The European Commission has ordered Apple to pay a record fine of 1.8 billion euros for abusing its dominant position by promoting its own online music service, Apple Music, at the expense of the competition.
While the Digital Markets Act (DMA) is about to come into force and more than thirty companies, Spotify and Deezer in the lead, are criticizing the “unfair policy” from Apple regarding the new European rules – the Apple firm would even go as far as “to make fun of” the DMA –, the European Commission comes to make its decision regarding the anti-trust case against Apple Music. Result of the races: the tech giant is sentenced to a record fine of 1.8 billion euros for “abuse of dominant position” in the music streaming application distribution market, through the App Store, for years. A sentence much heavier than what was estimated, since it is the third highest fine imposed by the European Commission in its history. Worse: it is the first to sanction Apple for violating European laws. The regulator hopes that the amount will be “sufficiently dissuasive” to bring Apple back into line. A decision that is far from pleasing Tim Cook’s firm…
Apple fine: illegal and unfair anti-steering practices
The story begins in 2019, when Spotify filed a complaint against Apple, accusing it of abusing its dominant position to promote its own streaming solution, Apple Music, within its ecosystem, to the detriment of the competition. . After investigation, the European Commission recognizes that this is indeed an antitrust matter, but says no more. It was not until 2023 that it announced that a sanction would be imposed against Apple. Sanction which will finally fall on March 4, 2024.
Several things are criticized against Apple. This requires third-party services to go through its own payment tool integrated into the App Store, on which it takes care to charge a commission. Any third-party application is also prohibited from putting forward a link to offer to pay elsewhere – to a page on its own site allowing you to directly take out a subscription, for example. The icing on the cake: third-party services are prohibited from explaining why a price is more expensive on the App Store – since the 15 to 30% commission is often passed on to consumers, who therefore pay more for the same service to which they would have subscribed from the Web.
For the European Commission, these so-called “anti-steering” practices are unfair commercial conditions given that they are not “neither necessary nor proportionate” for the protection of Apple’s commercial interests. The behavior of the latter negatively affects users on iOS, “who cannot decide in an informed and efficient manner where and how to purchase subscriptions”. European regulator believes many users paid prices “significantly higher for subscriptions [à des services de streaming]“ because of the commission charged by Apple. He goes even further, believing that these practices have led to a “moral harm” because users had to engage in “tedious research” to find better deals.
“For a decade, Apple abused its dominant position in the market for distributing music streaming applications through the App Store,” said Margarethe Vestager, Executive Vice-President of the European Commission. “It did this by preventing developers from informing consumers about other, cheaper music services available outside of the Apple ecosystem.” The amount of the fine was determined by taking into account the duration and seriousness of the infringement as well as the turnover and market capitalization of Apple – which is still the most valuable company in the world.
Apple fine: Apple attacks Spotify
The news is having difficulty getting through to Apple, for whom “the decision was made by the Commission despite the absence of credible evidence of harm caused to consumers, and without taking into account the realities of a prosperous, competitive and fast-growing market”. In his press release, the firm directly attacks Spotify, which is at the origin of the complaint before the Commission. She recalls that “Spotify now holds 56% of the music streaming market share in Europe — more than double its closest competitor — and pays nothing to Apple for the services that helped it become one of the most recognized brands in the world. Much of its success is due to the App Store and all the tools and technologies that Spotify uses to develop, update and share its app with Apple users around the world. For Apple, this is simply blackmail of an application downloaded 119 billion times. “But free isn’t enough for Spotify. They also want to rewrite the rules of the App Store – in a way that benefits them even more”she castigates.
With the entry into force of the DMA on March 6, changes have already been announced within the App Store. Thus, Apple will allow users to install applications outside the App Store, without having to pay the commission. But the company took care to put in place some protections so as not to lose its monopoly. Thus, for developers who choose to distribute their app either solely outside the App Store, or in combination with it, an additional tax, called Core Technology Fee (CTF), will be imposed on them. Thus, if the application exceeds one million installations, each additional download (including updates) will be billed €0.5 to the publisher. Suffice to say that the system is not very advantageous for giants like Spotify. Apple has of course announced that it will appeal the European Commission’s decision. We will know the rest of the story in a few years!