The European Commission has launched an anti-trust investigation into Apple over its App Store rules in Europe.
The probe, announced in Brussels today (June 16), seeks to find whether or not Apple’s restrictions for app developers around the distribution of apps via its App Store are in violation of EU competition rules.
The Commission will investigate two restrictions imposed by Apple in its agreements with companies distributing their apps via Apple devices:
(i) The mandatory use of Apple’s own proprietary in-app purchase system “IAP” for the distribution of paid digital content. Apple charges third party app developers a 30% commission on all subscription fees through IAP.
This controversial 30% commission – also known as Apple’s ‘app tax’ – also applies to rival music streaming subscriptions.
(ii) Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps:
While Apple allows users to consume content such as music, e-books and audiobooks purchased elsewhere (e.g. on the website of the app developer) also in the app, its rules prevent developers from informing users about such purchasing possibilities, which are often cheaper.
The EC’s new investigation follows up on separate complaints made last year by Spotify and by an e-book/audiobook distributor on the impact of the App Store rules on competition in music streaming and e-books/audiobooks.
Spotify’s anti-trust complaint was filed against Apple with the European Commission in March 2019.
In a response to Spotify’s complaint last year, Apple claimed that Spotify hadn’t actually paid any additional commission on a single subscriber obtained via the App Store for the prior three years.
Responding to today’s news (see below), Spotify’s Head of Global Affairs and Chief Legal Officer, Horacio Gutierrez, said that Apple’s App Store rules have “deprived consumers of meaningful choice for far too long”.
According to the EC, a preliminary investigation into the matter led to concerns that “Apple’s restrictions may distort competition for music streaming services on Apple’s devices”.
“Apple’s competitors have either decided to disable the in-app subscription possibility altogether or have raised their subscription prices in the app and passed on Apple’s fee to consumers,” continued the EC, in a press release announcing the investiagtion.
“In both cases, they were not allowed to inform users about alternative subscription possibilities outside of the app.
“The IAP obligation also appears to give Apple full control over the relationship with customers of its competitors subscribing in the app, thus dis-intermediating its competitors from important customer data while Apple may obtain valuable data about the activities and offers of its competitors.”
“Apple’s anticompetitive behavior has intentionally disadvantaged competitors, created an un-level playing field, and deprived consumers of meaningful choice for far too long.”
Horacio Gutierrez, Spotify
Said Gutierrez: “Today is a good day for consumers, Spotify and other app developers across Europe and around the world.
“Apple’s anticompetitive behavior has intentionally disadvantaged competitors, created an un-level playing field, and deprived consumers of meaningful choice for far too long.
“We welcome the European Commission’s decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.”
“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books.”
Margrethe Vestager, European Commission
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Mobile applications have fundamentally changed the way we access content.
“Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a “gatekeeper” role when it comes to the distribution of apps and content to users of Apple’s popular devices.
“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books.
“I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”
“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else.”
UPDATE: An Apple spokesperson issued the following statement in response to today’s news: “Throughout our history, Apple has created groundbreaking new products and services in some of the most fiercely competitive markets in the world. We follow the law in everything we do and we embrace competition at every stage because we believe it pushes us to deliver even better results.
“We developed the App Store with two goals in mind: that it be a safe and trusted place for customers to discover and download apps, and a great business opportunity for entrepreneurs and developers.
“We’re deeply proud of the countless developers who’ve innovated and found success through our platform. And as we’ve grown together, we’ve continued to deliver innovative new services — like Apple Pay — that provide the very best customer experience while meeting industry-leading standards for privacy and security.
“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.
“At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality.”Music Business Worldwide