European Commission finds Apple's App Store in violation of EU competition rules

nanoguy

Posts: 772   +12
Staff member
In context: With every passing quarter, Apple announces a new record in services revenue, which has quickly grown to become the company's second biggest revenue stream after the iPhone. The problem -- at least in the eye of EU regulators and Apple's competitors in the services industry -- is that it managed to achieve this performance by gatekeeping the App Store and using unfair policies to keep any competition at bay.

Apple is currently facing several antitrust battles across the US, Europe, and Australia, for allegedly exerting monopolistic power over the App Store and using it to put competitors at a disadvantage. This has even led to the creation of a "Coalition for App Fairness" to promote freedom of choice and the idea of alternative app stores in the Apple ecosystem.

Following a complaint made by Spotify in 2019 regarding Apple's supposedly unfair licensing agreements for streaming app developers that operate in the App Store, the European Commission started an antitrust investigation into the matter. Today, it published the preliminary results, which are nothing short of bad news for Apple, who could be fined to the tune of 10 percent of its 2020 revenue, or around $27.5 billion.

The Commission found the Cupertino giant is in violation of EU competition rules, at least when it comes to the music streaming market. Regulators explain that Apple's App Store rules "distort competition in the market for music streaming services by raising the costs of competing music streaming app developers," leading to higher prices for consumers who purchase subscriptions using Apple's in-app system on iPhone and iPad.

This is only the beginning of a formal process where Apple will have 12 weeks to review the Commission's concerns, as detailed in a Statement of Objections. Notable among these concerns are the mandatory use of Apple's in-app purchase system, as well as the "anti-steering provisions" that severely limit developers in their ability to advertise alternative purchasing options outside apps.

Spotify CEO Daniel Ek welcomed the findings, noting that "fairness is the key to competition. With the European Commission's Statement of Objections, we are one step closer to creating a level playing field, which is so important for the entire ecosystem of European developers."

Understandably, Apple isn't so thrilled with the Commission's findings. In a statement, the company explained that "Spotify has become the largest music subscription service in the world, and we’re proud of the role we played in that. Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store."

The Cupertino company believes the antitrust case is rooted in Spotify's desire to advertise alternative deals for its premium service inside the iOS app, which would be "a practice that no store in the world allows." As for the Commission's preliminary conclusion, Apple believes the cut it takes on in-app subscriptions is essential in maintaining the App Store as a trusted and reliable place for consumers to discover apps and games.

However, this antitrust case against Apple is only one of several being investigated by the European Commission. Last year, Kobo subsidiary Rakuten complained about Apple taking a 30 percent cut on eBook sales while running a competing service -- Apple Books, which doesn't incur the same costs. Then there's the special deal that allows Amazon to bypass Apple's standard fee when it comes to selling content through its Amazon Prime Video app on iOS.

Apple's biggest antitrust headaches will likely be caused by the EU's growing interest in learning more on how Apple is using App Store rules to thwart its biggest competitors in the gaming space, namely Epic, Microsoft, Google, Facebook. To top it off, the exclusivity of Apple Pay, which makes up five percent of global card transactions and is set to double by 2025, is also on the EU regulator's crosshairs.

In an effort to deflect some of these antitrust complaints, Apple last year reduced the commission fee to 15 percent for App Store developers making less than $1 million, but that didn't change the public perception on the matter. The decision is estimated to impact 98 percent of developers, who also happen to account for less than five percent of the App Store's annual revenue.

We also know from court filings that Apple's main argument for acting like a gatekeeper in the case of its App Store is that developers can always create web apps to bypass it. Game streaming services are a great example of that, with services like Stadia and GeForce Now working well through their respective web-based clients, which could encourage more developers to adopt that distribution model.

In the meantime, EU regulators are working on sweeping new rules under the Digital Markets Act and the Digital Services Act. Both are expected to have a major impact in how tech giants like Apple operate, such as putting an end to practices like self-preferencing -- in the case of Apple, that would be using the App Store search rankings to upsell its own apps and bury the competitors down the list.

