Apple Inc faces a potentially hefty fine as well as a ban on App Store rules it allegedly used to thwart music-streaming rivals, in the European Union’s latest crackdown on Big Tech.
EU regulators are putting the finishing touches to a decision on Apple’s practice of blocking music services from pushing their users away from the App Store to alternative, cheaper, subscription options, according to people familiar with the investigation. The decision is slated for early next year, they added.
As part of the upcoming decision, Apple runs the risk of a potential fine of as much as 10 per cent of its annual sales — although EU penalties seldom reach that level and orders for companies to change their business models can be more hard-hitting.
The probe was sparked by a complaint nearly four years ago from Sweden’s Spotify Technology SA, which claimed it was forced to ramp up the price of its monthly subscriptions to cover costs associated with Apple’s alleged stranglehold on how the App Store operates. The European Commission homed in on Apple’s so-called anti-steering rules in a formal charge sheet in February, saying the conditions were unnecessary and meant customers faced higher prices.
At a private June hearing in the EU case, Apple’s stance was that it already addressed any possible competition concerns, according to a person familiar with the US firm’s thinking. In early 2022, Apple began allowing Spotify and other music services to direct users to the web in their apps to sign up for subscriptions. This bypasses Apple’s revenue cut of up to 30 per cent and gives consumers more pricing and subscription options.
A few months earlier, the company had agreed for the first time to allow apps to advertise lower prices for subscriptions outside of the App Store. For example, Spotify or another developer could email customers to inform them of cheaper prices if they sign up online rather than through the App Store.
But Spotify hit back at Apple’s efforts, saying in June that the restrictions still existed and the changes were “just for show.”
The EU crackdown on App Store rules has run alongside another probe focused on how Cupertino, California-based Apple controls tap-to-pay technology on its devices. But the company is in talks to settle that case, according to people familiar with the investigation. Across the Atlantic there has been a similar focus on app store abuses. This week, jurors found that Google unfairly wields monopoly power, in a win for Fortnite maker Epic Games Inc, which has also complained about Apple’s App Store policies.
Margrethe Vestager — who returned to her role as EU antitrust czar after a failed bid for the top job at the European Investment Bank — has a history of taking on Apple and other Silicon Valley giants. She’s slapped Alphabet Inc.’s Google with fines of more than €8 billion ($8.6 billion) and also ordered Apple to repay €13 billion in allegedly unfair tax breaks from Ireland.
The Brussels-based commission declined to comment on its forthcoming decision. Apple didn’t respond to questions from Bloomberg on the case. Spotify declined to immediately comment.
Aside from attacking firms for their past abuses, the commission, the EU’s antitrust arm, has also pushed through sweeping new rules to head off competition violations by tech firms before they take root. The Digital Markets Act enters into full force in March 2024, and lays out a series of dos and don’ts.
Under the DMA, it will be illegal for the most powerful firms to favor their own services over those of rivals. They’ll be barred from combining personal data across their different services, prohibited from using data they collect from third-party merchants to compete against them, and will have to allow users to download apps from rivals platforms.
Apple, Meta Platforms Inc and TikTok owner ByteDance Ltd have all asked the EU courts to double-check whether some of their services should come under the scope of the DMA — seen as hitting the heart of some of their most profitable business models.
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