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  • Khushboo Pareek

EU orders Apple to pay $2 billion in fine over App Store rules; Spotify hails decision



The European Commission (EC) has fined Apple for nearly $2 billion in response to accusations of abusive practices on its App Store -- a decision the tech giant said will appeal against.


The fine, $1.95 billion to be precise, comes as a result of alleged violations of antitrust laws, specifically targeting restrictions that the EC deemed detrimental to music streaming apps other than Apple Music.


These restrictions were said to have led to degradation in user experience and increased prices within the app ecosystem.


The EC found, "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')."


It added, "This is illegal under EU antitrust rules" and harms consumers "who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device."


For years, Spotify and Apple have been in a fight, with the former accusing Apple of unfair practices, claiming it had an advantage because it didn't have to pay the same fees.


In 2015, Apple launched Apple Music, its own streaming service, which Spotify saw as competition. Later, in 2019, Spotify started buying popular podcasts, challenging Apple's dominance in that area too.


Apple in its defence said the EC imposed the fine without any credible evidence. It also claimed Spotify became a success because of the very App Store it was railing against.  


"Today, the European Commission announced a decision claiming the App Store has been a barrier to competition in the digital music market. The decision was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast," Apple said.


It added, "Today, Spotify has a 56 percent share of Europe’s music streaming market — more than double their closest competitor’s — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world.


"A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world. We’re proud to play a key role supporting Spotify’s success — as we have for developers of all sizes, from the App Store’s earliest days."


According to the European Commission, Apple imposed conditions that stopped developers from telling users about cheaper subscription options outside the App Store.


They couldn't advertise price differences or provide links to cheaper options, or even email users about them. The European Commission said Apple's actions might have made many users pay more for music subscriptions. It also said this could have made the experience worse for users of music apps.


"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," the EC said.


An EC spokesperson, according to Ars Technica, told that investigators "calculated that, in the European Economic Area, around 1.5 million subscribers to the main music streaming apps—other than Apple Music—on iPhones and iPads ended up paying 2–3 euros per month more as of July 2023 and throughout the entire duration of the subscription, compared to what they could have paid outside of the app. This was due to the in-app commissions imposed by Apple on developers, which were then passed on to consumers through higher subscription fees."


The European Commission thought the other harms were more important. The body said it gave Apple a fine of about $1.95 billion. They did this because they believed a big fine was the only way to stop Apple and other app stores from doing the same unfair things again.


Margrethe Vestager, who leads the competition policy at the European Commission, said Apple has been mistreating music streaming apps for ten years. She told Apple to stop its unfair rules and not do it again. She said Apple's actions broke a law in the European Union that stops unfair trade practices like setting unfair prices.


Apple defended itself by stating that developers can already inform users about cheaper options. They mentioned updating their rules so that music app developers can include such information and even provide links to external websites for account management.


Spotify welcomed the decision and called it a win for open market.


"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," it said.


Apple announced it is ready to appeal against the decision.


"Apple has been a part of Europe for over 40 years, and today, we support more than 2.5 million jobs across the continent. We’ve helped markets thrive, promoting competition and innovation at every turn — and the App Store is an important part of that story. So while we respect the European Commission, the facts simply don’t support this decision. And as a result, Apple will appeal," it said.

 

 

 

 

 

 

 

 

 

 

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