The European Commission sent a so-called statement of objections to Apple on Friday, explaining how it thinks Apple is abusing its power as a “gatekeeper” for music streaming apps on the App Store, following a complaint by Spotify.
“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,” European Competition Commissioner Margrethe Vestager said in a statement.
“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,” she said.
Apple rebuffed the EU charge and said “Spotify has become the largest music subscription service in the world, and we’re proud of the role we played in that.”
If the case is pursued, it could lead to a fine of up to 10% of Apple’s global revenue, or as much as $27 billion, and changes in its profitable business model.
“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,” it said. “No store in the world” allows alternative deals to be advertised as Spotify is seeking from its iOS app”
“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,” Apple added.
On the other hand, Spotify welcomed the statement.
“The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers,” its Head of Global Affairs and Chief Legal Officer Horacio Gutierrez said.
The EU move comes days before a trial begins in California over Epic Games’ allegations that Apple’s standard fee violates U.S. antitrust law.
(April 28, 2021) Apple’s App Store to reportedly face EU antitrust charges over Spotify complaints
According to a person familiar with the matter told Financial Times on Tuesday, Apple could face a EU antitrust charge as soon as this week following a complaint by Spotify.
This charge could lead to a fine of up to 10% of Apple’s global revenue, or as much as $27 billion, and changes in its profitable business model.
Last week, Spotify said at the “Antitrust Applied: Examining Competition in App Stores” hearing that Apple is abusing its market power to disadvantage its rivals.
“Apple abuses its dominant position as a gatekeeper of the App Store to insulate itself from competition and disadvantage rival services like Spotify,” said Horacio Gutierrez, Spotify’s Chief Legal Officer. He added that Apple’s restrictions on developers “are nothing more than an abusive power grab and a confiscation of the value created by others.”
Spotify’s fight with Apple started just after Apple launched its own music streaming service. While Apple Music charges users $9.99/per month, Spotify says it has no other options but to charge iOS users more as the App Store cuts 30% for in-app purchases and Apple doesn’t allow alternative signup or payment options.
Spotify is not the only company or institution complaining about Apple’s App Store regulations.
In mid-February, Fortnite-maker Epic Games took its fight against Apple to the European Union with a new antitrust complaint, one month after it filed a similar lawsuit against Apple in the UK.
Epic’s fight with Apple started in August 2020, when it added a new in-app payment option to Fortnite in order to bypass the 30% fee that the App Store and Google Play Store cut. After adding the feature to the wildly popular game, Apple and Google removed Fortnite from their app stores.
The Federal Antimonopoly Service of Russia (FAS) said on Tuesday that it had fined Apple $12 million for “alleged abuse of its dominance in the mobile apps market”. The FAS argued that Apple’s distribution of apps through the App Store gave its own products a competitive advantage. Apple said it “respectfully disagreed” with the FAS ruling and it would appeal it.
Back in October, the U.S. antitrust subcommittee of the Judiciary Committee completed its investigation into competition in digital markets to examine the abuses of market power by Apple, Google, Amazon, and Facebook, and found the tech giants guilty of using monopoly power.
In response to the U.S. antitrust committee’s report, Apple said: “App Store has enabled new markets, new services and new products that were unimaginable a dozen years ago, and developers have been primary beneficiaries of this ecosystem. Last year in the United States alone, the App Store facilitated $138 billion in commerce with over 85% of that amount accruing solely to third-party developers. Apple’s commission rates are firmly in the mainstream of those charged by other app stores and gaming marketplaces.“
Meanwhile, Apple is also under fire by the adtech industry following its App Tracking Transparency framework rolled out this week. The ATT framework forces iOS apps to ask users’ permission to track for advertising purposes.
Advertisers, developers, and analysts argue that Apple, as the owner of the App Store, privileges its own ad network with ATT. While the ATT limits receiving behavioral and device data from the ads through third party ad networks, it excludes its own ad network from these limitations by not using SKAdNetwork.
6/ Apple doesnt use SKAdNetwork for its own ad network, and the privacy setting that governs its own ad network’s “personalization” efforts is hidden deep within a menu tree. More background on this dual operating standard: https://t.co/QGsa0O6CGx— Eric Seufert (@eric_seufert) April 27, 2021
On Monday, Germany’s advertising, media, and internet industries filed an antitrust complaint against Apple alleging that its ATT framework violates competition law and abuse the market.
“As a result of these one-sided measures, Apple is effectively shutting out all competitors from processing commercially relevant data in its ecosystem,” several business associations said in a joint statement.
Per an estimate from Cowen & Co., Apple’s app store advertising business is expected to generate around $2 billion this fiscal year. According to the Financial Times, the company will roll out a new ad slot under the “Suggested” category in the App Store by the end of this month.
Apple did not confirm the launch of the new ad spot but, amidst all these antitrust complaints claiming that Apple is using its monopoly power to control the app ecosystem, making such a move seems to further fuel the debate.