EC Fines Apple $1.95 Billion for App Store Antitrust Breaches

Apple must pay more than $1.95 billion for abusing its dominant position in the market for distribution of music streaming apps to iPhone and iPad users through its App Store, the European Commission said Monday. Specifically, it found Apple violated EU antitrust law by barring app developers from telling iOS users about alternative and cheaper music subscription services available outside the app ("anti-steering provisions"). Apple said the EC failed to find any "credible evidence of consumer harm," but the European Consumer Organisation (BEUC) cheered the move. The EC noted that Apple is the sole provider of an app store where developers can distribute their apps to iOS users in the European Economic Area, and it controls every aspect of the iOS user experience and sets the terms and conditions developers must comply with to be present on the App Store. Apple's anti-steering provisions amount to unfair trading conditions in breach of EU law, are not necessary or proportionate for the protection of Apple's commercial interests in connection to the App Store or Apple's smart mobile devices, and negatively affect the interests of iOS users, who can't make informed decisions on where and how to buy streaming subscriptions, the EC said. That conduct, occurring for nearly 10 years, may have caused many iOS users to pay much higher prices for streaming subscriptions and has led to nonmonetary harm, as users either had to engage in a cumbersome search to find other services or never subscribed to a service because they couldn't find the right one on their own. The massive fine took into account the duration and gravity of the antitrust infringement as well as the company's total revenue and market capitalization. In addition, the EC included a lump sum to the basic penalty, serving as a deterrent. Apple slammed the decision, saying Spotify lobbied the EC for it and was its biggest beneficiary. Spotify "has a 56 percent share of Europe's music streaming market -- more than double their closest competitor's -- and pays Apple nothing for the services that have helped make them one of the more recognizable brands in the world. A large part of their success is due to the App Store." Despite that, Spotify wants to embed "subscription prices in their app without using the App Store’s In-App Purchase system. They want to use Apple’s tools and technologies, distribute on the App Store, and benefit from the trust we’ve built with users -- and to pay Apple nothing for it." Moreover, it said, the decision came just before the Digital Markets Act is effective, on March 7. "Apple is set to comply with the DMA in days, and our plans include changes to the rules challenged here. What’s clear is that this decision is not grounded in existing competition law. It’s an effort by the Commission to enforce the DMA before the DMA becomes law." BEUC said the decision, along with effective enforcement of the DMA, "should help consumers benefit from more competitive and better digital services.”