Apple fined €1.84BN in EU over anti-steering on iOS music streaming market

The European Union has fined Apple €1.84 billion for breaching antitrust rules in the market for music streaming services on its mobile platform, iOS.

The penalty is focused on Apple’s application of anti-steering provisions, which put restrictions on music streaming apps’ abilities to tell consumers about cheaper offers outside Apple’s App Store.

The iPhone maker has its own music streaming service, Apple Music, and rivals — such as Spotify — have argued the restrictions put them at a disadvantage compared to the platform operator.

Today the Commission said the restriction had prevented European consumers from making a free choice.

“Apple’s rules ended up in harming consumers,” said the EU’s competition chief, Margrethe Vestager, speaking during a Commission press conference to announce the decision. “Critical information was withheld so that consumer could not effectively use or make informed choices.

“Some consumers may have paid more, because they were unaware that they could pay less if they subscribed outside of app. And other consumers may not have managed at all to subscribe to their preferred music streaming provider because they simply couldn’t find it.”

“The Commission found that Apple’s rules result in withholding key information on prices and features of services from consumers. As such they are neither necessary nor proportionate for the provision of the App Store on Apple’s mobile devices,” she added. “We therefore consider them to be unfair trading conditions as they were unilaterally imposed by a dominant company.”

The penalty follows a March 2019 antitrust complaint by Spotify — which argued Apple’s App Store rules “purposely limit choice and stifle innovation at the expense of the user experience”, and accused the iPhone maker of deliberately disadvantaging other app developers by being both “a player and referee”.

Back in June 2020, the EU announced a formal antitrust investigation of the App Store — saying then that it was concerned conditions and restrictions applied by the tech giant, such as anti-steering provisions preventing developers from informing users of cheaper ways to pay for content outside Apple’s store, may be distorting competition.

A formal EU statement of objections duly followed, in April 2021, when the Commission accused Apple of operating its App Store in a way that distorts competition in the market for music streaming services.

However almost two years after that the EU refined the case — issuing a revised statement of objections which dropped an earlier charge related to Apple’s requirement that music streaming apps use its own payment processing tech and fully focused on the anti-steering provisions.

Last month, the FT reported Apple was facing a €500M antitrust penalty over music streaming. But the fine announced by the Commission today is considerably higher. The penalty breaks down into a fine on Apple for breaching the EU’s rules — of around €40M — but on top of that Vestager said a “lump sum” has been added (i.e. €1.8BN) to “account for the non-monetary harm caused to consumers and to achieve deterrence”.

“The fine we impose today reflects both Apple’s financial power and the harm that Apple’s conduct inflicted on millions of European users,” she said, noting that the total penalty (€1.84BN) represents 0.5% of the iPhone maker’s worldwide turnover.

From today, the Commission has also ordered Apple not to apply anti-steering provisions on music streaming apps.

From Thursday, Apple will also be barred from applying anti-steering provisions on any iOS apps under the bloc’s ex ante competition reform, the Digital Markets Act (DMA), as it has been designated a gatekeeper, and both iOS and the App Store are regulated as core platform services, under that pan-EU law. Penalties under the DMA can scale up to 10% of annual turnover (or higher for repeat offenders).

Apple responds

Apple has responded to the Commission’s antitrust decision today with an excoriating blog post in which it attacks the EU — claiming enforcers failed to uncover “any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast”.

The blog post accuses Spotify of wanting to rewrite the rules of the App Store to suit its commercial interests. Apple argues the music streaming platform has spent the best part of a decade attempting to fashion competition complaints with “little grounding in reality”. Its blog post implies EU enforcers have been unduly influenced by complaints from a homegrown tech startup.

“What’s clear is that this decision is not grounded in existing competition law,” Apple writes. “It’s an effort by the Commission to enforce the DMA [Digital Markets Act] before the DMA becomes law. The reality is that European consumers have more choices than ever. Ironically, in the name of competition, today’s decision just cements the dominant position of a successful European company that is the digital music market’s runaway leader.”

While the Commission’s competition intervention on the App Store followed Spotify’s (private) complaint, which was accompanied by a very public lobbying campaign by the European music streaming giant decrying Apple’s 30% “tax” on developers, Vestager has — in recent years — sought to frame the intervention as not a case about Spotify — arguing, in April 2021, that Apple’s actions have, more generally, deprived users of cheaper music streaming choices and distorted competition in this market as a consequence of it charging fees on music streaming rivals and applying anti-steering provisions that prevent them from informing users about cheaper offers.

Last month, with an EU enforcement decision on the case reported to be looming, Apple aggressively pushed back — seeking to train a spotlight on Spotify and the size of its iOS business. “Spotify pays Apple nothing for the services that have helped them build, update, and share their app with Apple users in 160 countries spanning the globe,” Apple wrote in a statement put out in late February. “Fundamentally, their complaint is about trying to get limitless access to all of Apple’s tools without paying anything for the value Apple provides.”

Apple also released a number of data points about Spotify’s app and use of iOS developer tools — saying the music streaming giant’s app has been downloaded, re-downloaded or updated more than 119 billion times across Apple devices. It also revealed Spotify has used thousands of its APIs across 60 frameworks; has submitted over 420 versions of its app to App Review which were approved; as well as using Apple’s beta testing platform TestFlight. Per Apple, its own engineers have also helped Spotify solve various challenges, such as those impacting hardware-accelerated media playback and battery optimization.

Apple’s response to the DMA also shows the company taking a defiant and even aggressive stance to face off against the bloc’s approach. Apple’s initial strategy for DMA compliance, which it made public towards the end of January, essentially opts to unbundle the App Store fee structure, rather than reduce its cut (which is, presumably, what Spotify and other developers that complaint about Apple’s “tax” actually want).

This story is developing… refresh for updates

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