EU accuses Apple of breaking competitors legislation over app retailer guidelines, after Spotify anti-trust criticism

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Apple has been accused of violating European antitrust rules and also of having “distorted competition in the music streaming market,” according to the European Commission.

The European Commission launched an antitrust investigation into Apple’s App Store rules last year and published its preliminary results today (Friday, April 30). It has told Apple that it has “abused its dominant position in the distribution of music streaming apps through its app store.”

At the heart of the EU’s investigation are two particular restrictions that Apple imposes on developers who use the App Store to distribute their products:

  • The mandatory use of Apple’s own in-app purchase system (IAP) for the distribution of paid digital content. Apple charges third-party app developers a 30% commission – also known as Apple’s app tax – on all subscription fees through IAP for the first year.
  • Second, the Apple rules that prevent developers from informing users about alternative purchase options outside of their IoS apps.

The commission announced today that it “has problems with the mandatory use of Apple’s in-app purchase mechanism imposed on developers of streaming music apps to sell their apps through Apple’s App Store”.

The commission also said it is “concerned that Apple is applying certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper ways to buy”.

The EU investigation followed a separate complaint from Spotify in 2019 regarding the impact of Apple’s App Store rules on competition in the music streaming business. Spotify’s antitrust complaint was filed with the European Commission against Apple in March 2019.

At the time, Spotify’s founder and CEO Daniel Ek wrote in a blog post that Apple “essentially acted as both a player and an arbiter to deliberately discriminate against other app developers.”

In response to Spotify’s complaint, Apple claimed last year that Spotify had not paid any additional commission for a single subscriber obtained through the App Store in the past three years.

Horacio Gutierrez, Head of Global Affairs and Chief Legal Officer of Spotify, also claimed in June last year that Apple “deliberately developed a system that was manipulated in their favor”.

Today the EC published a “Statement of Objections”, which is required in the context of a formal investigation into suspected violations of EU antitrust law.

If confirmed, the Commission’s preliminary results would mean that Apple’s behavior is in breach of antitrust rules.

The EU’s statement of objections states: “The Commission provisionally finds that Apple has a dominant position in the market for the distribution of music streaming apps through the App Store ”.

It adds, “For app developers, the App Store is the only gateway for consumers using Apple’s Smart Mobile devices running on Apple’s iOS Smart Mobile operating system. Apple’s devices and software form a “closed ecosystem” in which Apple controls every aspect of the user experience for iPhones and iPads.

“Apple’s App Store is part of this ecosystem and is the only app store that iPhone and iPad users can use to download apps for their mobile devices. The commission found that users of Apple’s devices are very loyal to the brand and cannot easily switch. In order to serve iOS users, app developers must therefore distribute their apps via the app store. This is subject to Apple’s mandatory and non-negotiable rules. “

Apple now has the opportunity to examine the Commission’s findings, respond in writing and request an oral hearing to discuss its case with representatives of the EC and national competition authorities.

In a statement to the media, Apple said that “the Commission’s argument on behalf of Spotify is the opposite of fair competition”.

Apple argues that “at the core” of Spotify’s complaint to the EU is its inability to advertise and direct users in its app for offers outside of its app, which Spotify says is anti-competitive behavior.

Apple states that “no business in the world allows this practice”.

“The Commission’s argument on behalf of Spotify is the opposite of fair competition.”

Apple

Apple said in a statement, “Spotify has become the largest music subscription service in the world and we’re proud of the role we’ve played in it.

“Spotify pays Apple no commission for over 99% of its subscribers and only pays a 15% commission for the remaining subscribers they purchase through the App Store.

“At the heart of this case is Spotify’s request to promote alternative offerings for their iOS app, a practice that no business in the world allows.

“They want to use all the advantages of the App Store again, but don’t think that they have to pay anything for them. The Commission’s argument on behalf of Spotify is the opposite of fair competition. “

“The Statement of Objections from the European Commission is a critical step in holding Apple accountable for its anti-competitive behavior and ensuring sensible choice for all consumers and a level playing field for app developers.”

Horacio Gutierrez, Spotify

Horacio Gutierrez, Head of Global Affairs and Chief Legal Officer of Spotify, told MBW: “Ensuring the fair operation of the iOS platform is an urgent task with far-reaching implications.

“The Statement of Objections from the European Commission is a critical step in holding Apple accountable for its anti-competitive behavior and ensuring sensible choice for all consumers and a level playing field for app developers.”

“By setting strict rules in the App Store that penalize competing music streaming services, Apple is depriving users of cheaper music streaming options and distorting competition.”

Margrethe VestagerEuropean Commission

Executive Vice President Margrethe VestagerThe provider responsible for competition policy said: “App stores play a central role in today’s digital economy.

“We can now shop, access news, music or movies through apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper for users of iPhones and iPads through the App Store.

“With Apple Music, Apple is also competing with music streaming providers. By setting strict rules in the App Store that penalize competing music streaming services, Apple is depriving users of cheaper music streaming options and distorting competition.

“It does this by charging rivals high commission fees for every transaction in the App Store and by prohibiting them from informing their customers of alternative subscription options.”Music business worldwide

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