EU to Launch Apple Antitrust Probe

Posted on May 6, 2019 by Paul Thurrott in Apple with 60 Comments

It’s finally happening: The European Commission will investigate whether Apple is abusing its market power with the iPhone’s app store.

And yes, Spotify’s formal complaint—and, no doubt, Apple’s feeble response—was the impetus for this action. As you may recall, Spotify in March complained that “Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers.” The firm tried unsuccessfully to resolve the issues directly with Apple, so it formally requested that the EC take action to ensure fair competition.

And it will do so.

“We filed our complaint because Apple’s actions hurt competition and consumers, and are in clear violation of the law,” a Spotify statement explains. “This is evident in Apple’s belief that Spotify’s users on iOS are Apple customers and not Spotify customers, which goes to the very heart of the issue with Apple.”

The EC’s complaint will prove that Apple “deliberately disadvantage other app developers,” as the evidence is clear. The only questions then regard timing—the EU moves very slowly—and the degree of the punishment. I expect Apple to be required to make changes to its business practices and to pay a fine between $1.67 billion and $5 billion, which are the amounts of Google’s two most recent EU antitrust fines.

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Comments (60)

60 responses to “EU to Launch Apple Antitrust Probe”

  1. Andi

    Between Spotify and the user, the iphone, the xbox, the playstation, a web browser, etc. all constitute dumb pipes. There is no reason for the iphone to force itself into a middle man position. Just like the play store allows Spotify to use its own payment infrastructure so should the app store. This is not Mario Run or Angry Birds.


    Netflix and all the other subscription based services are in the same boat.

    • lvthunder

      In reply to Andi:

      So how is Apple suppose to pay for all the updates those apps push out. Netflix and Spotify update their app all the time. That's millions of downloads a month that Apple has to pay for.

      • toukale

        In reply to lvthunder:

        Exactly, they want all the benefits of the platform, with non of the costs.

      • skane2600

        In reply to lvthunder:

        Please define "all the time". I suspect that Apple's expense for Spotify app updates is negligible. Otherwise Apple could drop their 30% policy and just charge app makers for the bandwidth actually used. They won't because likely the 30% cut represents orders of magnitude more money.

        • provision l-3

          In reply to skane2600:

          I get why people seem to think the 30% charge is simply for storage and bandwidth but that isn't correct. If the 30% is worth it for developers? Certainly debatable and I would imagine it would also be somewhat dependent on the actual developer as well.

          • skane2600

            In reply to provision l-3:

            If Apple follows a typical business model the primary purpose of the 30% is to make a profit, not merely cover actual costs.

            • provision l-3

              In reply to skane2600:

              I didn’t say that Apple didn’t generate a profit or was simply cover costs. Part of it is going to be profit. What I was pointing out that Apple’s costs are more than simply bandwidth and storage. Your statement that they charge the 30% simple because it is larger than a he bandwidth cost isn’t accurate. Apple has costs beyond bandwidth.

              • Andi

                In reply to provision l-3:

                This is not about cost. Apple is forcing its way into a middle man position through arbitrary roadblocks that its own competing service skips.


                The iphone is equal to the mac or your TV in the living room for the purpose of spotify consumption. Should Spotify pay 30% to all the owners of all these platforms?


                • provision l-3

                  In reply to Andi:

                  ugh, if you are going to respond to my posts please keep it relevant to what o was talking about.


                  I absolutely think Spotify has a legitimate complaint. I don’t think Spotify having a legitimate complaint means we get to make claims that aren’t accurate.

                • lvthunder

                  In reply to Andi:

                  The road blocks you are talking about are not arbitrary and their own competing services don't skip. Unless you are trying to say Apple doesn't review and distribute their own apps.

                • Greg Green

                  In reply to Andi:

                  Apple isn’t the middleman, they own the platform.

              • skane2600

                In reply to provision l-3:

                The specific comment I was responding to claimed that the Apple was justified because of the bandwidth costs of app updates. I never claimed that Apple's costs were limited to bandwidth and storage I merely pointed out that if bandwidth costs were the issue, they'd prefer the larger cut rather than passing on those costs to the app maker.

