The European Commission has fined Apple over €1.8 billion for abusing its dominant position on the market for the distribution of music streaming apps to iPhone and iPad users through its App Store.
Following a complaint from Spotify, the Commission found that Apple applied restrictions on app developers preventing them from informing iOS users about alternative and cheaper music subscription services available outside of the app ('anti-steering provisions').
The infringement
Apple is currently the sole provider of an App Store where developers can distribute their apps to iOS users throughout the European Economic Area ('EEA'). Apple controls every aspect of the iOS user experience and sets the terms and conditions that developers need to abide by to be present on the App Store and be able to reach iOS users in the EEA.
The Commission's investigation found that Apple bans music streaming app developers from fully informing iOS users about alternative and cheaper music subscription services available outside of the app and from providing any instructions about how to subscribe to such offers. In particular, the anti-steering provisions ban app developers from:
● Informing iOS users within their apps about the prices of subscription offers available on the internet outside of the app.
● Informing iOS users within their apps about the price differences between in-app subscriptions sold through Apple's in-app purchase mechanism and those available elsewhere.
● Including links in their apps leading iOS users to the app developer's website on which alternative subscriptions can be bought. App developers were also prevented from contacting their own newly acquired users, for instance by email, to inform them about alternative pricing options after they set up an account.
Today's decision concludes that Apple's anti-steering provisions amount to unfair trading conditions, in breach of Article 102(a) of the Treaty on the Functioning of the European Union ('TFEU'). These anti-steering provisions are neither necessary nor proportionate for the protection of Apple's commercial interests in relation to the App Store on Apple's smart mobile devices and negatively affect the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device.
Apple's conduct, which lasted for almost ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission fee imposed by Apple on developers and passed on to consumers in the form of higher subscription prices for the same service on the Apple App Store. Moreover, Apple's anti-steering provisions led to non-monetary harm in the form of a degraded user experience: iOS users either had to engage in a cumbersome search before they found their way to relevant offers outside the app, or they never subscribed to any service because they did not find the right one on their own.
The Fine
In setting the level of the fine, the Commission took into account the duration and gravity of the infringement as well as Apple's total turnover and market capitalization. It also factored in that Apple submitted incorrect information in the framework of the administrative procedure.
In addition, the Commission decided to add to the basic amount of the fine an additional lump sum of €1.8 billion to ensure that the overall fine imposed on Apple is sufficiently deterrent. Such lump sum fine was necessary in this case because a significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for under the revenue-based methodology as set out in the Commission's 2006 Guidelines on Fines. In addition, the fine must be sufficient to deter Apple from repeating the present or a similar infringement; and to deter other companies of a similar size and with similar resources from committing the same or a similar infringement.
The Commission has concluded that the total amount of the fine of over €1.8 billion is proportionate to Apple's global revenues and is necessary to achieve deterrence.
The Commission has also ordered Apple to remove the anti-steering provisions and to refrain from repeating the infringement or from adopting practices with an equivalent object or effect in the future.
Action for damages
Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the company concerned, damages may be awarded by national courts without being reduced on account of the Commission fine. The Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.
Apple has responded with a lengthy press release deriding the EU's findings. The company accuses Spotify of working with the European Commission to form a case no evidence.
-----
In 2015, Spotify started working with the European Commission on an investigation with little grounding in reality. They claimed the digital music market had stalled, and that Apple was holding competitors back. Unfortunately for their case, Spotify continued to grow — and thanks in part to the App Store, eclipsed every other digital music business in the world.
Over the next eight years, and more than 65 meetings with Spotify, the European Commission has tried to build three different cases. With every pivot, they've narrowed the scope of their claims — but each theory has had a couple of features in common:
● No evidence of consumer harm: European consumers have more choices than ever in a digital music market that's grown exponentially. In just eight years, it's gone from 25 million subscribers to almost 160 million — with more than 300 million active listeners — and Spotify has been the biggest winner.
● No evidence of anti-competitive behavior: Eight years of investigations have never yielded a viable theory explaining how Apple has thwarted competition in a market that is so clearly thriving.
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Apple also claims today's decision will cement Spotify (a European company), as the digital music market's runaway leader.
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The European Commission is issuing this decision just before their new regulation — the Digital Markets Act (DMA) — comes into force. Apple is set to comply with the DMA in days, and our plans include changes to the rules challenged here. What's clear is that this decision is not grounded in existing competition law. It's an effort by the Commission to enforce the DMA before the DMA becomes law.
The reality is that European consumers have more choices than ever. Ironically, in the name of competition, today's decision just cements the dominant position of a successful European company that is the digital music market's runaway leader.
-----
Unsurprisingly, Apple plans to appeal the fine.
Meanwhile, Spotify has issued a statement celebrating the decision...
---
Today's decision marks an important moment in the fight for a more open internet for consumers. The European Commission (EC) has made its conclusion clear: Apple's behaviour limiting communications to consumers is unlawful. This decision sends a powerful message—no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers.
Apple's rules muzzled Spotify and other music streaming services from sharing with our users directly in our app about various benefits—denying us the ability to communicate with them about how to upgrade and the price of subscriptions, promotions, discounts, or numerous other perks. Of course, Apple Music, a competitor to these apps, is not barred from the same behaviour. By requiring Apple to stop its illegal conduct in the EU, the EC is putting consumers first. It is a basic concept of free markets—customers should know what options they have, and customers, not Apple, should decide what to buy, and where, when and how.
While we appreciate the EC addressing this important case, we also know that the details matter. Apple has routinely defied laws and court decisions in other markets. So we're looking forward to the next steps that will hopefully clearly and conclusively address Apple's long-standing unfair practices.
