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The European Commission recently issued a statement, imposing a massive fine of over 1.8 billion euros on Apple Inc. for abusing its dominant market position in the distribution of music streaming apps. This specifically refers to restrictions placed within the App Store that limit iPhone and iPad users (namely “iOS users”) from accessing music streaming services, thus affecting competition.
According to the EU, in addition to the base fine, the fine also includes an additional 1.8 billion euros intended to deter Apple’s conduct, though details of the base amount of the fine have not been disclosed. Following this news, Apple’s stock price fell by more than 1.6% after the opening of the US stock market.
This fine results from a complaint made by the Swedish music streaming service provider Spotify to the EU antitrust authorities in 2019. Spotify claimed that Apple charged up to a 30% service fee on its platform and restricted users’ access to other services, violating the principle of fair competition.
The EU antitrust body ruled that Apple created unfair trading conditions, and the EU’s antitrust chief Margrethe Vestager explicitly stated: “Over the past decade, Apple has used its dominant position in the App Store to limit developersā ability to communicate cheaper alternative music services to consumers, violating EU antitrust regulations.”
The EU’s adopted antitrust provisions, the so-called āanti-steeringā clauses, prohibit developers from informing iOS users about alternative subscription offers outside of the app, and developers are not allowed to inform iOS users that they can find cheaper subscription services outside the Apple App Store. The clauses stipulate that iOS users cannot access non-Apple App Store websites through pathways outside of the app, nor can application developers contact users via email or other means to inform them about alternative subscription service prices.
The European Commission pointed out that these clauses are designed to protect Apple’s commercial interests in mobile device application stores but have harmed users’ rights. Consumers are deprived of information on where and how to purchase music streaming subscriptions, leading to an inability to make informed purchasing decisions.
In assessing the amount of the fine, the European Commission took into account factors such as the duration of Apple’s illegal conduct, the severity, its total turnover and market value, as well as the submission of false information by Apple during the administrative proceedings.
The European Commission believes that imposing a one-off fine is a necessary means to prevent Apple from repeating similar illegal conduct in the future, as well as to curb other companies of similar scale and resources from implementing similar actions.
The European Commission pointed out that a series of actions by Apple in the past nearly ten years may have caused iOS users to bear excessively high costs for music streaming subscriptions. This is due to the high commissions Apple charges developers, which ultimately are passed on to consumers, causing subscription prices to rise unreasonably.
Moreover, the European Commission has heavily criticized Apple’s “anti-steering provisions,” arguing that such measures harm the user experience. iOS users affected by these terms are either only able to discover suitable offers outside of the app through a more cumbersome search, or they cannot find any alternative subscription options at all.
In response to this series of anti-competitive practices, the European Commission has demanded that Apple rescind the “anti-steering provisions” and prevent future infringements or actions with the same intent and effect. The agency has stated that any individual or business affected by these restrictive competitive practices can file a lawsuit in member states’ courts to claim damages.
In national court cases, the decisions of the European Commission are legally binding, and can serve as evidence of the existence of unlawful conduct. It is noteworthy that even if the European Commission has imposed fines on the concerned companies, national courts can still award damages independently, unaffected by the fines imposed by the European Commission.
Facing the charges and decisions of the EU, Apple has expressed an opposing stance and plans to appeal. Apple stated through a press release that the European Commission made its decision without reliable evidence of harm to consumers, and believes that the decision is more about accommodating the interests of the music streaming service provider Spotify.
Apple even revealed that before the European Commission made its decision, Spotify had already met with officials from the commission up to 65 times. Despite this, the fine of over 1.8 billion euros imposed on Apple does not break the record for the highest fine in EU history. In 2018, Google faced a massive fine of 4.34 billion euros for abusing its dominant position with its smartphone operating system Android.
From 2017 to 2019, the EU imposed a total of 8.25 billion euros in fines on Google.
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