The European Commission has formally charged Apple with antitrust violations related to its mobile app store on the iPhone and iPad. The charges are preliminary, allowing Apple to respond before the EC issues a punishment.
“The Commission takes issue with the mandatory use of Apple’s own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple’s App Store,” the announcement reads, cutting right to the heart of Apple’s anticompetitive business practices. “The Commission is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.”
The EU charges come in the wake of complaints by Spotify, which correctly points out that Apple not only hobbles the developers that are forced to use its monopoly app store and payment system, but also competes directly with them in that store. Spotify, for example, must compete against Apple Music, a service that is cheaper to operate because Apple doesn’t impose its fees and limitations on its own services.
“App stores play a central role in today’s digital economy,” EC executive vice president Margrethe Vestager said. “We can now do our shopping, access news, music or movies via apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App Store for rivals and by forbidding them from informing their customers of alternative subscription options.”
According to the EU complaint, Apple has a “dominant position” in the market for distributing apps to users of its devices. This store is the “sole gateway” to consumers who wish to use apps, and Apple’s platform is a “closed ecosystem in which Apple controls every aspect of the user experience for iPhones and iPads.” Developers, meanwhile, are forced to distribute their apps via Apple’s App Store, and are subject to Apple’s mandatory, non-negotiable, and often arbitrary rules.
“The Commission’s preliminary view is that Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers,” the announcement adds. “This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices. In addition, Apple becomes the intermediary for all IAP transactions and takes over the billing relationship, as well as related communications for competitors.”