What you need to know
- The European Commission has found Apple's app store practices to be in violation of the EU competition law.
- It is concerned with the mandatory use of Apple's own in-app purchase system imposed on third-party music streaming apps distributed via the App Store.
- Apple will have to respond to the European Commission's objections within the next twelve weeks.
The European Commission today issued a "Statement of Objections" against Apple, nearly two years after Spotify filed an antitrust complaint with the European Union over "Apple Tax." The Commission's preliminary conclusion is that the Cupertino-based tech giant is in breach of the EU competition law.
The Statement of Objections takes issue with the imposition of Apple's own in-app purchase system on all third-party music streaming apps that are distributed via the App Store. A preliminary investigation by the Commission found that nearly all the best music streaming services pass on the 30% commission fee imposed by Apple on purchases made through the system to end-users, which has resulted in higher in-app music subscription prices. It is also concerned that Apple enforces restrictions on app developers that prevent them from informing users about alternative purchasing options.
Responding to the European Commission's findings, Apple said in a statement sent to The Verge:
Spotify has become the largest music subscription service in the world, and we're proud for the role we played in that. Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store. At the core of this case is Spotify's demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows. Once again, they want all the benefits of the App Store but don't think they should have to pay anything for that. The Commission's argument on Spotify's behalf is the opposite of fair competition.
The Commission believes Apple's App Store rules "distort competition in the market for music streaming services by raising costs of competing music streaming app developers." If Apple is found to be guilty of abusing its dominant market position under Article 102 of the Treaty on the Functioning of the European Union (TFEU), it may have to pay 10% of its annual revenue as a fine, which would be around $27 billion. Apple will have to respond to the European Commission's preliminary charges within a period of 12 weeks.
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