The European Union (EU) is expected to reach a decision in early 2024 regarding Apple Inc.'s App Store rules, which have allegedly hindered competition in the music-streaming industry. Sources familiar with the investigation indicate that EU regulators are finalizing a ruling on Apple's practice of preventing music services from redirecting users to alternative, more affordable subscription options outside of the App Store. If found guilty, Apple could face a potential fine of up to 10% of its annual sales, although EU penalties rarely reach that magnitude. The EU's decision may also include orders for Apple to revise its business models.
The investigation was initiated in response to a complaint lodged nearly four years ago by Swedish music streaming giant, Spotify Technology SA. Spotify alleged that it was forced to increase its monthly subscription prices in order to offset the costs imposed by Apple's alleged control over the App Store ecosystem. In February, the European Commission formally charged Apple for its anti-steering rules, arguing that they were unnecessary and resulted in higher prices for customers.
During a private hearing in June, Apple defended its position by claiming that it had already addressed any potential competition concerns. In early 2022, Apple allowed music streaming services like Spotify to direct users to sign up for subscriptions through their websites, bypassing the App Store's revenue share of up to 30%. Moreover, Apple agreed to permit apps to advertise lower subscription prices outside of the App Store. However, Spotify criticized these changes, stating that the restrictions still persisted and the alterations were merely cosmetic.
Parallel to the probe on App Store rules, EU authorities are also investigating Apple's control over tap-to-pay technology on its devices. However, sources familiar with the investigation suggest that Apple is currently in settlement discussions regarding the latter case. The scrutiny of app store practices is not limited to the EU, as a recent high-profile trial in the United States found Google to unfairly exert monopoly power, creating further concerns about Apple's App Store policies.
Margrethe Vestager, the EU's antitrust czar, has a history of confronting tech giants, including Apple. In the past, she imposed significant fines on Alphabet Inc.'s Google and ordered Apple to repay alleged unfair tax benefits from Ireland. The European Commission has not commented on the impending decision, while Apple did not respond to inquiries. Spotify declined to provide immediate comment.
In addition to targeting past industry abuses, the EU's antitrust arm is implementing new regulations to prevent competition violations by tech companies in the future. The Digital Markets Act, set to take full effect in March 2024, establishes a set of regulations and restrictions. These include prohibiting powerful firms from favoring their own services over those of rivals, disallowing the use of personal data garnered from third-party merchants to compete against them, and granting users the ability to download apps from competing platforms.
Apple, along with Meta Platforms Inc. (formerly Facebook) and ByteDance Ltd. (the parent company of TikTok), have all requested that the EU courts review whether some of their services fall within the scope of the Digital Markets Act. This move is seen as a direct challenge to the core of their profitable business models.