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Following a complaint from Spotify, the Commission found that Apple applied restrictions on app developers preventing them from informing iOS users about alternative and cheaper music subscription services available outside of the app ('anti-steering provisions').
The infringement
Apple is currently the sole provider of an App Store where developers can distribute their apps to iOS users throughout the European Economic Area ('EEA'). Apple controls every aspect of the iOS user experience and sets the terms and conditions that developers need to abide by to be present on the App Store and be able to reach iOS users in the EEA.
The Commission's investigation found that Apple bans music streaming app developers from fully informing iOS users about alternative and cheaper music subscription services available outside of the app and from providing any instructions about how to subscribe to such offers. In particular, the anti-steering provisions ban app developers from:
● Informing iOS users within their apps about the prices of subscription offers available on the internet outside of the app.
● Informing iOS users within their apps about the price differences between in-app subscriptions sold through Apple's in-app purchase mechanism and those available elsewhere.
● Including links in their apps leading iOS users to the app developer's website on which alternative subscriptions can be bought. App developers were also prevented from contacting their own newly acquired users, for instance by email, to inform them about alternative pricing options after they set up an account.
Today's decision concludes that Apple's anti-steering provisions amount to unfair trading conditions, in breach of Article 102(a) of the Treaty on the Functioning of the European Union ('TFEU'). These anti-steering provisions are neither necessary nor proportionate for the protection of Apple's commercial interests in relation to the App Store on Apple's smart mobile devices and negatively affect the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device.
Apple's conduct, which lasted for almost ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission fee imposed by Apple on developers and passed on to consumers in the form of higher subscription prices for the same service on the Apple App Store. Moreover, Apple's anti-steering provisions led to non-monetary harm in the form of a degraded user experience: iOS users either had to engage in a cumbersome search before they found their way to relevant offers outside the app, or they never subscribed to any service because they did not find the right one on their own.
The Fine
In setting the level of the fine, the Commission took into account the duration and gravity of the infringement as well as Apple's total turnover and market capitalization. It also factored in that Apple submitted incorrect information in the framework of the administrative procedure.
In addition, the Commission decided to add to the basic amount of the fine an additional lump sum of €1.8 billion to ensure that the overall fine imposed on Apple is sufficiently deterrent. Such lump sum fine was necessary in this case because a significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for under the revenue-based methodology as set out in the Commission's 2006 Guidelines on Fines. In addition, the fine must be sufficient to deter Apple from repeating the present or a similar infringement; and to deter other companies of a similar size and with similar resources from committing the same or a similar infringement.
The Commission has concluded that the total amount of the fine of over €1.8 billion is proportionate to Apple's global revenues and is necessary to achieve deterrence.
The Commission has also ordered Apple to remove the anti-steering provisions and to refrain from repeating the infringement or from adopting practices with an equivalent object or effect in the future.
Action for damages
Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the company concerned, damages may be awarded by national courts without being reduced on account of the Commission fine. The Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.
Apple has responded with a lengthy press release deriding the EU's findings. The company accuses Spotify of working with the European Commission to form a case no evidence.
-----
In 2015, Spotify started working with the European Commission on an investigation with little grounding in reality. They claimed the digital music market had stalled, and that Apple was holding competitors back. Unfortunately for their case, Spotify continued to grow — and thanks in part to the App Store, eclipsed every other digital music business in the world.
Over the next eight years, and more than 65 meetings with Spotify, the European Commission has tried to build three different cases. With every pivot, they've narrowed the scope of their claims — but each theory has had a couple of features in common:
● No evidence of consumer harm: European consumers have more choices than ever in a digital music market that's grown exponentially. In just eight years, it's gone from 25 million subscribers to almost 160 million — with more than 300 million active listeners — and Spotify has been the biggest winner.
● No evidence of anti-competitive behavior: Eight years of investigations have never yielded a viable theory explaining how Apple has thwarted competition in a market that is so clearly thriving.
-----
Apple also claims today's decision will cement Spotify (a European company), as the digital music market's runaway leader.
-----
The European Commission is issuing this decision just before their new regulation — the Digital Markets Act (DMA) — comes into force. Apple is set to comply with the DMA in days, and our plans include changes to the rules challenged here. What's clear is that this decision is not grounded in existing competition law. It's an effort by the Commission to enforce the DMA before the DMA becomes law.
The reality is that European consumers have more choices than ever. Ironically, in the name of competition, today's decision just cements the dominant position of a successful European company that is the digital music market's runaway leader.
-----
Unsurprisingly, Apple plans to appeal the fine.
Meanwhile, Spotify has issued a statement celebrating the decision...
---
Today's decision marks an important moment in the fight for a more open internet for consumers. The European Commission (EC) has made its conclusion clear: Apple's behaviour limiting communications to consumers is unlawful. This decision sends a powerful message—no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers.
Apple's rules muzzled Spotify and other music streaming services from sharing with our users directly in our app about various benefits—denying us the ability to communicate with them about how to upgrade and the price of subscriptions, promotions, discounts, or numerous other perks. Of course, Apple Music, a competitor to these apps, is not barred from the same behaviour. By requiring Apple to stop its illegal conduct in the EU, the EC is putting consumers first. It is a basic concept of free markets—customers should know what options they have, and customers, not Apple, should decide what to buy, and where, when and how.
While we appreciate the EC addressing this important case, we also know that the details matter. Apple has routinely defied laws and court decisions in other markets. So we're looking forward to the next steps that will hopefully clearly and conclusively address Apple's long-standing unfair practices.
---
Please download the iClarified app or follow iClarified on Twitter, Facebook, YouTube, and RSS for the latest updates!