EU to Launch Apple Antitrust Probe
- Paul Thurrott
- May 06, 2019
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60
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.
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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.
Conversation 60 comments
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skane2600
<blockquote><em><a href="#426068">In reply to lvthunder:</a></em></blockquote><p>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.</p>
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provision l-3
<blockquote><em><a href="#426083">In reply to skane2600:</a></em></blockquote><p>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. </p>
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skane2600
<blockquote><em><a href="#426085">In reply to provision l-3:</a></em></blockquote><p>If Apple follows a typical business model the primary purpose of the 30% is to make a profit, not merely cover actual costs.</p>
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provision l-3
<blockquote><em><a href="#426090">In reply to skane2600:</a></em></blockquote><p>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. </p>
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provision l-3
<blockquote><em><a href="#426138">In reply to Andi:</a></em></blockquote><p>ugh, if you are going to respond to my posts please keep it relevant to what o was talking about. </p><p><br></p><p>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. </p>
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skane2600
<blockquote><em><a href="#426111">In reply to provision l-3:</a></em></blockquote><p>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. </p>
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provision l-3
<blockquote><em><a href="#426167">In reply to skane2600:</a></em></blockquote><p>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. </p><p><br></p>
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skane2600
<blockquote><em><a href="#426176">In reply to provision l-3:</a></em></blockquote><p>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.</p>
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provision l-3
<blockquote><em><a href="#426224">In reply to skane2600:</a></em></blockquote><p>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. </p><p><br></p><p>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. </p><p><br></p><p>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. </p><p><br></p><p>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. </p><p><br></p><p>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. </p><p><br></p><p>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. </p><p><br></p>
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skane2600
<blockquote><em><a href="#426244">In reply to provision l-3:</a></em></blockquote><p>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.</p>
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provision l-3
<blockquote><em><a href="#426246">In reply to skane2600:</a></em></blockquote><p>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.</p>
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provision l-3
<blockquote><em><a href="#426068">In reply to lvthunder:</a></em></blockquote><p>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. </p><p><br></p><p>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. </p><p><br></p><p>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?</p>
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skane2600
<blockquote><em><a href="#426067">In reply to lvthunder:</a></em></blockquote><p>He should probably have mentioned antitrust rather than monopoly. You don't need to be a monopoly to violate antitrust laws.</p>
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skane2600
<blockquote><em><a href="#426150">In reply to lvthunder:</a></em></blockquote><p>Andi gave you <em>one </em>example of a company violating antitrust without a monopoly. Andi didn't say it was the <em>only </em>possible scenario. </p>
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provision l-3
<blockquote><em><a href="#426115">In reply to lvthunder:</a></em></blockquote><p><br></p><p>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".</p><p><br></p><p><span style="background-color: rgb(255, 255, 255);">"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."</span></p>
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provision l-3
<blockquote><em><a href="#426208">In reply to Bob_Shutts:</a></em></blockquote><p>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. </p><p><br></p><p>Thanks for chiming in about the EU though. It's always interesting to hear about nuance outside of where one lives. </p><p><br></p><p>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. </p>
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provision l-3
<blockquote><em><a href="#426272">In reply to MikeGalos:</a></em></blockquote><p>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. </p><p><br></p><p>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. </p><p><br></p><p><br></p><p><br></p>
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skane2600
<blockquote><em><a href="#426270">In reply to MikeGalos:</a></em></blockquote><p>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." </p><p><br></p><p><br></p><p><br></p><p>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.</p><p><br></p><p><br></p><p><br></p><p>Source: http://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws</p>
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dontbe evil
<blockquote><em><a href="#426067">In reply to lvthunder:</a></em></blockquote><p><br></p><p>the problem comes on iOS when you start to offer same services of your competitors: music, videos and news.</p><p><br></p><p>if your competitors want to sell at 10 they'll get 7 and you 3</p><p><br></p><p>if you want to selle at 7,8,9 you get full price and sell a lower price than competitors</p>
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dontbe evil
<p>finally… hope video streaming and news will be included</p>
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Hifihedgehog
<p><span style="color: rgb(0, 0, 0);">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.</span></p>