In an unforeseen turn of events, the European Commission has levied a fine of 1.8 billion euros against Apple subsequent to a lawsuit filed by Spotify. This fine marks the largest ever imposed within the music industry and is anticipated to have significant repercussions on the digital music landscape. Contrary to expectations, the surprise lies not in the imposition of the penalty itself but rather in its substantial magnitude. Initially, it was speculated that the European Commission would fine Apple approximately 500 million euros following allegations of market position abuse levelled by Spotify.
Apple has incurred the fine for various reasons, chiefly due to the substantial Commission it imposes on transactions, which has consistently placed competitors at a disadvantage compared to Apple Music. Moreover, Apple’s stringent conditions for app releases on the App Store have hindered the dissemination of user information. Consequently, certain users ended up paying higher prices despite more cost-effective alternatives being available.
The European Commission’s ruling comes five years after Spotify initially lodged a complaint against Apple’s practices. The Commission determined that Apple had obstructed app developers from informing users about cheaper subscription options available outside the app. Additionally, Apple prohibited developers from alerting users about lower prices outside the app environment. Furthermore, Apple prohibited the inclusion of links within applications that would redirect users outside the app or send electronic messages, such as emails, to users.
Abuse of Dominant Market Position
The Commission’s evaluation suggests that Apple could have been deemed a monopoly during that period. This assertion stems from the fact that Apple exclusively owns the App Store, the sole platform for developers to release their iOS applications. This monopoly position enabled Apple to generate substantial revenue through its 30% commission fee.
“Apple’s conduct, which lasted for almost ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission fee imposed by Apple on developers and passed on to consumers in the form of higher subscription prices for the same service on the Apple App Store. Moreover, Apple’s anti-steering provisions led to non-monetary harm in the form of a degraded user experience: iOS users either had to engage in a cumbersome search before they found their way to relevant offers outside the app, or they never subscribed to any service because they did not find the right one on their own.”
according to the Commission’s report
Although the fine seems vast, in principle, it is almost insignificant for Apple. The total fine of 1.84 billion euros is only 0.5 percent of Apple’s worldwide turnover.
Apple Believes Spotify’s Actions Are Excessive
Some of the remarks made by the Commission have already been addressed as of today. Since 2021, even before the decision on Spotify’s appeal, Apple has permitted app publishers to include notifications regarding alternative payment methods. As of 2022, specific applications could incorporate links to their websites. Regrettably, this necessitated special authorization from Apple. This functionality was exclusively accessible for what are known as “reader apps.”
Apple contends that the European Commission’s decision lacks merit, asserting that the company has not caused any harm to users.
“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.”
according to Apple‘s press release.
Apple reiterated that despite Spotify not paying fees, they collaborated to ensure compatibility with Siri, CarPlay, and Apple Watch. Spotify utilizes over 250,000 APIs from Apple for normal operations and testing, provided at no cost. Moreover, Apple facilitated the testing and release of 421 application versions. However, Apple maintains that Spotify’s demands seek to alter App Store regulations to suit their interests better.
Apple has announced its intention to appeal the decision, signaling a probable protracted legal dispute.
This represents the European Commission’s inaugural decision against Apple. Nevertheless, in 2020, France imposed a fine of 1.1 billion euros on Apple for distorting competition. Subsequently, following an appeal, this fine was reduced to 372 million euros.
