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June 16, 2020updated 17 Jun 2020 8:28am

Apple faces EU antitrust probe over App Store practices

By Robert Scammell

The European Commission has launched a fresh antitrust investigation into Apple after e-book firm Kobo joined Spotify in filing a complaint alleging that the App Store has anti-competitive practices.

The antitrust investigation, announced today, will focus on two specific “restrictions” that Apple places on the App Store.

The first is the way app developers are forced to use Apple’s proprietary in-app purchase system, which charges app makers 30% commission on all app subscriptions made via the App Store.

The second is an Apple rule that prevents developers from informing users of ways to download their app from outside of the App Store, which the Commission notes is “usually cheaper”.

Apple’s in-app purchase system also “appears” to give Apple control over customer data from its competitors, the Commission said. In this case, Apple competes against Spotify with Apple Music and against Kobo with Apple Books.

Music streaming giant Spotify filed its complaint in March 2019, raising concerns about both of these practices.

Spotify CEO Daniel Ek has dubbed the App Store practice of taking a 30% cut on every Spotify subscription as the “Apple tax”.

“If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music,” said Ek in a March blog post.

The Commission said an “e-book and audiobook distributor” filed a similar complaint on 5 March 2020.

According to the Financial Times, that company is Kobo, the e-reader subsidiary of Japanese media and ecommerce group Rakuten. Verdict has approached Kobo for comment.

Executive vice-president Margrethe Vestager, in charge of competition policy, said in a statement: “Mobile applications have fundamentally changed the way we access content. 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. I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”

In 2019, Apple’s App Store facilitated over half a trillion dollars in financial activity, according to its own figures released Monday. However, it said that more than 85% of that figure came from transactions that it did not take a commission from.

Apple Pay faces parallel antitrust probe

The European Commission has launched a separate antitrust investigation into Apple Pay in parallel with its App Store probe. This investigation will focus on whether iPhone owners should have more choice about the “tap and go” payment software they use and the conditions that Apple sets for merchants accepting Apple Pay.

The European Commission said it will carry out its investigations as “a matter of priority”. However, such investigations are complex and will likely take years to resolve. If Apple is found to be in violation of anti-competition laws it faces a hefty fine – up to 10% of its global revenue – and will likely be forced to change its behaviour.

Last year Google was hit with a third antitrust fine from the European Commission, bringing the tech firm’s total bill to $9.3bn.

Verdict has approached Apple for comment.

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