Apple Fined $2 Billion by EU for Abusing Market Dominance

A pedestrian walks by an Apple Store in Berkeley, Calif., on Aug. 4, 2023. Justin Sullivan/Getty Images

The European Commission has imposed more than 1.8 billion euros (about $1.95 billion) in fines on Apple for engaging in “unfair trading” practices that harmed iOS users’ choices.

“The Commission’s investigation found that Apple bans music streaming app developers from fully informing iOS users about alternative and cheaper music subscription services available outside of the app and from providing any instructions about how to subscribe to such offers,” the European Commission said in a March 4 statement. Apple engaged in such “unfair trading conditions” for almost 10 years, causing customers to pay “significantly higher prices for music streaming subscriptions.”

The commission decided that the fine was necessary because Apple’s actions led to non-monetary harm that can’t be properly quantified.

The commission also stated, “The fine must be sufficient to deter Apple from repeating the present or a similar infringement; and to deter other companies of a similar size and with similar resources from committing the same or a similar infringement.”

Formal proceedings into Apple’s actions began in June 2020 and revolved around the tech behemoth’s allegedly abusing its dominant market position. The investigation was regarding Apple’s being the sole provider to its App Store and thus setting terms and conditions that developers must abide by to be listed on the store and reach users.

Apple’s act of banning music streaming app developers from informing iOS users about cheaper and alternative music subscriptions was found to violate the European Economic Area’s rules regarding anti-steering provisions.

Developers were banned from informing users about price differences between in-app subscriptions sold via the company’s App Store and available elsewhere. They were also prohibited from including links in apps that could lead users to the developers’ websites, where users could select alternative subscriptions.

The European Commission pointed out that Apple’s anti-steering provisions “negatively affect the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device.”

The high fee imposed by Apple on developers was passed to customers in the form of higher subscription prices. That might have caused iOS users to pay more for the same service bought via the App Store than they would have paid elsewhere.

“Moreover, Apple’s anti-steering provisions led to non-monetary harm in the form of a degraded user experience: iOS users either had to engage in a cumbersome search before they found their way to relevant offers outside the app, or they never subscribed to any service because they did not find the right one on their own,” the commission stated.

The European Commission ordered Apple to remove all the identified anti-steering provisions and further refrain from repeating the infringement or adopting practices of a similar nature.

“Market dominance is, as such, not illegal under EU antitrust rules,“ the commission noted. ”However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.”

Apple Versus Spotify

The complaint that triggered the EU investigation and the 1.8 billion euro fine was filed by music streaming app Spotify, which claimed that Apple was abusing its dominant position and stifling competition.

Apple responded to the European Commission decision and Spotify, stating it would appeal the fine.

“The decision was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast,” the company said in a statement, according to The Associated Press.

The tech giant pointed out that the EU decision would benefit Spotify, which has a 56 percent share of Europe’s music streaming market.

“Ironically, in the name of competition, today’s decision just cements the dominant position of a successful European company that is the digital music market’s runaway leader,” Apple said.

Spotify hailed the decision as “an important moment in the fight for a more open internet for consumers,” according to a March 4 blog post.

“This decision sends a powerful message—no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers,” Spotify stated.

During a news conference in Brussels, Margrethe Vestager, EU’s competition commissioner, said that Apple’s actions were illegal and affected “millions of European consumers who were not able to make a free choice as to where, how, and at what price to buy music streaming subscriptions.”

The commission’s investigation found that more than 20 percent of European consumers who would have signed up for Spotify’s premium service didn’t do so because they were left in the dark about subscription options because of Apple’s restrictions.

The EU fine comes as the Digital Markets Act is set to take effect on March 7 across the EU; it will impose strict regulations on “gatekeeper” firms, with the threat of hefty fines for violations. The act is meant to prevent Big Tech firms from abusing their market dominance.

Ms. Vestager said that the commission will be carefully looking at Apple to check whether the company is following the new regulations.

“Apple will have to open its gates to its ecosystem to allow users to easily find the apps they want, pay for them in any way they want, and use them on any device that they want.”