The European Union is reportedly getting ready to fine Apple in the region of half a billion euros for breaching competition laws by forcing unfair trading conditions on music streaming services. The mega-fine is the outcome of an EU investigation that began with a complaint from Spotify.
According to the FT, multiple sources with direct knowledge of the EU’s investigation have confirmed the plan to impose a fine “in the region of €500 million”. The regulators have reportedly concluded that Apple’s App Store rules regarding the highlighting of payment options outside the Apple ecosystem are prejudicial against streaming services that compete with the tech giant’s own Apple Music.
“Brussels will accuse Apple of abusing its powerful position and imposing anti-competitive trading practices on rivals”, the FT reports, adding that “the EU will say the tech giant’s terms were unfair trading conditions”.
Spotify – and many other app developers – have long criticised Apple’s App Store rules in relation to in-app payments. Those rules state that, with certain apps, all in-app payments must be taken using Apple’s own commission-charging transactions platform. Not only that, but app developers cannot sign-post users to other payment options outside of their apps – a rule often referred to as the anti-steering provision.
Apple’s commission on in-app payments is up to 30%. As Spotify’s profit margin is also in the region of 30%, it would need to pass on the Apple charge to the customer, which makes a Spotify subscription look more expensive than an Apple Music subscription.
The other option, which is the one Spotify took, is not to take in-app payments at all. But that makes up-selling premium subscriptions to free tier users much harder, and the introduction of pay-to-access tools within the Spotify app – to monetise podcasts and audiobooks – basically impossible.
Spotify filed a formal complaint with the European Commission over Apple’s rules in 2019. EU competition regulators initially sent a statement of objections to Apple in 2021 raising their own concerns that Apple’s in-app payment rules were anti-competitive. Two years later an updated statement of objection was sent announcing that the investigation had been narrowed to specifically focus on the anti-steering provision.
It’s that which the regulators have seemingly deemed is anti-competitive, prompting the proposed mega-fine, one of the most significant fines ever levied against a tech company by the EU, and the first to target Apple.
Apple has already been forced to make some changes to its App Store rules as a result of litigation, regulator intervention and changes in the law. That includes the EU’s new Digital Markets Act. Although Spotify was scathing about the changes Apple is making in order to comply with the new EU regulations, which it dubbed “a complete and total farce”.