Apple in the European Commission’s sights
The Commission sent a statement of objections to Apple on April 30, 2021 regarding rules for the distribution of music streaming apps on the Apple Store. [1]
The Commission considers that the combination of two of the rules imposed by Apple in its licensing with developers of music streaming applications raise competition concerns under Article 102 of the Treaty on the Functioning of the European Union relating to abuse of a dominant position.
The first concerns the use of a proprietary integrated purchasing system for the distribution of paid digital content, with Apple charging app developers a 30% commission on all subscriptions purchased through this system. This restriction would give providers an incentive to pass on the commission in the price of subscriptions paid by the end user.
The second concerns restrictions on the ability of developers to inform users of alternative purchasing options outside of apps, which are usually cheaper. According to the Commission, users of Apple devices would pay significantly higher prices for their music subscription services and be prevented from purchasing certain subscriptions directly in their apps.
Practices likely to constitute an abuse of a dominant position
It will be reminded that any company in a dominant position has a particular responsibility not to harm competition.
In this case, the App Store is the only application store for users of iPhones and IPads. According to the Commission, it is the only way for developers to reach consumers who use its devices running on the iOS system, thus granting Apple a dominant position.
What is the possible outcome?
The statement of objections was sent as a follow-up to the opening of a formal investigation by the Commission in 2020 following complaints from Spotify and an e-book distributor[2].
The sending of a statement of objections opens the adversarial process by granting companies the right to a written reply and to ask to be heard if necessary. It does not prejudge the outcome of an investigation.
The Commission could, if the grievances are proven, pronounce a decision to sanction the company up to 10% of its total turnover. The Commission has recently imposed significant amounts on digital companies, including Google, which was fined € 1.49 billion in March 2019 for abusive practices in online advertising[3].
Apple is not at its first procedure before a competition authority for anti-competitive practices
The American giant was recently fined 1.1 billion euros by the French Competition Authority on March 16, 2020 for cartel practices within its distribution network and abuse of economic dependence on independent “premium”[4] resellers. This decision is being appealed to the Paris Court of Appeal.
Apple is also the subject of a second investigation opened by the Commission regarding Apple Pay, in particular “on the terms, conditions and other measures imposed by Apple for the integration of Apple Pay in commercial applications and commercial websites on iPhones and iPads“[5].
[1] European Commission press release: https://ec.europa.eu/commission/presscorner/detail/fr/ip_21_2061
[2] European Commission press release: https://ec.europa.eu/commission/presscorner/detail/fr/ip_20_1073
[3] EU Comm. March 20, 2019, Case AT.40411, Google.
[4] Décision n°20-D-04 du 16 mars 2020 relative à des pratiques de mises en œuvre dans le secteur de la distribution de produits de marque Apple.
[5] Communiqué de presse de la Commission européenne : https://ec.europa.eu/commission/presscorner/detail/fr/ip_20_1075