The European Commission has imposed a record €1.8 billion (around $2 billion) fine on Apple for anti-competitive practices related to music streaming apps on the App Store. This landmark decision marks the first time the EU has fined Apple for such practices and sets a precedent for regulating dominant tech companies in the digital market.

The Allegations: Abusing Market Power to Stifle Competition

The Commission accused Apple of abusing its dominant market position in the distribution of music streaming apps through the App Store. This dominance allowed Apple to implement “anti-steering provisions” within the App Store, effectively preventing music streaming services like Spotify, Deezer, and Tidal from informing users about cheaper subscription options available outside the App Store. These provisions prohibited developers from:

• Displaying information about alternative subscription prices within their apps.
• Including links directing users to subscribe outside the App Store.
• Contacting users directly with information about alternative subscription options.

The Commission deemed these practices illegal under EU antitrust rules, arguing that they “stifle competition, limit consumer choice, and ultimately force users to pay higher prices for music streaming services,” according to Commission chief Margrethe Vestager.

A Record-Breaking Fine with a Deterrent Purpose

The €1.8 billion fine imposed on Apple is the largest antitrust fine ever issued by the EU. It comprises two key components:

• A base amount: This sum reflects the duration and severity of the infringement, taking into account the period over which Apple enforced these anti-steering provisions.
• A record-breaking €1.8 billion deterrent element: This unprecedented addition signifies the Commission’s intent to “strongly discourage similar anti-competitive behavior from Apple and other dominant companies in the future,” Vestager stated.

Apple’s Rebuttal and the Road Ahead

Apple vehemently contested the EU’s decision, claiming it lacks evidence of consumer harm and unfairly hinders “a thriving and competitive market,” according to a company statement. The company has announced its intention to challenge the ruling in court, potentially leading to a legal battle that could take several years to resolve.

Apple further argued that the primary beneficiary of this decision is its competitor, Spotify, which allegedly “met with the European Commission more than 65 times during this investigation,” the company claimed. They point out that Spotify does not pay any commission to Apple as it sells its subscriptions directly through its website, bypassing the App Store entirely.

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Despite Apple’s objections, the Commission’s order aligns with the upcoming Digital Markets Act (DMA) regulations, which come into effect on March 7, 2024. These regulations require companies like Apple to remove restrictions such as the anti-steering provisions, “empowering developers to provide users with more information and choice regarding subscription options,” as outlined by the Commission.

This landmark case not only sets a precedent for future antitrust actions against big tech companies in the EU but also highlights the complexities involved in regulating dominant players in the digital marketplace. It remains to be seen how Apple’s legal challenge and the implementation of the DMA will ultimately impact the future of music streaming app distribution on iPhones and iPads.