                • provision l-3

                  In reply to skane2600:

                  Which side steps the value of the service Apple is offering as part of that 30%. The honest discussion is what is Apple charging for and is the price actually reasonable. As a long time reader of Thurrott I really should know that the honest discussion isn’t ever going to happen here. People either want to make it a cash grab or say it’s perfectly reasonable. No really gives a crap about the details.


                • skane2600

                  In reply to provision l-3:

                  Without knowing what the actual costs are it's impossible to reach a definitive conclusion, but I'm not sure what the "value of the service" is beyond Apple's obvious expenses. Your statement about the lack of an "honest discussion" is of course, an ad hominem argument that isn't up to your usual standards.

                • provision l-3

                  In reply to skane2600:

                  To me the obvious part of the service is not having to set up a payment mechanism or pay credit card processing fees. Apple also handles customer support for billing issues.


                  The big thing that gets overlooked is around being able to easily operate internationally. Because developers license their app to Apple fore resale, Apple ensures that all relevant taxes are collected for based on the country that the purchaser is in. And while Apple accepts various currencies, they pay the developer in their local currency so the developer doesn't pick up the cost of currency conversion.


                  So if I'm a developer in Omaha Nebraska I can have an app that sells globally without worrying about trying to manage collecting and paying taxes in every country where my App may be sold. Nor do I have to worry about converting various currencies back to USD or paying any sort of repatriation tax. Apple cuts me a check for my 70% in dollars and I pay taxes as a US based business. For small and medium sized developers that opens up a huge market that would have been too difficult or expensive to otherwise reach. Making a few thousand dollars out of country likely wouldn't be worth figuring out regional tax collection, paying regional taxes and or dealing with repatriating international income.


                  I think that as a service has value. Is that value worth the 30% they give up? I would imagine that depends on the developer and how much revenue they make beyond their native country.


                  That said, that service really isn't as valuable to larger developers that already have an international footprint. So Microsoft, Adobe, Netflix, Amazon and in this case Spotify. They already have online store fronts in all the areas they do business and don't get the same value out of using the App store payment system that a smaller company would. It is my opinion that Apple needs to offer a solution that works for companies that don't need the international sales support, storefront or billing support for customers.


                  As far as honest discussion goes, I really feel like whenever the subject comes up here it is just knee-jerk reactions. Paul sets the tone with his "vig" crap. If you can point to an article where he as talked about the payment split in thoughtful and informed way I'll happily retract my complaint. The comment section then just kind of devolves into arguments that confabulate monopolies and anti-trust laws and people either saying Apple is greedy or totally justified because of contrived things like bandwidth. For whatever reason this subject always seems to become a complete dumpster fire even by the kinda low standards of internet commentary.


                • skane2600

                  In reply to provision l-3:

                  I think for hobbyists who are sticking their toe in the App Store pool and have under 100 buyers the billing features add a lot of value, but for serious app developers I doubt it. Still, I'm too lazy to investigate the cost just to prove my argument :). I have nothing to sell.

                • provision l-3

                  In reply to skane2600:

                  I saw a talk from a decent sized developer talking about how not having to screw with hiring people to help figure out VAT and making a store that accounted for it was worth the 30% alone. What was interesting was though they thought the pricing was fair they were removing their stuff from the Mac App store because they just felt like it wasn't managed well and created headaches they . That seems to be a common sentiment about the Mac App store. That is a sample size of one so hard to say.

                • red.radar

                  In reply to provision l-3:

                  I come and look for your comments. You provide reasonable discussion points that counter the outrage narratives people try to push.


        • lvthunder

          In reply to skane2600:

          I don't specifically know about all of them, but Facebook updates all their apps every other week. Since all of Facebook's app are free the paid apps and subscriptions have to subsidize that.

      • Andi

        In reply to lvthunder:

        Simple, Apple will pay through the 99$/yr devs pay Apple. The iphone is not more expensive to maintain per user than macos which does not have the benefit of the app store economy. The mac goes on just fine.


