May 9, 2021

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EC charges Apple of dominance abuse, distortion of competition in Spotify case • The Register

The European Commission said today believes that Apple has abused its full control over app distribution on iOS, resulting in the absence of third-party streaming services competing with Apple Music.

In its Statement of Objections, the Commission took an umbrella on Apple’s strict (and non-negotiable) terms that all developers must follow, as well as the App Store’s position as the only available distribution method of the app on iOS (and other similar platforms, such as the iPad OS).

In accordance with App Store terms, Apple has forced developers to use its own payment infrastructure, which takes a 15 to 30 percent cut. In addition, the use of other in-app payment systems (such as PayPal or Stripe) is strictly prohibited, and will inevitably result in an app being deleted until re-entering compliance.

The Commission noted that Apple users tend to be loyal to the platform, and rarely switch to competing operating systems, resulting in developers having limited (if any) leverage on disputes.

Although Apple’s terms allow subscriptions purchased beyond the App Store’s walled garden to be used, developers are prohibited from marketing them to users within the app, which the Commission described as a “ provisions against steering. “

The EU could fine Apple up to 10 per cent of annual revenue, an amount that could reach more than $ 27bn based on fy2020’s top line; it could also force Apple to change its rules for users who are residents of the block.

In the background, the EC is also conducting a separate investigation with Apple about how it treats payment providers and developers in its Apple Pay system.

More expensive

Streaming services (and any other third parties that rely on monthly subscription revenue) regularly charge more for subscriptions purchased through the App Store, to account for Apple’s heavy cut. Since streaming apps made by Apple are not subject to this “tax”, they are better off price.

The Commission said it believes Apple’s policies have distorted the market for music streaming services, resulting in higher costs for consumers.

The EC specified the rule allegedly violated is Article 102 of the Treaty on the Functioning of the European Union, which prohibits companies from abusing their existing dominant position.

The publication of a Statement of Objections is an early, but important, step in a broader antitrust investigation. The Commission informed Apple of its assessment of its objections, and gave it the correct response. The company can now request an oral hearing, issue a written response, or ask to review the evidence collected so far.

Put on Spotify

This investigation is started in June last year by a complaint from music streaming giant Spotify, which has long ignored Apple’s payment policies, and is among the most vocal lobbyists for reform in the U.S..

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Spotify is also one of the the founding members of the Coalition for App Fairness, a U.S. trade association that also counts Tile and the Match Group in its rankings, and has pushed hard for a statewide law in the United States that would take away Apple’s ironclad control over the app store, though without real success.

In a statement, Commission executive veep Margrethe Vestager said: “Our initial finding is that Apple is a gatekeeper among users of iPhones and iPads through the App Store. In Apple Music, Apple also competes with provides music streaming. “

He added: “By setting strict App store policies that poorly compete with music streaming services, Apple is depriving users of cheaper music streaming options and eliminating competition. It does. this by charging high commission fees per transaction in the App store for rivals and by prohibiting them from informing their customers of alternative subscription options. “

The results of the preliminary investigation were accepted by Deezer, a relative minnow in the music streaming space. In a statement, Alexander Holland, head of content and strategy officer, said:

“We applaud the Commission’s findings today. This is an important step towards a fair competition landscape where dominant market players like Apple have to compete with independent companies like Deezer on service quality, innovation and consumer experience, rather than artificial barriers and lack of equal playground space. ”

He added: “Consumers are benefiting from fair competition through better and more diverse offers, features and content. While this is only the first step in a longer journey, we are pleased that the Commission is acting in the interest. of healthy competition in Europe, “he added

How about them apples?

In recent months, Apple has tried to reduce criticism of its app store policies by lowering the commission rate for smaller developers to 15 percent. For larger ticket purchases, it’s still more than you can imagine paying on Stripe, which takes 2.9 percent plus 30 cents for each successful card charge.

Apple struck a destructive tone in a statement issued on The Reg: “Spotify has become the largest music subscription service in the world, and we’re proud of the role we’ve played there. Spotify doesn’t pay Apple any commission on more than 99 percent of their subscribers, and only pays 15 percentage commission to the remaining subscribers they earned through the App Store.

“At the main bat of this case is Spotify’s demand that they should advertise alternative deals on their iOS app, a practice that the store doesn’t allow around the world. Again, they want all the benefits of the App Store but don’t think they should pay anything for that. The Commission’s dispute on behalf of Spotify is the opposite of fair competition. “

Speaking to Call Apple’s Q2 2021 earnings, Tim Cook said the company will deal with the regulatory investigation by “saying [its] story. “

“If we think more disclosure will help, we’re clearly moving in that direction. The App Store and other parts of Apple aren’t thrown in concrete. And so, we can move and be flexible at times. , “he said.

“For example, in the App Store, as you know, just a few squares ago, we reduced the commission rate for small developers to 15 percent. So that’s an example of moving times, and we got “well, great reception there. And so, we keep learning, and I think it’s very important that we’re very clear about why we’re doing what we’re doing,” he added. ®