Monday, April 15, 2024

EU Fines Apple €1.84 Billion for Antitrust Violations in Music Streaming

HomeTechEU Fines Apple €1.84 Billion for Antitrust Violations in Music Streaming

In a significant blow to one of the world’s most valuable companies, European Union regulators on Monday levied a $2 billion fine against Apple for abusing its dominant position and illegally restricting music streaming app developers like Spotify from informing users about cheaper ways to pay for subscriptions outside the App Store.

The landmark penalty, one of the largest ever imposed by competition enforcers in Europe, punishes Apple for years of anticompetitive behavior that has allowed it to rake in excessive profits from its App Store while choking off consumer choice.

E.U. officials said Apple’s restrictive rules requiring apps to use its in-app payment system — and pay commissions as high as 30 percent on digital subscriptions and content — ended up costing consumers collectively hundreds of millions of dollars.

“Apple has stubbornly insisted on keeping its inherently unfair practices in place,” said Margrethe Vestager, the European Commission’s executive vice president overseeing competition policy. “This is illegal under our competition laws.”

At a news conference in Brussels, Ms. Vestager said the case highlighted the commission’s campaign to loosen the grip that Big Tech companies have over key technology gatekeepers that give them outsized influence over consumer choice.

The ruling, she said, could result in consumers seeing more services available at cheaper prices, especially for music streaming, e-books, podcasts and other types of media and entertainment subscribed to through apps on iPhones and iPads.

The fine, Ms. Vestager said, sends “a clear signal that such practices cannot continue in our modern digital economy.”

Apple did not respond to requests for comment Monday, but it is expected to appeal the decision, setting the stage for a protracted legal battle. In a statement, the iPhone maker said the commission’s case was legally flawed, lacked evidence of consumer harm and amounted to “giving one company what it wants at the expense of protecting creativity and safeguarding choice.”

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Spotify, the Swedish music streaming service that filed the original complaint in 2015 that spurred the commission’s investigation, hailed the decision as a landmark moment in the battle to curb Big Tech’s abusive business practices.

“This decision sends a powerful message—no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers,” Spotify said in a statement. “It is a basic concept of free markets—customers should know what options they have.”

For years, Apple and other tech giants like Google have dictated the terms for app developers looking to distribute their software on the world’s most popular mobile operating systems. Apple strictly forbids apps from nudging customers to pay for services outside its payment system.

Apple and many app developers have argued that the company’s commissions, while high, help generate revenue that allows it to maintain rigorous app quality controls and security measures.

But regulators in Europe, as well as in the United States and other countries, have argued that the practices have entrenched the market dominance of Apple’s mobile operating system, iOS, creating an uneven playing field that harms competition and lines the pockets of tech giants.

The latest antitrust rebuke in Europe is the culmination of a yearslong investigation begun in 2019 shortly after Spotify complained that it was effectively being “tax[ed]” for accessing customers on iOS devices as Apple unfairly promoted its own rival music service, Apple Music.

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Regulators found that Apple deliberately put competitors at a disadvantage by forcing them to use its proprietary in-app payment technology, allowing the iPhone maker to take a cut on all transactions. They also determined that Apple explicitly prohibited app developers from informing users of alternative ways to pay for subscriptions and services, effectively blocking competitors from offering lower prices to iOS users.

Monday’s ruling could potentially force Apple to further loosen its app distribution policies, which the company has already begun modifying, albeit grudgingly, in recent years amid a steady drumbeat of regulatory action and legal challenges on both sides of the Atlantic.

Spurred by antitrust investigations and a high-profile lawsuit by the maker of the popular video game Fortnite, Apple last year began allowing some apps like Spotify, Netflix and e-book platforms like Amazon’s Kindle to redirect their customers to external websites to pay for subscriptions.

Apple has also been compelled to allow third-party payment processors in apps in certain countries like the Netherlands, paving the way for users to potentially avoid the tech giant’s onerous commissions. In a 2021 settlement with Japanese regulators, Apple opened its systems up to allow certain apps like Netflix to point users to an external website to set up and manage accounts.

But authorities in Brussels said the changes did not go far enough, arguing that Apple continued to impose unfair restrictions that put competitors at a disadvantage. They also bemoaned the fact that most mobile web browsers on iOS devices are barred from installing external payment processors, ensuring that in-app purchases remained firmly in control of Apple’s proprietary systems.

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The European Commission has accused Apple of flouting EU antitrust laws since 2018 and edged closer to bringing formal charges in 2021. Apple can appeal the ruling to the European Court of Justice, Europe’s highest legal authority.

Critics contend that the commission’s case against Apple could serve as a template for similar charges related to gaming consoles and other walled gardens that give tech platforms effective gatekeeping control over which apps reach consumers.

The ruling will undoubtedly embolden competitors and critics who have alleged that Apple takes a cut not just from apps that offer a service, such as music streaming, but from a broad array of apps delivering digital content.

The decision comes amid a flurry of regulatory activity in Brussels aimed at restraining the power of Big Tech giants like Apple, Google, Facebook and Amazon that have reshaped the global economy.

Last year, European lawmakers passed the Digital Markets Act, a sweeping new tech antitrust law aimed at preventing the biggest tech companies from abusing their dominance. Under the law, some of the largest tech companies face heightened scrutiny and stiff penalties for anti-competitive practices.

While the latest case deals primarily with Apple’s app store policies in Europe, separate investigations are examining the company’s dominance in mobile advertising and Apple Pay, among other services.

Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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