EU Imposes $2B Penalty on Apple for Unfairly Restricting App Store Rivals - Insights

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The European Commission (EC) announced its first major antitrust fine on a US tech company, fining Apple almost $2 billion. The EC says Apple prevented the developers of music streaming services such as Spotify from informing iPhone and iPad users about alternatives and lower prices for music subscriptions available outside the App Store

“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” said Margrethe Vestager, the Commission’s executive vice president in charge of competition policy. “They did so by restricting developers from informing consumers about alternative, cheaper music services outside the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over €1.8 billion.”

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Being the sole provider of the App Store for iOS users gives Apple control over all aspects of the iOS experience, and the EC found the company’s level of control to be outright restrictive and in violation of the European Union’s (EU) anti-steering provisions.

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Apple contradicted the EC’s decision, noting that Spotify met with the Commission more than 65 times during this investigation. Apple defended its App Store review process and commission structure, calling them fair and applicable equally to all developers. It noted that many services, including music streaming, can avoid commission fees by selling subscriptions outside the App Store.

According to different sources , Apple required Spotify and other music streaming app developers to pay up to a 30% commission fee on purchases made through Apple’s in-app payment system without allowing these developers to share information about subscription deals outside the App Store.

Apple, however, stressed that Spotify does not pay Apple any commission despite utilizing the App Store’s infrastructure because it acquires subscribers through its website. It also said 86% of the developers participating in its App Store never pay Apple a commission.

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The EC’s fine charges that Apple failed to inform iOS users within their apps about lower prices of subscription offers available on the internet outside of the app and price differences between in-app subscriptions sold through Apple’s in-app purchase mechanism and those available elsewhere.

The EC says that Apple also prohibited developers like Spotify from including links in their apps that would lead iOS users to the app developer’s website on which alternative subscriptions can be purchased.

“App developers were also prevented from contacting their own newly acquired users, for instance by email, to inform them about alternative pricing options after they set up an account,” the EC’s document notes.

Apple contends that the EC’s decision is ungrounded, arguing there is no evidence of consumer harm or anti-competitive behavior. The company released a statement emphasizing its contributions to the European economy and the digital music market’s growth, challenging the EC’s findings with signals of an appeal.

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According to the EC, in turn, these anti-steering provisions are an effort to protect consumers; in this case, iPhone and iPad users were not given the opportunity they deserved to make informed decisions on where and how to purchase music streaming subscriptions to use on their own devices.

This fine is another notch in the EU’s belt to level European competition among large tech companies – dubbed “gatekeepers” – that dominate the market under the Digital Markets Act (DMA). The DMA has already forced Apple to allow app sideloading in the EU to prevent some of the issues outlined in the EC’s fine, as it aims to diminish the market control these gatekeepers have in the EU.