The European Commission is bringing antitrust charges against Apple over concerns about the company’s App Store practices. The Commission has found that Apple violated EU competition rules with its App Store guidelines following an initial complaint from Spotify in 2019. In particular, the Commission believes that Apple has a “dominant position in the market for the distribution of streaming music apps through its app store.”
The EU has focused on two rules that Apple is imposing on developers: the mandatory use of Apple’s in-app purchase system (which Apple charges a 30 percent cut on) and a rule that prohibits app developers from letting users through other purchase options outside of apps. The Commission found that the 30 percent commission fee, or “Apple Tax” as it is often called, has resulted in higher prices for consumers. “Most streaming providers have passed this fee on to end users through price increases,” said the European Commission.
“Apple’s rules distort competition in the market for music streaming services by increasing costs for competing developers of music streaming apps,” said an EU statement. “This in turn results in higher prices for consumers for their in-app music subscriptions on iOS devices.” The EU has also sent Apple an objection notice, essentially detailing how the Commission believes Apple has violated the competition rules.
This is the first formal stage of an antitrust proceeding against Apple and the company will have an opportunity to respond to the Commission’s list of objections. Apple faces a fine of up to 10 percent of its annual sales if found guilty of violating EU regulations. That could be as high as $ 27 billion based on Apple’s annual revenue of $ 274.5 billion last year. Apple could also be forced to change its business model, which has more damaging and lasting effects than a fine.
Epic Games also joined many developers and companies in opposing Apple’s App Store policies and filed an antitrust complaint with the EU earlier this year. This is part of an ongoing dispute with Apple after the Fortnite developer publicly criticized Apple’s App Store policies on sales and payments. This led Epic to try to bypass Apple’s 30 percent cut in in-app purchases in Fortnite, and Apple quickly removed the game from the App Store.
“Our preliminary determination is that Apple is a gatekeeper for users of iPhones and iPads through the App Store,” said EU Competition Commissioner Margrethe Vestager in a press release. “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.” Apple didn’t immediately respond to a request for comment.