European Commission says Apple is in breach of EU competition law

The European Commission has announced its “preliminary conclusion” that Apple is in breach of EU competition laws over the App Store.

As previously predicted, the European Commission has concluded that the App Store is in breach of European Union laws.

Ahead of the formal announcement, EU antitrust chief Margrethe Vestager tweeted the broad outline of the investigation’s conclusions.

“App stores play a central role in today’s digital economy,” added Vestager in a statement. “Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store.”

“With Apple Music, Apple also competes with music streaming providers,” she continued. “By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition.”

“This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options,” she said.

The preliminary conclusion is that Apple has infringed Article 102 of the Treaty on the Functioning of the European Union (TFEU) which specifically prohibits the abuse of a dominant market position.

In a statement to AppleInsider, Apple has responded that it believes the EU’s position ignores how the App Store has helped competition.

“Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that,” said an Apple spokesperson. “Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store.”

“At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows,” continued the spokesperson. “Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The Commission’s argument on Spotify’s behalf is the opposite of fair competition.”

Apple will be called before the commission to defend its actions. If found guilty, it could be fined up to 10% of its annual revenue from the App Store. Not only is the process likely to take years, but it can appeal any decision made.

In 2019, Spotify lodged the original complaint with the European Commission. It alleged Apple, through its App Store, put Apple Music competitors at a disadvantage.

In its complaint, Spotify pointed instances like when Apple rejected multiple Apple Watch app submissions in 2015 and 2016. Apple later added third-party API for music streaming apps on Apple Watch with watchOS 5, which has been used by popular services like Pandora.

Spotify also complained about Apple’s 30% cut of App Store purchases, a fee levied on all third-party developers. For subscriptions, the rate drops down to 15% after one year of continual payments.

Apple responded to this later, pointing out that none of Spotify’s subscribers were paying the 30%. The company’s response said that the 680,000 users paying 15% were out of the company’s self-reported 100 million paying users world-wide, and there were zero Spotify users paying 30%, which was and is the main thrust of the complaint.

Apple collects the fee on any sales of any digital items. That could be premium in-game currencies, or in this case, a subscription to Spotify. The collected fees are used for Apple’s hosting fees, development of the platform and developer resources, payment infrastructure and other expenses.

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