This month saw a landmark decision by the European Commission (the Commission) involving the competition rules of the European Union (EU) and one of the major technology players in the digital market – Apple. Competition rules are an important part of EU law, designed to promote the smooth functioning of the EU’s internal market.
There is nothing wrong with having a dominant position in the market. However, under Article 102 of the Treaty on the Functioning of the European Union (TFEU), dominant players have some additional responsibilities, such as not abusing their dominant position in the market. On 4 March 2024, the Commission concluded that Apple had abused its dominant position by imposing unfair trading conditions, which is prohibited by Article 102/1-a of the TFEU. According to the Commission, app developers are required to inform iOS users about subscription prices available outside the app, disclose price differences between in-app subscriptions and external options, and provide links to their websites for alternative subscription purchases. In addition, developers are prohibited from directly contacting newly acquired users to inform them about alternative pricing options via email or other means after they have created an account. The Commission found that these provisions were neither necessary nor proportionate. They were therefore not objectively justified. For almost a decade, Apple’s actions may have resulted in iOS users paying significantly higher prices for music streaming subscriptions due to the high commissions paid by the developers. This has adversely affected the interests of iOS users. Based on its decision, the Commission fined Apple the basic amount of the fine and an additional lump sum of €1.8 billion to be paid into the general EU budget.
Following the Commission’s decision, Apple issued a statement. Contrary to the Commission’s reasoning, Apple said that 86 per cent of app developers do not pay any commission to Apple. There are only two instances where Apple receives a commission. When a user purchases a paid application from the App Store or a digital product or service within an app, such as a
subscription or in-game power-up. If a user leaves the app and pays for the subscription/service on the developer’s website, Apple does not receive a commission.
As well as rejecting the Commission’s claims, Apple also claimed that Spotify would benefit most from the Commission’s decision. Furthermore, Apple stated that it had made a huge contribution to Spotify’s growth (Spotify has a 56% share of Europe’s music streaming market) and that it had never received any commission from Spotify for this. As a result, Apple says it will appeal the Commission’s decision.
On the same day, Spotify also issued a press release. They claimed that Apple’s rules were silencing Spotify and similar music streaming services by preventing them from directly informing users of various benefits within their apps. However, Apple Music, a competitor to these services, faced no such restrictions. By requiring Apple to end its illegal behavior in the EU, the Commission is putting consumer welfare first.
In conclusion, the Commission’s decision shows the evolution of big tech in the digital market and the close attention the EU is paying to this evolution. While the Commission’s decision is captivating, the appeal process is already intriguing.
References:
https://ec.europa.eu/commission/presscorner/detail/en/ip_24_1161