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Aceseven

Posts: 25   +51
Ok, im a bit lost here.

I'm an android user anyway but isnt the point of storefronts like apple, google play, sony, xbox etc to be "exclusive" and because its their device sorta push their stuff to the top? yet also if you want to use their system you pay, make a good enough app to be profitable and just sorta deal with it?

from what I've read with their fight against epic and the rest is that the other companies want to be on apples devices because, c'mon iphones are everywhere but they dont want to pay apple a fee?

if apple loses these fights wouldnt that cascade onto all of the other storefronts also?
 

dangh

Posts: 229   +293
Ok, im a bit lost here.

I'm an android user anyway but isnt the point of storefronts like apple, google play, sony, xbox etc to be "exclusive" and because its their device sorta push their stuff to the top? yet also if you want to use their system you pay, make a good enough app to be profitable and just sorta deal with it?

from what I've read with their fight against epic and the rest is that the other companies want to be on apples devices because, c'mon iphones are everywhere but they dont want to pay apple a fee?

if apple loses these fights wouldnt that cascade onto all of the other storefronts also?
There is much more to this. One quick sample: pating Spotify subscription on ios you pay 15 pct to apple, who is using this money to pay more to artists in apple music, leading to absurds where one company supports its direct competitor, which is ludicrous (and no other companies like ms or sony are doing on consoles).
Operating system should not blok user from buying apps elsewhere. Imagine windows kicking out steam and any way of installing adobe products if not bought in ms store? And allows you to use only ms transaction to buy it? Makes no sense, right? So how this makes sense with ipods or iphones?
On Android you can install any store you want or buy applications packages directly. Our you can keep using google store. Perfect solution for customer. Why a customer should cheer for corporate income is beyond me.
 

dnous

Posts: 32   +35
Ok, im a bit lost here.

I'm an android user anyway but isnt the point of storefronts like apple, google play, sony, xbox etc to be "exclusive" and because its their device sorta push their stuff to the top? yet also if you want to use their system you pay, make a good enough app to be profitable and just sorta deal with it?

from what I've read with their fight against epic and the rest is that the other companies want to be on apples devices because, c'mon iphones are everywhere but they dont want to pay apple a fee?

if apple loses these fights wouldnt that cascade onto all of the other storefronts also?

In this specific case it is about getting 15% from the Spotify subscription if the payment also goes via the Apple store. It would put other music streaming services on a disadvantage due to Apple also having Apple Music. If they did not have Apple Music it might not have been that big of an issue.
 

Michael7

Posts: 67   +55
It will be a well deserved fine and they should be fined every year until they change their ways.
There would be no issue with that if they charged a fair amount to keep the store running and make decent profit (let's say 2-3% but not more than 5%) and all parties would be satisfied but instead corporate greed prevailed and Apple decided to extort developers and publishers and make a cash cow out of the Apple Store off other people's work (non-Apple empoyees). And on top of it Apple forbids informing customers of third party apps of other payment and subscription options (which are obviously cheaper than via Apple's in-app purchase option) so yes, make them pay.
 
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Porkous

Posts: 129   +37
Funny how they portray these companies as some cheeky entities that have been caught by a higher authority. Little children playing in sand hearing new rulles and having to behave.
 

Angga B

Posts: 136   +117
EU still has not find a way to tax tech giants properly. These companies enjoy so much privilege they are now becoming too big to be left on their own device.
 

Aceseven

Posts: 25   +51
There is much more to this. One quick sample: pating Spotify subscription on ios you pay 15 pct to apple, who is using this money to pay more to artists in apple music, leading to absurds where one company supports its direct competitor, which is ludicrous (and no other companies like ms or sony are doing on consoles).
Operating system should not blok user from buying apps elsewhere. Imagine windows kicking out steam and any way of installing adobe products if not bought in ms store? And allows you to use only ms transaction to buy it? Makes no sense, right? So how this makes sense with ipods or iphones?
On Android you can install any store you want or buy applications packages directly. Our you can keep using google store. Perfect solution for customer. Why a customer should cheer for corporate income is beyond me.
thanks so much, you really clarified it, windows has always just been "there" so I never really realized how it works, build pc, buy windows license, live your life.

seems since mobile came into the scene that its really messed up revenue streams and how things work.
 

lostinlodos

Posts: 185   +44
The quickest solution is to allow companies to add a separate payment option that has different pricing. As long as they still offer Apple Pay.
I think various groups would be surprised how many will stick to the slightly higher Apple Pay price.
I think these same people would be surprised how many of us would rather loose the app than switch to direct payments.

