Margrethe Vestager, European Head of Digital and Competition, focuses on one of Apple’s growing revenue streams: the App Store.
The European Commission denounced on Friday how Apple’s rules for app developers give Apple Music an unfair advantage over competing music streaming services, in an attack on the iPhone maker’s business model. The case began after a complaint from Spotify.
Apple “has abused its dominant position for the distribution of music streaming applications via its App Store,” the Commission concluded in its preliminary opinion following its 10-month investigation.
“Our preliminary finding is that Apple is a gatekeeper for iPhone and iPad users through the App Store,” Vestager said. “Apple deprives users of cheaper music streaming choices and distorts the competition.”
This is Vestager’s second big battle with the Silicon Valley giant. In a landmark state aid case, the General Court of the European Union last year overturned an EU order requiring Ireland to recover more than € 13 billion in unpaid taxes from ‘Apple. Vestager appealed the decision to the highest court in Europe.
Apple’s contested practices include charging high commissions on every competitor’s transaction in the App Store and preventing competitors from telling customers about alternative subscription options.
“Apple devices and software form a ‘closed ecosystem’ in which Apple controls all aspects of the user experience of iPhones and iPads,” the commission said. The App Store is “the only gateway” to iPhone or iPad users, he said.
The Commission’s “Statement of Objections” is the next procedural step in a case that began with a 2019 complaint from the music streaming service Spotify. Apple now has the option of responding to the charges, which could lead to settlement negotiations or the Commission to push forward with a fine and an order to change practices.
There’s a lot at stake for Apple, as the deal could impact what it earns on thousands of other apps. Apple this week announced record revenue for services, a category that includes App Store fees and has over the past decade become the company’s second-largest source of revenue, after iPhones.
Apple argues that Spotify’s claim that it has been wronged by the policies of the App Store is difficult to reconcile with its success. “At the heart of this matter is Spotify’s demand that they should be able to advertise alternative offers on their iOS app, a practice that no store in the world allows,” an Apple spokesperson said.
Spotify Chief Legal Officer Horacio Gutierrez called the Commission’s accusations “a crucial step in holding Apple accountable for its anti-competitive behavior, ensuring meaningful choice for all consumers and a level playing field for developers of applications “.
The fixes offered by Vestager will be the subject of special scrutiny, after previous lawsuits against Google failed to bring competition back to the markets, despite more than 8 billion euros in penalties. Spotify’s success suggests a greater chance of maintaining some competition in the music streaming market, but the case also applies to more vulnerable rivals such as Deezer and Soundcloud.
Last year, the Commission simultaneously launched two more investigations into the Apple App Store, one involving e-books and audiobooks, and the other into competing apps in games and iCloud. He also opened a separate investigation into Apple Pay.
“This is not the last case we will have when it comes to the App Store,” Vestager told reporters on Friday.
EU lawmakers have criticized the slow pace of the Apple investigation, saying it demonstrates the need to push forward new rules on gatekeepers.
“It took years for the EU competition authorities to mobilize,” MEP Markus Ferber said in a statement. “Apple’s competitors must have taken the hit in the meantime.”
The Commission’s proposal for a digital markets law is currently under consideration by the European Parliament and EU countries. Evidence gathered in probes like Apple’s could inform the EU on how exactly to formulate the new rules and apply them.
This article has been updated.
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