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E.U. says Apple’s App Store breaks competition rules after Spotify complaint

In response, Apple said the E.U.’s case was the “opposite of fair competition.”
Apple CEO Tim Cook Kicks Off Worldwide Developers Conference
Apple CEO Tim Cook speaks during the 2018 Apple Worldwide Developer Conference in San Jose, Calif., on June 4, 2018.Justin Sullivan / Getty Images file
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LONDON — Apple has “abused its dominant position” in the distribution of music streaming apps through its App Store, the European Commission said Friday.

“Our preliminary finding is that Apple exercises considerable market power in the distribution of music streaming apps to owners of Apple devices. On that market, Apple has a monopoly,” Margrethe Vestager, the head of competition policy in the E.U., said in a press conference.

The European Commission, the EU’s executive arm, opened an antitrust investigation into the App Store last year, after the music streaming platform Spotify complained in 2019 about Apple’s license agreements. These mean that app developers have to pay a 30 percent commission on all subscription fees that come through the App Store.

On Friday, the E.U. said it took issue with the “mandatory use of Apple’s own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple’s App Store.”

App developers are also unable to inform users of alternative ways to purchase the same apps elsewhere — another issue the Commission said it was concerned with.

“The European Commission has informed Apple of its preliminary view that it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store,” it summarized in a “statement of objections” sent to Apple.

In response, Apple said the E.U.’s case was the “opposite of fair competition.”

“Spotify has become the largest music subscription service in the world, and we’re proud of the role we played in that,” Apple said a statement. “Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that.”

A statement of objections is part of the formal process in an antitrust investigation, but it does not conclude the probe. Apple now has to reply to the Commission’s concerns either in writing or via a oral hearing.

Spotify welcomed the news Friday. “The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers,” Spotify’s Chief Legal Officer Horacio Gutierrez said in a statement.

'Apple is a gatekeeper'

It comes after an e-book and audiobook distributor filed a similar complaint against Apple March 2020, while Epic Games — which is already locking horns with Apple in a U.S. legal battle — filed an antitrust complaint against the iPhone maker with the European Commission earlier this year.

At the press conference, Vestager stressed that app stores play a central role in today’s digital economy.

″(Apple) not only controls the only access to apps on Apple devices, it also offers a music streaming service, Apple Music, that competes with other apps available in the Apple App Store, such as Spotify or Deezer,” Vestager said.

She added that App Store rules are a concern for many app developers, “because they depend on Apple App Store as a gatekeeper to access users of Apple’s iPhones and iPads.”

“This significant market power cannot go unchecked as the conditions of access to the Apple App Store are key for the success of app developers,” Vestager said.

The Commission is also looking at Apple Pay, but Vestager did not say when this probe would be concluded.

Legal battles

This is not the first investigation that the European Commission has brought against Apple. The commission decided in September to take Apple and the Irish government to the highest court in the European Union for what Brussels deems unfair taxation practices.

The E.U. ruled in 2016 that Apple had to repay 13 billion euros ($15.7 billion) in unpaid taxes to the Irish government, after the latter granted “undue tax benefits.” Apple and the Irish government have contested the decision and the case is still in court.

Hoping to overcome long legal battles and make its markets fairer, the European Union is working on new regulation that could ultimately impact many of the U.S. tech giants.

The Digital Markets Act is likely to end what’s known as self-preferencing — when, for instance, app search results in an Apple product prioritize those developed by the tech giant. The idea is to give smaller app developers the same chance of being found and chosen by consumers.

The legislation is still being discussed by European lawmakers. But, apart from enforcing practical changes, it will also have the power to fine companies up to 10 percent of their worldwide annual turnover.