        If I consume Spofity on my iphone without paying Apple 30% it does not sink the iphone. Apple is a 3rd party between me and Spotify not the other way around.

        • lvthunder

          In reply to Andi:

          Sure it is more expensive for Apple to maintain. On the Mac unless you use the Apple App Store then it is on the publisher to distribute updates. On iOS that is completely on Apple by design. It's a better user experience that way. Imagine having ten updaters running on your phone all the time looking for updates.

      • provision l-3

        In reply to lvthunder:

        You got the pricing thing wrong. Apps and iOS have a virtuous cycle. Apps add value to the OS and enhancing the OS adds to what the Apps can do. Hosting and them delivering them to customers would more or less be baked into the cost of the purchase of the phone. The 30% is for services Apple provides to the developer of the App. There are obvious things like building a store front and payment processing that developer gets for that cost as well as other less obvious administrative work that it would be a bit of pain for smaller developers to reasonably manage. There are clear benefits for Apple as well. They obviously make a profit off of what they are offering developers and there is some argument for better customer experience.


        Anyway, the long and the short is that arguing that hosting and bandwidth justifies the 30% cut is as misguided and uninformed as people saying they are just going for money grab.


        The better conversation is around what is a fair prices or the services being offered and how do you handle developers that really don't need those services?

  2. cheetahdriver

    I have to admit, it's their phone, they do not have a commanding place in the marketplace. If they were google, I could see this, or if IOS was on other phones than Apple, I could see this. As it is, they make their little product, and sell it with the knowledge that they only allow certain things on the phone.


    That's actually why I buy it. While I have cheered on the EU in some past complaints, this one has no merit.

  3. Trapp

    Does anyone get the impression that it is the U.S. that creates and the EU consumes?

    • wright_is

      In reply to Trapp:

      More that the US protects big business from those pesky cosumers and the EU protects consumers from those pesky big businesses... Although in some cases, like this one, it seems like a spat between two big businesses, in general the EU laws offer its citizens much more protection and privacy, whilst US laws seem to be geared to helping business squeeze consumers for every last cent and bit of information they have.

  4. dontbe evil

    finally... hope video streaming and news will be included

  5. toukale

    The problem I have with Spotify is no one have to use the iPhone app to sign up for their service. They can easily use any web browser to sign up for Spotify and Apple will not get a dime. I would side with them if that option was not available, but it is. The burden is therefore on Spotify to get people to use the browser to sign up instead of using the app. Also, since Apple only have a teen market share in mobile, like everyone love to point out when they want to put them down, I fail to see how this is an issue. We all know why this is an issue, most paying users are of course on iOS.

    • MikeGalos

      In reply to toukale:

      The problem with your theory is that abuse of monopoly power to restrict competitors doesn't require there to be no ways to work around that abuse.


      It's not Spotify's job to find ways to exist despite Apple restraining their trade. It's Apple's job to play fair. Period.

      • lvthunder

        In reply to MikeGalos:

        You have to be a monopoly before you can abuse your monopoly power. Apple is not a monopoly.

        • skane2600

          In reply to lvthunder:

          He should probably have mentioned antitrust rather than monopoly. You don't need to be a monopoly to violate antitrust laws.

          • lvthunder

            In reply to skane2600:

            I thought antitrust law was to prevent monopolies from abusing their power. If that's not the case then how is antitrust law different from regular law.

            • Andi

              In reply to lvthunder:

              Apple already violated anti-trust law in the US by building a cartel with the book publishers. A cartel is a monopoly. This is how you violate anti-trust law without having an actual monopoly.


              In the EU if you are large enough to warp markets and leverage your platform control to prop up new services(Apple Music) then it might be reason for prosecution. EU laws are more pro-consumer than US laws.

              • lvthunder

                In reply to Andi:

                If Apple wanted to put Spotify out of business they simply could make Apple Music free and still pay the royalties they currently pay. They certainly have the cash to do that. So what cartel is Apple building around music? I don't see how they say Apple leveraged their platform to prop up Apple Music. They charge the same as Spotify does.

