Apple and the European Union have had a challenging—at times volatile—relationship. Since Apple grew into a major global corporation, ongoing debates and robust scrutiny have existed. For instance, taxation problems have continued to cause tension, and the fractious relationship has indeed shaped the global digital economy.
However, the antitrust saga may be the most significant issue between the EU and Apple. The issue stems from two primary areas: Apple Pay and the App Store. The EU conducted an antitrust investigation in June 2020 to look at the Apple App Store practices.
Let’s take a look at these two issues they focused on:
1. The App Store Rules
The EU has taken a robust stance on the rules Apple enforces on App developers. Apple charges a 30% commission on digital content and subscriptions—thus creating concern from EU politicians regarding stifled competition, limited choice, and rising costs for developers and consumers.
2. The App Store as a Gatekeeper
The antitrust investigation also examined Apple’s role as a gatekeeper due to how it controls access to the App Store on iOS devices. As such, the EU questioned whether Apple’s practices may hinder other apps from competing and prevent fair competition.
However, they also investigated Apple Pay, whereby they focused on Apple Pay’s anti-competitive behavior in the mobile payment market.
What Started the Dispute?
The saga primarily began in 2019 when music-streaming service providers like Spotify first filed a complaint to the European Union about Apple’s rules. They referred to an ‘Apple Tax,’ whereby app developers must pay a fee to Apple if in-app payments or subscriptions are involved.
Here’s the problem: When Apple places a 30% fee on any subscriptions made through the App Store, Spotify then has to pass this fee to the consumers. As a result, it’s more costly to become a Spotify user via an iPhone or iPad than through Spotify’s website.
In addition, Apple has its own competing music service: Apple Music. In turn, Spotify believes, Apple has a major advantage due to offering its own music streaming service at its preferred price.
Furthermore, Spotify was also frustrated at how Apple doesn’t allow developers to inform customers of alternative payment methods. For example, Spotify can’t tell customers it’s $3 cheaper to buy a monthly Spotify subscription through its website.
In reality, despite Spotify’s anger at Apple’s rules, not too much has changed in the previous four years. Although Apple issued a formal statement of objections against Apple in 2021, progress has been slow.
Spotify, alongside a team of co-signatories, published an open letter to the European Commission that demanded a faster resolution to the issue. Weeks later, the European Union made a significant decision.
The Current Situation Between Apple and the EU
The European Union sent Apple an updated list of objections for its ongoing antitrust investigation on Tuesday, May 30, 2022. The investigation currently focuses on App Store rules for popular music providers like Spotify. The European Commission narrowed the preliminary statement of objections against Apple in 2021.
Initially, the statement suggested that Apple has been accused of "exploiting its dominant market position" by compelling music streaming app developers to use its in-app purchase payment system and limiting their ability to inform iOS users about alternative music subscription services.
The commission dropped the first charge this week; instead, they will focus on Apple’s anti-sneering obligations.
Spotify general counsel, Eve Konstan, said in a statement: “Today, the European Commission sent a clear message that Apple’s anti-competitive behavior and unfair practices have harmed consumers and disadvantaged developers for far too long. We urge the Commission to reach a swift decision, in this case, to protect consumers and restore fair competition on the iOS platform.”
However, an Apple spokesperson said: “We’re pleased that the Commission has narrowed its case and is no longer challenging Apple’s right to collect a commission for digital goods and require the use of the In-App Payment systems users trust,”
The spokesperson added: “The App Store has helped Spotify become the top music streaming service across Europe and we hope the European Commission will end its pursuit of a complaint that has no merit.”
The Future of Apple and the EU
It’s challenging to predict where the legal battles between the EU and Apple will end. However, this isn’t the only legal trouble Apple has faced: The company faced hefty fines after not complying with an order to permit dating apps to utilize alternative payment systems.
However, this issue was later resolved when Apple made concessions, ultimately allowing the integration of alternative payment options.
That said, the recent move from the European Commission, arguably in response to pressure from the music industry, suggests proceedings are about to speed up. Likewise, app developers now recognize a better chance of success in pursuing Apple’s anti-steering restrictions.
When the European Commission finally reaches a decision, Apple is likely to fight its corner robustly. There will likely be a lengthy appeals process and heaps of red tape. If the European Commission sticks to its guns, it can fine Apple around 10% of its global turnover of almost $400 billion.
In addition, Apple would need to withdraw any contractual obligations between developers; this would mean Spotify, and other music streaming services, could link their iPhone apps to other, cheaper subscription portals.
All in all, it would be a costly hit to the Apple brand. Yet nothing is for certain right now—and there is still a long way to go in the investigation. Stay tuned.
The tension between the EU and Apple is likely to continue for some time. Even when the European Union reaches a conclusion, Apple is likely to launch a lengthy appeal.
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