Apple was fined nearly $2 billion after complaining to Spotify

Apple has been hit with a €1.84 billion (about $2 billion) fine by European Union antitrust regulators over App Store rules, and has been told it cannot stop music services from advertising cheaper subscription offers outside of Apple’s store. News of today’s fine was previously reported by the Financial timesand comes ahead of Apple’s massive shake-up of iPhone app distribution rules following the EU’s Digital Markets Act.

In a press release on Monday, the European Commission said its investigation found that “Apple prohibits developers of music streaming apps from fully informing iOS users about alternative and cheaper music subscription services available outside the app,” in addition to preventing app providers from share instructions. on how to subscribe to such offers.

“For a decade, Apple has abused its dominant position in the market for the distribution of music streaming apps through the App Store,” said Margrethe Vestager, Executive Vice President responsible for competition policy. “They did this by preventing developers from informing consumers about alternative, cheaper music services available outside the Apple ecosystem. This is illegal under EU antitrust rules, so today we fined Apple more than €1.8 billion.”

The Commission said that when setting the fine, it took into account the “duration and seriousness of the infringement”, as well as Apple’s total turnover and market capitalization, while also taking into account “incorrect information” provided by Apple during the administrative procedure had provided.

“This decision sends a strong message: no company, not even a monopoly like Apple, can abuse power to control how other companies interact with their customers,” Spotify said in response to the ruling. “Apple’s rules prevented Spotify and other music streaming services from sharing with our users about various benefits directly in our app – preventing us from communicating with them about how to upgrade and the price of subscriptions, promotions, discounts and many other benefits. Of course, Apple Music, a competitor of these apps, is not excluded from the same behavior.”

Apple also responded scathingly to the ruling, saying the Commission had failed to “find any credible evidence” of consumer harm or anticompetitive behavior. The company also says that Spotify wants to “rewrite the rules of the App Store” to gain competitive advantages, while paying nothing to Apple, despite Apple claiming that the App Store was crucial to Spotify’s current market dominance. Apple says it will appeal the decision.

The EU investigation dates back to 2020 and was announced after Spotify filed an antitrust complaint over Apple’s so-called ‘Apple Tax’. Spotify not only complained about the 30 percent commission, but also went against App Store rules, which it said limited communications with its customers and limited its ability to market and promote deals.

Over time, the committee’s investigation has focused on App Store rules that prevent developers from telling their users about alternatives to Apple’s own payment options. In February 2023, the commission said its “preliminary position” was that Apple’s “anti-steering commitments” represented “unfair terms of trade” and argued that the App Store policy was “neither necessary nor proportionate”, which could lead to users would pay more, and limited choice for consumers.

Apple has already made some concessions. 2021 stated that developers could advertise payment methods outside of the iOS app through communications such as email. Then, in early 2022, developers were able to link to their own sites from within the iOS apps themselves. But this second change only applied to so-called ‘reader apps’ for services like Netflix, Kindle or Spotify that are primarily designed to provide access to digital content, and developers had to apply for a ‘right’ before adding an external link . . Bloombergwhich previously reported on the EU’s antitrust fine, said Spotify criticized Apple’s rule changes as “just for show.”

The EU fine comes as Apple prepares to overhaul app distribution rules in the EU to comply with the Digital Markets Act (DMA) from March 7, which will allow third-party app marketplaces on iPhone for the first time allows. But app developers have been critical of Apple’s approach, which includes charging a commission of up to 17 percent for developers who use their own payment method or link to their own website, plus an annual fee of €0.50 per app installation after the first million. Spotify said the changes are “an unworkable alternative that will stifle [developers’] companies immediately.”

On March 1, Spotify also published an open letter, backed by 33 other companies and associations, highlighting concerns about Apple’s DMA compliance. In the letter, Spotify claimed that the EU’s response to the proposal “will serve as a litmus test for the DMA and whether it can deliver results for European citizens and economy.”

Meanwhile, US courts have also ruled that Apple must allow developers to link to other payment methods following a legal challenge from Fortnite developer Epic Games. But when Apple did allow developers to connect, the company claimed it would still get a cut of up to 27 percent on all digital purchases — a small cut from the usual 30 percent rate. Apple’s critics called out the changes, with Spotify saying they showed that Apple “will stop at nothing to protect the profits they demand off the backs of developers and consumers under their app store monopoly.”

In addition to its investigation into Apple’s App Store policy, the European Commission also looked into Apple’s policy of limiting the iPhone’s tap-top-pay NFC (near-field communication) to its own wallet and payment services. As a result of the investigation, Apple has offered to let third-party mobile wallet and payment providers use the iPhone’s NFC feature for payments.

Update March 4, 8:21 AM ET: Added comments from Apple and Spotify.

Leave a Reply

Your email address will not be published. Required fields are marked *