The European Union Slaps Apple with Record Fine of €1.8 Billion for Anti-Competitive Practices
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In a major development, the European Union has imposed a hefty fine of over €1.8 billion on tech giant Apple for engaging in anti-competitive practices in relation to the distribution of music streaming apps for iOS devices. This fine, nearly four times larger than originally reported, represents the third largest fine ever imposed by the EU for breaches of competition law. The investigation that led to this significant penalty was prompted by a complaint lodged by Spotify.
“Apple’s abuse of its dominant position in the market for distributing music streaming apps through the App Store over the past decade cannot go unchecked,” declared Margrethe Vestager, the Executive Vice-President responsible for competition policy at the European Commission. “By restricting developers from promoting alternative, more affordable music services outside the Apple ecosystem, Apple violated EU antitrust regulations, leading to this substantial fine of over €1.8 billion.”
Apple has indicated its intention to appeal the fine, which amounts to approximately 1.36% of its $143.5 billion in current assets, commonly referred to as Apple’s “cash reserve.” This appeal process is expected to involve years of legal wrangling. However, for Spotify, the key takeaway from today’s announcement is the European Commission’s directive for Apple to eliminate the App Store rules that prevent app developers from highlighting payment options external to their apps.
While Apple has made some adjustments to comply with the new EU Digital Markets Act, it has introduced additional conditions that Spotify argues do not benefit app developers. As a result, the efficacy of the EC’s order will be contingent on Apple refraining from imposing any further new conditions. App developers, including Spotify, have long been critical of the App Store’s policy that compels them to process in-app payments through Apple’s commission-based system, and they have also opposed Apple’s anti-steering provisions, which prohibit the promotion of alternative payment options within apps.
The anti-steering provision was the focal point of the EC’s investigation, which was initiated following Spotify’s formal complaint in 2019. The investigation uncovered Apple’s practice of prohibiting music streaming app developers from adequately informing iOS users about alternative, more cost-effective music subscription services available outside of the app, thereby depriving consumers of choice.
In calculating the staggering €1.8 billion fine, the European Commission considered the duration and severity of the violation, as well as Apple’s submission of inaccurate information during the administrative process. Notably, the commission took into account Apple’s substantial turnover and market capitalization, underscoring the necessity of a substantial penalty to serve as an effective deterrent.
In addition to the fine, the EC has mandated that Apple remove the anti-steering provisions and refrain from repeating the infringement or adopting similar practices in the future. The enforcement of this directive is crucial for Spotify and other app developers, although Apple’s compliance with the ruling remains uncertain. Apple’s introduction of new conditions for app developers to promote alternative payment options has cast doubt on the extent to which the EC’s order will truly benefit Spotify and other stakeholders.
As Apple continues to challenge the ruling and the exorbitant fine, it is vital for the European Commission to ensure that its order compels Apple to effectively amend its anti-steering rules to create a more competitive digital marketplace. Spotify, along with other tech companies and trade organizations, has called for Apple to adhere to the spirit and letter of the law and to implement meaningful changes that uphold fair competition in digital markets. The ball is now in Apple’s court to demonstrate its commitment to compliance with EU regulations and to facilitate a more level playing field for all market participants.