In a clear blow to Apple's ongoing and international antitrust woes over the App Store, the European Union's European Commission has issued a "statement of objections ” said Friday it believes Apple is abusing its position in the music streaming apps market in what could be a violation of EU antitrust laws. The preliminary findings do not bode well for Apple for the outcome of the committee's investigation, which was prompted by a complaint from Spotify.
"By setting strict rules in the App Store that penalize competing music streaming services, Apple is depriving users of cheaper music streaming choices and distorting competition," said Margrethe Vestager, European Commission executive vice president who oversees competition and antitrust enforcement, in a statement. . "With Apple Music, Apple is also competing with music streaming providers."
The European Commission found that Apple & # 39; s App Store rules – and the fact that only the App Store was the only way for Apple mobile device users to get apps for their iPhones and iPads – was forcing app developers to follow suit. Play those rules and pay Apple's commissions if they wanted access to Apple's users. The commission on purchases and subscriptions that Apple demands has led to higher prices for those users, according to the European Commission. The committee also objected to Apple's anti-steering provisions, which prevent companies from informing users that they can purchase subscriptions outside of the App Store.
A Statement of Objections is not the end result of an investigation, but a formal step in the process. If Apple is found to have violated EU antitrust rules, it could be fined up to 10 percent of its annual revenue.
"The European Commission's Statement of Objections is a critical step in holding Apple accountable for its anti-competitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers," said Horacio Gutierrez, head of global affairs of Spotify and Chief Legal Officer in a ruling.
Apple claimed, as it has always done, that the vast majority of Spotify app users do not have paid subscriptions and that Spotify makes money from ads for those free subscribers, while Apple provides the means to put the Spotify app on its store. . Paid subscriptions through the app give Apple a 30 percent commission for the first year and 15 percent thereafter.
"At the heart of this matter is Spotify's demand that they should be able to advertise alternative deals on their iOS app, a practice that no retailer in the world allows," Apple said in a statement. "Again, they want all the benefits of the App Store, but don't think they have to pay for it. The Commission's argument on behalf of Spotify is the opposite of fair competition."
The App Store investigation was started following a complaint from Spotify to the European Commission in 2019. The audio streaming service alleged that Apple & # 39; s App Store and Apple Pay services falsely favored Apple over third parties such as Spotify, who are being forced distribute their apps through the App Store and must therefore follow the store's rules. Spotify said it needed to increase its rates on subscriptions purchased through the app to make up for the 15 to 30 percent commission it had to pay to Apple. The preliminary findings of the European Commission did not address Spotify's complaint about Apple Pay, which is a separate case.
Apple launched its own very similar Apple Music streaming service in 2015, which it could promote to Apple device owners.
While the European Commission's findings only pertain to the App Store's practices with music streaming services, Spotify's complaint mirrors that of many companies claiming to have a clear disadvantage against Apple. In addition to Apple's mandatory commissions, the company can see how well third-party apps are doing and create its own versions, which Apple can then install on its devices and promote it in its App Store. Apple is known for this practice, even outside of the App Store; For example, it recently introduced the AirTag, a tiny tracking device that is remarkably similar to Tile, but uses Apple's & # 39; Find My & # 39; system exclusively.
The App Store's practices are also being scrutinized by regulators and legislators in Australia, the United Kingdom and the United States. The UK Competition and Markets Authority has opened an investigation in March in the App Store commission and in the company's requirement that the app be distributed through this app.
In late April, the Australian Competition and Consumer Commission last saw the controversial law recommended that could have forced Facebook and Google to pay news organizations to host or even link to their content. warned Apple and Google argue that their "significant market power" in their respective app stores, including commissions, promotion of their apps over third parties, and mandatory use of their payment systems for in-app purchases, may need to be addressed by regulations.
US lawmakers and regulators have stepped up scrutiny of Big Tech and antitrust practices, with Senator Amy Klobuchar (D-MN) positioning themselves as one of Congress' biggest critics of Apple's App Store (and Big Tech in general). Senator Elizabeth Warren (D-MA) proposed in 2019 that Apple should not both run an App Store and distribute its own apps in it. And different states are working on their own accounts targeting the fees and practices of Apple's and Google's app store – though none have successfully passed a law.
The EC's decision could be an example of how a US antitrust case over the App Store will unfold. Epic Games, which makes the popular game Fortnite, sued Apple when the company kicked Fortnite out of the App Store after Epic tried to bypass the mandatory in-app payment system. Opening statements in that trial begin next week.
"Making sure the iOS platform works fairly is an urgent task with far-reaching implications," said Spotify's Gutierrez.