Time will tell. Depending on how this works out.
Luckily we still have other pass-through options with other companies we trust. Eg PayPal. Where the seller/provider do not get their hands on our financial information.

Programs like ApplePay, Google Pay, PayPal, act as a secure middleman. I wonder how many people would be willing to hand epic their credit info directly!??
 
I'm all for fair competition but if Apple creates the space why can't they create their own rules to play in it? If app makers are complaining about the cut Apple wants to take, they don't have to use the app store.

If the app store is the only way to get your apps onto Apple phones, again, you don't have to make apps for the Apple phone.

It's all Apple made so why are they in trouble when the app makers want to come play but complain about the rules?
 

HardReset

Posts: 1,109   +688
I'm all for fair competition but if Apple creates the space why can't they create their own rules to play in it? If app makers are complaining about the cut Apple wants to take, they don't have to use the app store.

If the app store is the only way to get your apps onto Apple phones, again, you don't have to make apps for the Apple phone.

It's all Apple made so why are they in trouble when the app makers want to come play but complain about the rules?
Think further. Using your logic, companies should be allowed to sell their products at price they want any time, even for loss. However, that is not allowed. Help here https://en.wikipedia.org/wiki/Predatory_pricing

I won't even answer what is wrong on your post. Just think further.
 

lostinlodos

Posts: 185   +44
Think further. Using your logic, companies should be allowed to sell their products at price they want any time, even for loss. However, that is not allowed. Help here https://en.wikipedia.org/wiki/Predatory_pricing

I won't even answer what is wrong on your post. Just think further.

here’s where I get confused by left leaning and beyond. If Twitter should have complete control why can’t Apple?

even if I believed the nonsense Epic is spouting in public, hint: I don’t, they could find a middle ground. Many many many apps exist that allow not Apple in app purchases off app. Via a web site.
I’m not sure what the EU has in mind here though.
In music standards Apple isn’t the problem, predatory publishing restrictions are.
It’s hard for an American company to negotiate European distribution when the laws are contradictory.

speaking of predation: in the US it’s extremely difficult to tie loss pricing to illegality. (The referenced Wikipedia article points that out).
in most cases it’s completely legal.
the entire video game industry depends on this method. Selling machines at a loss and making up the cost difference in games and accessories.

many computer companies (inc Dell, Packard Bell, and HP) have done this on entry level systems. IBM spent decades selling workstations and servers below value and making income on services.
there may be others, but the only industry I’m aware of that has legally been bared from sub-cost-pricing is fuel. And ONLY for automotive fuel (road use rated petrol and diesel).
in my state at least that doesn’t cover alt fuels either.
it’s not uncommon to find M90 or M95 at some ultra low level with coupons, or e85 the same. $1 off per gallon or more.
 

HardReset

Posts: 1,109   +688
here’s where I get confused by left leaning and beyond. If Twitter should have complete control why can’t Apple?
Because anyone can easily create alternative for Twitter and also Twitter does not directly sell anything.

Apple cannot have complete control because Apple uses that control for anti-competitive purposes. Good example is Apple books mentioned on article. Apple could sell books cheaper on their own service because others must pay Apple cut that is 30%. Why someone must pay Apple 30% from something they sell themself?

Yeah, you can buy from website but since buying from website is usually harder than via app, many people want to buy via app. Real question is: why Apple fee must be paid if bought via app but not paid when bought via website? What is main difference in Apple's point of view? There is no major difference, it's just Apple wants more money.