                • skane2600

                  In reply to lvthunder:

                  Andi gave you one example of a company violating antitrust without a monopoly. Andi didn't say it was the only possible scenario.

                • wright_is

                  In reply to lvthunder:

                  No, they charge 30% more than Spotify does. 30% of the cost of Spotify goes to Apple, for Apple Music, 100% goes to Apple.

                  And Spotify aren't allowed to charge 30% more in the store to compensate for the loss of revenue through the Apple Store, compared to the user signing up directly...

            • provision l-3

              In reply to lvthunder:


              I answered this for you in a previous thread. Here it is again. If you and Mike G are going to continue to bicker about anti-trust it would be in your both of your best interests to know something about it other they one saying "monopoly" and the other saying "not a monopoly".


              "With respect to ant-trust laws, monopolies are one of the areas antitrust laws cover but by no means all. The Sherman Act identifies monopolies, collusion, product bundling/tying, refusal to deal, exclusive dealing, dividing territories, conscious parallelism, predatory pricing and misuse of patents/copyrights as potentially anti-competitive practices. For example the anti-trust action taken against Apple and book publishers wasn't based on anyone being a monopoly it was based on collusion."

              • bob_shutts

                In reply to provision l-3: EU law has a special provision that covers a company’s behavior when other merchants have to use its marketplace. I think that’s the major thrust of the investigation.

                It’s almost as though the EU adopted this specifically to target select U.S. retailers.
                • provision l-3

                  In reply to Bob_Shutts:

                  Yeah, I would assume the EU and other countries all have different variation of ant-trust. People seem to get really stuck on the whole monopoly thing and I think it is pretty universal that anti-trust laws are not just about monopoly power.


                  Thanks for chiming in about the EU though. It's always interesting to hear about nuance outside of where one lives.


                  Somewhat unrelated, I always find it funny when Paul complains how long the EU takes in deliberating on Anti-trust. As if being thoughtful in making a decision that could potentially have far reaching impact were a bad thing.

                • wright_is

                  In reply to Bob_Shutts:
                  It’s almost as though the EU adopted this specifically to target select U.S. retailers.

                  Except it was aimed at EU based physical stores long before virtual stores came along.

              • MikeGalos

                In reply to provision l-3:

                Monopolies are merely those companies who can act and are signficant enough in a specific marketplace that their action changes the nature of that marketplace.


                That's NOT a crime.


                It does trigger additional regulation. Those include things like the rest of what you list.


                If you are NOT significant enough to qualify as a monopoly you colluding with another tiny company may be "collusion" but it's not an antitrust violation because you do not have power to influence the market itself.


                Sorry but I lived this for a couple of years.

                • provision l-3

                  In reply to MikeGalos:

                  I'm aware you claim to have worked for Microsoft but the reality is that you make claims that are verifiably false. So I take your "I lived this for a couple of years" comment with all the credibility of anyone else that blatantly lies.


                  The rest of your post is really explaining what I have already pointed out. I'm aware of the Sherman Act which contains the majority of the antitrust laws in the U.S. I am simply you and Ivthunder could both take time to look at rather than keep ranting about what is and isn't a monopoly. Or don't, I really don't care.




            • MikeGalos

              In reply to lvthunder:

              Antitrust law IS to prevent monopolies from abusing their power.


              Prior to US v Microsoft there was also the need to show harm to the consumer. After that showing harm to another company was sufficient even if it benefitted the actual consumer.

          • MikeGalos

            In reply to skane2600:

            Actually, you do but, again, being a monopoly is neither rare not a bad thing. ABUSING a monopoly is violating antitrust law.

            • skane2600

              In reply to MikeGalos:

              Actually, you really don't have to be a monopoly: "The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize." 




              Note the "and" between the clauses indicating two distinct categories of violation. Of course the Sherman Act is only one of three main anti-trust laws.




              Source: www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws

        • MikeGalos

          In reply to lvthunder:

          Apple certainly is a monopoly. There's nothing wrong with that. Virtually EVERYBODY has a monopoly over some market. It's ABUSING monopoly power that is the issue.


