the harm that Apple’s conduct inflicted on millions of European users,” the EU officials said, adding that it still represents 0.5% of the iPhone maker’s worldwide turnover.

What next for the EU and Apple?

On its part, the Commission has ordered Apple not to apply anti-steering provisions on music streaming apps. “From now on, Apple will have to allow music streaming developers to communicate freely with their own users — be that within the app, by email or any other ways of communicating,” says Vestager.

It will also be barred from applying anti-steering provisions on any iOS apps as per the EU’s Digital Markets Act (DMA), which has been designated as a gatekeeper under which the iOS and the App Store are regulated as core platform services. DMA penalties can scale up to 10% of annual turnover with the Commission being the sole enforcer. 

As for Apple, the company says it would appeal and claims that “the App Store has helped developers of all sizes build successful businesses and reach people around the world. And few companies embody that story better than Spotify.” 

“The European Commission is issuing this decision just before their new regulation — the Digital Markets Act (DMA) — comes into force. Apple is set to comply with the DMA in days, and our plans include changes to the rules challenged here. What’s clear is that this decision is not grounded in existing competition law. It’s an effort by the Commission to enforce the DMA before the DMA becomes law,” says the Apple statement. 

The company says it has been part of Europe for over 40 years and supports more than 2.5 million jobs in the region, helping markets thrive and promoting competition and innovation. “… and the App store is an important part of this story. So, while we respect the EC, the facts simply don’t support this decision.” 

While this battle seems set to get bloodier in the near future, we are sure that Apple competitors such as Google and Meta would be watching with a lot of interest.