The European Commission said Friday that Apple is in breach of EU competition law, announcing preliminary findings of an investigation into the company's App Store. The commission outlined concerns raised by an antitrust complaint made by Spotify back in 2019 about Apple's policy for handling in-app payments.
For the past year, the European Union has beenby charging Spotify and other subscription-based companies a 30% fee, often referred to as the "Apple Tax," for in-app purchases. Spotify claimed in its complaint that Apple was stifling competition by charging companies that compete with its own services, in this case Apple Music.
The EU has been trying to establish whether Apple's fees are preventing or dissuading other music streaming services from offering people affordable subscriptions within their own apps. Even though the complaint was brought by Spotify, the EU has also been examining the impact on smaller streaming services, including Deezer and Sound Cloud.
European Competition Commissioner Margrethe Vestager said in a tweet Friday morning that the investigation found "consumers losing out" as a result of Apple's policies. The preliminary findings constitute a Statement of Objections to Apple's behavior and don't equate to a final judgment.
In a statement, Vestager described Apple as a "gatekeeper" because users of iPhones and iPads have no choice but to download apps through the company's own App Store. "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," she said. "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."
Apple will now have an opportunity to respond to the commission's objections ahead of a final judgment on the matter. If it fails to assuage the commission's concerns, it could be slapped with a fine of up to 10% of its annual revenue and be required to change how it applies fees to streaming services, at least within the EU.
Apple protested Friday's announcement, saying that the commission's argument on Spotify's behalf was "the opposite of fair competition." In a statement, a spokesman for Apple said the company is proud of the role it's played in helping Spotify become the largest global music streaming service and said Spotify doesn't pay commission on more than 99% of its subscribers and pays only 15% commission on the remaining subscribers acquired through the App Store.
"At the core of this case is Spotify's demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows," said Apple. "Once again, they want all the benefits of the App Store but don't think they should have to pay anything for that."
For Apple, this isn't the first run-in with Europe's Competition Commission or Vestager. In 2016, Apple CEO Tim Cook responded to a handed out by Vestager by calling it " ."
Following the announcement, Spotify's CEO Daniel Ek tweeted, "We are one step closer to creating a level playing field."
In a further statement Spotify's head of global affairs and chief legal officer, Horacio Gutierrez, said that ensuring the iOS platform operates fairly is "an urgent task with far-reaching implications."
"The European Commission's Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers," Gutierrez said.
It'll likely be at least another year before the commission announces whether formal charges and a subsequent penalty will be issued. When wealthy tech companies break EU competition law, fines can stretch into, as has been the case with Google in the past few years. If the commission decides Apple has broken competition law and a fine is issued, the company will be able to appeal the decision.