        • dontbe evil

          In reply to lvthunder:


          the problem comes on iOS when you start to offer same services of your competitors: music, videos and news.


          if your competitors want to sell at 10 they'll get 7 and you 3


          if you want to selle at 7,8,9 you get full price and sell a lower price than competitors

    • BeckoningEagle

      In reply to toukale:

      Apple changed the rules a few years ago as not to allow an app to launch a web browser for the user to complete the transaction out of the store. They did it for the sole purpose of charging the 30% or 15% that Apple was not getting from these types of sales. You are correct that the user could very much launch the browser themselves, but the simplicity of being able to do it from within the app is an important detail to consider.


      I do not have a problem with Apple charging a one time cover charge, for example, since the Netflix app is free, then when the user subscribes, Apple gets a cut from that first month or first three months or whatever new terms they can come up with. Charging a 15% off a subscription in perpetuity however, when Apple offers competing services and has total control of the platform and the store, is not fair at all.

  6. lvthunder

    Wow Paul has already convicted them and passed a sentence. I guess we don't need a justice system.


    As far as I know Apple is not a monopoly or even #1 at anything except profits. So how can these antitrust laws apply to them? If a consumer doesn't like the app store then someone will be glad to get them into an Android phone.

    • wright_is

      In reply to lvthunder:

      I was surprised by his summary that it was a foregone conclusion and only the fine still needs to be decided. From an outsiders point of view, it looks like and open-and-shut case, but due process still has to be gone through - like determining whether Apple has a monopoly position or whether they are using abusive tactics that disadvantage consumers (it isn't just about monopoly status).

    • webdev511

      In reply to lvthunder:

      Apple is borderline acting like MSFT did with IE. The complaint data isn't very endearing to Apple and based on experience compaints in the EU are almost always tilted against the incumbent or larger company.


      I don't speak for anyone but myself, but I'd be surprised if this came out in Apple's favor. It's not prejudgement, just based on how EU complaints have ended up before.

      • lvthunder

        In reply to webdev511:

        The difference is Microsoft had 90% marketshare of Windows while they were doing that. Apple doesn't have nearly that number.

        • Alexander Rothacker

          In reply to lvthunder:

          Actually, Apple has 100% market share of iOS.

          • garethb

            In reply to earlster:

            Yes, exactly. It's a different kind of monopoly;

            • Microsoft had a monopoly share of the market, but anyone could install apps on Windows.
            • With Apple, it's not a monopoly of the phone market (although they're significant), but once you've got an iPhone you can only get apps from Apple.


            I suspect the EU will believe this is enough....

          • wright_is

            In reply to earlster:

            And that is the question, does the EU look at Apple's case as 100% of the iOS market or 15% - 25%* of the overall smartphone market in Europe or App Store revenue (excluding advertising).

            They are protectionist on their platform. The question is where does that platform fall. I guess that is one of the first questions that needs to be answered. The competition commission also don't solely look at monopoly position abuses (al la Google, Amazon and Microsoft), but also at competition in general.

    • falonyn

      In reply to lvthunder:

      So.. Paul is media and able to voice his opinion of the situation, since I wouldn't consider him an unbiased journalist. Journalism mixed with insights and opinion. Regardless of how the justice system decides, I agree with his opinion on this, but we must accept a court ruling.


      Apple is not a monopoly, but is 50% of the market in US, so large enough that the abuse is felt.


      In the EU, they view monopolistic action in terms of impact to consumers and not to competition and harm to businesses, so that is why they take it there. The thing is, in Europe, it is a much smaller % of the market, so it makes less sense as a complaint.

  7. Hifihedgehog

    The main takeaway here is you should be able to easily procure and use a third party app over a first party one and you should also be able to make that third-party one the default for a given protocol or file type in the operating system's settings. What Apple has been squeaking by with iOS for now a decade plus would have been straightway penalized if Microsoft had done it with Windows. The fact that you still cannot select a default web browser or mail client in iOS flies in the face of decades of judicial precedent which have been served to Microsoft and others. I, for one, am relieved that immediate action is now finally being taken against Apple's draconian, despotic policies.

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