Apple accused of breaking EU law over App Store sales fees
iPhone and iPad maker distorts competition for streaming services such as Spotify, says commissioner
Apple has been accused of breaking EU law by charging high fees and setting unfair rules on those selling their products in its App Store, resulting typically in a 30% price hike for paying customers.
Margrethe Vestager, the European commissioner for competition, said the preliminary view was that Apple had distorted competition in the music streaming market by abusing its dominant position and role as a “gatekeeper” to the 1.8m apps in its store.
The commissioner said it was unfair that developers had to pay up to 30% commission on sales and agree to tight rules if they wished to sell their apps on the world’s 1bn iPhones and 500m iPads.
“Apple charges a 30% commission fee for all purchases throughout its system,” Vestager said. “This means that music streaming providers cannot sell subscription on their apps without paying a 30% fee to Apple. Our investigation showed that this fee was passed on to end users by raising prices typically from €9.99 to €12.99.”
“A second concern is about the so-called anti-steering provisions,’” she added. “They limit the ability of app developers to inform iPad or iPhone users of alternative cheaper subscriptions, available elsewhere.
“In fact, to avoid paying the 30% commission, some music streaming providers decided to stop offering paid subscriptions in their apps. This is what Spotify decided to do in 2016. Since then, customers can download Spotify app in the Apple App Store, but they cannot purchase any subscription for Spotify premium services.”
The commission said that for app developers, the App Store was the sole gateway to consumers using Apple devices running on Apple’s smart mobile operating system, iOS.
Vestager said the commission’s two-year inquiry had shown that users were “very loyal” and rarely switched, and that Apple’s devices and software were said to form a “closed ecosystem” in which the company controls every aspect of the user experience.
As a result, the commission believed users of Apple devices were paying significantly higher prices for their music subscription services. “By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition,” Vestager said. “This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”
The commission first opened its investigation into Apple’s App Store rules on 16 June 2020.
Vestager’s announcement of a statement of objections is a the first formal step in an investigations into suspected violations of EU antitrust rules, which is likely to take years to go through the courts in Luxembourg. Any ruling would then be liable to an appeal.
In the first instance, the commission informs the parties concerned in writing of the objections raised against them and may reply in writing and request an oral hearing to present their comments.
There is no legal deadline for bringing an antitrust investigation to an end.
Spotify’s head of global affairs and chief legal officer, Horacio Gutierrez, said: “Ensuring the iOS platform operates fairly is an urgent task with far-reaching implications.
“The European commission’s statement of objections is a critical step toward holding Apple accountable for its anti-competitive behaviour, ensuring meaningful choice for all consumers and a level playing field for app developers.”
On Friday night, an Apple spokesman said: “Spotify has become the largest music subscription service in the world, and we’re proud for 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.
“At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows. Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The commission’s argument on Spotify’s behalf is the opposite of fair competition.”
Margrethe Vestager, the European commissioner for competition, said the preliminary view was that Apple had distorted competition in the music streaming market by abusing its dominant position and role as a “gatekeeper” to the 1.8m apps in its store.
The commissioner said it was unfair that developers had to pay up to 30% commission on sales and agree to tight rules if they wished to sell their apps on the world’s 1bn iPhones and 500m iPads.
“Apple charges a 30% commission fee for all purchases throughout its system,” Vestager said. “This means that music streaming providers cannot sell subscription on their apps without paying a 30% fee to Apple. Our investigation showed that this fee was passed on to end users by raising prices typically from €9.99 to €12.99.”
“A second concern is about the so-called anti-steering provisions,’” she added. “They limit the ability of app developers to inform iPad or iPhone users of alternative cheaper subscriptions, available elsewhere.
“In fact, to avoid paying the 30% commission, some music streaming providers decided to stop offering paid subscriptions in their apps. This is what Spotify decided to do in 2016. Since then, customers can download Spotify app in the Apple App Store, but they cannot purchase any subscription for Spotify premium services.”
The commission said that for app developers, the App Store was the sole gateway to consumers using Apple devices running on Apple’s smart mobile operating system, iOS.
Vestager said the commission’s two-year inquiry had shown that users were “very loyal” and rarely switched, and that Apple’s devices and software were said to form a “closed ecosystem” in which the company controls every aspect of the user experience.
As a result, the commission believed users of Apple devices were paying significantly higher prices for their music subscription services. “By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition,” Vestager said. “This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”
The commission first opened its investigation into Apple’s App Store rules on 16 June 2020.
Vestager’s announcement of a statement of objections is a the first formal step in an investigations into suspected violations of EU antitrust rules, which is likely to take years to go through the courts in Luxembourg. Any ruling would then be liable to an appeal.
In the first instance, the commission informs the parties concerned in writing of the objections raised against them and may reply in writing and request an oral hearing to present their comments.
There is no legal deadline for bringing an antitrust investigation to an end.
Spotify’s head of global affairs and chief legal officer, Horacio Gutierrez, said: “Ensuring the iOS platform operates fairly is an urgent task with far-reaching implications.
“The European commission’s statement of objections is a critical step toward holding Apple accountable for its anti-competitive behaviour, ensuring meaningful choice for all consumers and a level playing field for app developers.”
On Friday night, an Apple spokesman said: “Spotify has become the largest music subscription service in the world, and we’re proud for 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.
“At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows. Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The commission’s argument on Spotify’s behalf is the opposite of fair competition.”