Apple’s €1.8bn fine: Will anything change?

This week, Apple was fined more than €1.8bn by the European Commission (EC) for breaking anti-trust law. The ruling said Apple was “abusing its dominant position on the market for the distribution of music streaming apps” in its App Store and its restrictions on app developers from informing iOS users about “alternative and cheaper music subscription services” available outside the app.

Margrethe Vestager, the EC’s executive vice-president in charge of competition policy, said: “For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store. They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over €1.8bn.”

The EC concluded that the amount was “proportionate” to Apple’s global revenue and “necessary to achieve deterrence” of Apple and other companies of a similar size “from committing the same or similar infringements”.

On top of the fine, the EC has ordered Apple to remove its “anti-steering provisions”, namely banning app developers from informing iOS users of offers available outside the app. It has also instructed Apple to refrain from “repeating the infringement” or from “adopting practices” with an equivalent effect.

In response, Apple said in a statement that the EC had failed to “uncover any credible evidence of consumer harm” and that it ignored “the realities of a market that is thriving, competitive and growing fast”. Apple added that it will appeal the decision.

The fine follows a long-running investigation prompted by an official complaint from Spotify in 2019.

Spotify has welcomed the decision, saying it was “an important moment in the fight for a more open internet for consumers”.

In a statement, the company said: “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.”

Apple and Spotify were approached for comment on this story.

Analysis: Third-biggest anti-trust fine

Is a fine enough to stop a tech giant’s anti-competitive behaviour?

Potentially — if the figure is large enough and there are risks for repeated fines for non-compliance with a decision.

This is the third largest fine the EC has issued for anti-trust breaches in non-cartel cases. The top two were both issued for Google — the probes into Android (2018) and Search/Shopping (2017) received fines of €4.34bn and €2.42bn respectively.

Under current rules, the EC could not launch another investigation or fine for the exactly the same subject if a company were to breach the rules again. However, if Apple does not comply with the terms within 30 days of receiving the formal decision, it could face additional periodic fines of up to 5% of daily turnover.

If Apple wins its appeal, it could lead to “a partial annulment” of the decision and a reduction in the fine, but this would have to go through the general court and potentially the court of justice.

DMA dispute

Separately, Apple could face fines for non-compliance with the new Digital Markets Act (DMA) that is coming into effect this year. The DMA would give the EC the power to impose fines of up to 10% of a company’s worldwide turnover, or up to 20% in the case of repeated infringement. The UK is in the process of introducing a similar act called Digital Markets, Competition and Consumers Bill.

All relevant companies have to make a submission for DMA compliance by a deadline of 7 March.

Apple filed its submission in January. It prompted Spotify, Deezer and 32 other companies to pen an open letter last week to the EC to express “strong concerns” that Apple’s proposals did not meet the law’s requirements and, as a result, did not deliver benefits to consumers.

The letter said: “Apple’s new terms not only disregard both the spirit and letter of the law but, if left unchanged, make a mockery of the DMA and the considerable efforts by the EC and EU institutions to make digital markets competitive.”

In particular, the consortium took issue with four elements in Apple’s submission: new terms for app developers that were not DMA-compliant; a new fee structure that the letter said maintained or even amplified Apple’s dominance; creating unfounded privacy and security concerns “to the detriment of user choice”; and not allowing for “sideloading” or new app stores.

The letter urged the EC to “take swift, timely and decisive action against Apple” in order to protect developers and consumers”. It added: “This is the only way to guarantee the DMA remains both credible and delivers competitive digital markets.”

European Commission eyes Apple fine: What’s next?