The EU announced Tuesday that it has formally launched investigations into whether Apple’s rules for app developers covering distribution of apps via the App Store violate EU competition rules. In addition, European regulators opened an antitrust investigation into the tech company’s Apple Pay service.
If the EU determines Apple violated antitrust laws, the tech giant could be fined up to 10% of annual revenue and also be required to modify its business practices, the Wall Street Journal reported.
According to the EU, the investigations into the App Store are focused on Apple’s requirement that developers use its proprietary in-app purchase system and the company’s restrictions on developers to let iPhone and iPad users know about cheaper purchasing options outside of the App Store. The investigations follow a complaint last year by Spotify into the impact of the App Store rules on competition in music streaming and a separate one this year by an e-book and audiobook distributor.
In announcing the investigations, EU Executive Vice-President Margrethe Vestager, who is in charge of enforcing the region’s competition policy, said: “Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices. We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books.”
Spotify clearly was pleased with the EU’s announcement.
In a statement, Spotify said, “Today is a good day for consumers, Spotify and other app developers across Europe and around the world. Apple’s anticompetitive behavior has intentionally disadvantaged competitors, created an unlevel playing field, and deprived consumers of meaningful choice for far too long. We welcome the European Commission’s decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.”
In March 2019, Spotify filed a complaint with the EU about two rules in Apple’s license agreements: the mandatory use of Apple’s own proprietary in-app purchase system, for which Apple charges app developers a 30% commission (aka “the App Store tax”) on all fees; and restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of the App Store.
Spotify has alleged Apple has taken punitive steps against the music-streaming company to retaliate for Spotify pulling out of the App Store’s in-app purchase system. That has included rejecting Spotify’s app multiple times for purported violations of the App Store guidelines, Spotify has claimed.
The EU’s investigation into Apple Pay, meanwhile, is specifically looking into: Apple’s measures for integrating Apple Pay in merchant apps and websites on iPhones and iPads; allegations that the company has refused access to Apple Pay for “specific products of rivals on iOS and iPadOS smart mobile devices”; and Apple Pay’s limitations on “tap and go” functionality on iPhones for in-store payments.
Apple, in response to the EU’s announcements, said in a statement, “It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.”
The EU said there is “no legal deadline” for bringing an antitrust investigation to an end. “The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the companies concerned cooperate with the Commission and the exercise of the rights of defense,” the EU said.
Separately, in the U.S., Apple is the target of a class-action lawsuit alleging the App Store unlawfully monopolizes the aftermarket for iPhone apps. The Supreme Court allowed the case to proceed in a May 2019 ruling.