Why EU fined Apple over €1.8 billion | Explained

What was Apple accused of and how has the iPhone maker responded to the penalty

March 07, 2024 11:45 am | Updated 12:02 pm IST

The European Commission imposed its first antitrust penalty against Apple for unfairly favouring Apple Music over its rivals.

The European Commission imposed its first antitrust penalty against Apple for unfairly favouring Apple Music over its rivals. | Photo Credit: AP

The story so far: On March 5, the European Commission imposed its first antitrust penalty against Apple for unfairly favouring Apple Music over its rivals. The €1.8 billion ($1.95 billion) antitrust fine culminates the commission’s nearly four-year long investigation following a complaint from Spotify accusing the American company of purposely not disclosing to Apple’s customers about alternative options to pay for their streaming music subscriptions.

What are the accusations against Apple?

The EU’s antitrust regulator found that Apple unfairly favoured its own music streaming service by banning rivals like Spotify from telling users and failing to including link about a cheaper subscription option available outside of the App Store.

(Apple charges upto 30% commission on purchases made through its App Store. It won’t receive this fee if the user directly makes payment on the app’s website.)

The market regulator noted that Apple muzzled streaming music app developers from informing iOS users about alternative and cheaper music subscription services available on their websites.

What is the significance of the fine on Apple?

The fine on Apple comes nearly four years after formal proceedings began in June 2020. While having a dominant market position is not illegal in the EU, the amount of penalty in this case highlights the bloc’s seriousness in handling corporations that abuse their dominant market positions, especially in the world of technology.

This is also one of the biggest fines levied against a major tech company in the EU. Further, under the provisions of the EU’s antitrust laws, the fine exposes Apple against persons or companies affected by anti-competitive behaviour. This means that any person or company affected by Apple’s anti-competitive behaviour in this case may bring the matter before the courts of the EU Member States and seek damages.

This decision comes at a time when Apple is overhauling its app marketplace to comply with Europe’s Digital Markets Act to allow third-party apps on iOS devices.

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Which law did Apple violate?

The regulator concluded that Apple’s anti-steering provisions, that include Apple not allowing app developers to steer users towards alternative payment options, amounted to “unfair trading” conditions, in breach of provisions under the Treaty on the Functioning of the European Union (TFEU). The regulator found Apple to have violated specific provisions in the Treaty under Article 102 of the TFEU and Article 54 of the European Economic Area Agreement that prohibit the abuse of a dominant position.

The fine comes months after the EU implemented the DMA to put an end to unfair practices by tech companies that act as “gatekeepers” in the online space. From Thursday, Apple will be barred from applying ani-steering provisions on any iOS apps under the bloc’s competition reforms, as it has been designated a gatekeeper. iOS and the App Store are regulated as core platform services, under separate laws.

The fine on Apple sets a precedent for other tech giants facing antitrust investigations under the new rules.

Companies in the EU risk fines of up to 10% of their global turnover for antitrust violations, and in the event of repeated violations, the fine can be extended up to 20%.

How has Apple responded to the fine?

In a sharp response to the fine, Apple released a statement in which it attacked the EU, claiming enforcers failed to uncover “any credible evidence of consumer harm, and ignored the realities of the market that is thriving, competitive, and growing fast.”

Apple further said that there was “no evidence of anti-competitive behaviour”, and that the investigations did not yield a viable theory explaining how it thwarted competition in a thriving market.

The company further accused Spotify of wanting to rewrite the rules of the App Store to suit its own interests, while “working with the European Commission on an investigation with little grounding in reality”.

The iPhone maker said that though it respects the Commission’s decision, the facts do not support it [the ruling], and as such Apple will be appealing the decision.

What was the role of Spotify?

Spotify and Apple have been loggerheads over the latter’s app store fees. Spotify has over the years accused Apple of stifling competition by unfairly favouring its own services. The EU investigation against Apple was initiated after Spotify filed a complaint five years ago.

Earlier this year, Spotify called Apple’s new 50 cent fee per download by users in the EU as extortion. The music streaming platform accused Apple of putting forward a farce that skirted the regulations laid down under EU’s DMA.

Spotify has alleged that Apple’s new 50 cent Euro fee charged to developers per download, every year, in perpetuity, for the use of alternative app stores essentially allows the tech company to continue curtailing competition. Spotify further alleged that since Apple is already charging a commission of 17% (and 10% for recurring payments) on digital goods purchased, the annual flat fee is just another way for the company to continue charging developers under the garb of compliance under the DMA.

Spotify said that since developers will have to pay per download, after their app crosses one million downloads, developers stand to lose the chance of growing since users may download an app but never use it, or forget to delete it, forcing developers to continue paying Apple.

Spotify has been at the forefront of developers who have complained against Apple’s App Store rules.

Which other companies are facing antitrust investigations?

In December last year, Apple offered to let rivals access its tap-and-go mobile payments system used for mobile wallets in a bid to settle EU antitrust charges. The investigation charged Apple with curbing rival’s access to its tap-and-go technology, Near-Field Communication (NFC), making it difficult for them to develop rival services on Apple devices.

Google is also a long-running antitrust investigation in which regulators found the company gave its own shopping recommendations and illegal advantage over rivals in search results.

In December 2022, The European Commission informed Meta that they believe the company has breached EU antitrust rules by distorting competition in the markets for online classified ads.

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