When it comes to predatory pricing, it's not same thing as selling for loss. It's just another example where things are not so clear as "Apple should be allowed to do whatever they want" -opinion.

When you think further, reasons for this investigation becomes more and more obvious.
 

lostinlodos

Posts: 185   +44
What is main difference in Apple's point of view? There is no major difference, it's just Apple wants more money.?
the differen Is Apple users, who chose Apple’s ecosystem, use Apple Pay to have Apple protect their payment details.
I don’t see anyone demanding Microsoft release their game properties on Switch or PlayStation!
Nobody is forcing anyone to use Apple products.
If you want a movie not on Netflix go somewhere else.
if you want to talk discuss stuff that is outside of Twitter’ ultra narrow blinders go somewhere else.
and if you want a game or song not on Apple go somewhere else!
If you don’t like Apple’s terms go somewhat elsewhere.

Anyone can manufacture a new smart phone just as much as they can manufacture a new “social” service.
I don’t care who you follow politically but I’m sick and tired of rules for you, not for me.
And I’m sick and tired of people blindly ignoring criminals being propped up as some sort of hero or martyr!
Since the twitter ants-trump crowd is so high and mighty over TOS, terms of service, little e crybaby epic flagrantly violated both Apples TOS and THE LAW by doing so, a blatant violation of their contract.
The hypocrisy of the same people supporting Twitter and Epic at the same time is a joke.

here’s your Twitter argument for you:
Apple is a private company with a private platform and the chose to kick out a company that violated their rules. End of the discussion’s reality.
All I see is a bunch of game addicts crying that they can’t play their game.
 

Neatfeatguy

Posts: 300   +431
What is main difference in Apple's point of view? There is no major difference, it's just Apple wants more money.?
the differen Is Apple users, who chose Apple’s ecosystem, use Apple Pay to have Apple protect their payment details.
I don’t see anyone demanding Microsoft release their game properties on Switch or PlayStation!
Nobody is forcing anyone to use Apple products.
If you want a movie not on Netflix go somewhere else.
if you want to talk discuss stuff that is outside of Twitter’ ultra narrow blinders go somewhere else.
and if you want a game or song not on Apple go somewhere else!
If you don’t like Apple’s terms go somewhat elsewhere.

Anyone can manufacture a new smart phone just as much as they can manufacture a new “social” service.
I don’t care who you follow politically but I’m sick and tired of rules for you, not for me.
And I’m sick and tired of people blindly ignoring criminals being propped up as some sort of hero or martyr!
Since the twitter ants-trump crowd is so high and mighty over TOS, terms of service, little e crybaby epic flagrantly violated both Apples TOS and THE LAW by doing so, a blatant violation of their contract.
The hypocrisy of the same people supporting Twitter and Epic at the same time is a joke.

here’s your Twitter argument for you:
Apple is a private company with a private platform and the chose to kick out a company that violated their rules. End of the discussion’s reality.
All I see is a bunch of game addicts crying that they can’t play their game.

We get it. You don't understand or refuse to and you love Apple.
 

lostinlodos

Posts: 185   +44
We get it. You don't understand or refuse to and you love Apple.
I don’t “love” apple as much as like their products.
and I trust the company.
Apple’s 30% commission is standard practice in distribution. ‘Though that’s changing now.
But this article is about the music aspect.
this really isn’t Apple’s fault. Or any other entertainment 3rd-level distribution platform. and some 2nd.

The EU set up a catch-22 with the single marketplace.copyright laws allow different pricing and release gating by country. At the same time they demand equal access to all EU States.
All streaming platforms complain about this. Netflix did so last year and Spotify has been vocal as well.

The secondary issue is inapp payment.
I did say on the epic topics a few times I support adding alternative payments as a compromise in ADDITION to ApplePay. As long as it’s undeniably clear the user has a choice and when they choose an alternative.
as I continually say, I think many of these companies are going to be surprised how many people still choose slightly higher price tag through ApplePay for the security it offers.
 
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