The European Commission is issuing antitrust charges against Apple over concerns about the company’s App Store practices. The Commission has found that Apple has broken EU competition rules with its App Store policies, following an initial complaint from Spotify back in 2019. Specifically, the Commission believes Apple has a “dominant position in the market for the distribution of music streaming apps through its App Store.”
The EU has focused on two rules that Apple imposes on developers: the mandatory use of Apple’s in-app purchase system (for which Apple charges a 30 percent cut), and a rule forbidding app developers to inform users of other purchasing options outside of apps. The Commission has found that the 30 percent commission fee, or “Apple tax” as it’s often referred to, has resulted in higher prices for consumers. “Most streaming providers passed this fee on to end users by raising prices,” according to the European Commission.
“Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers,” says a statement from the EU. “This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices.” The EU has also sent Apple a statement of objections, which is essentially a list of how the Commission believes Apple has violated competition rules.
This is the initial, formal stage of antitrust proceedings against Apple, and the company will have the chance to respond to the commission’s list of objections. Apple faces a fine of up to 10 percent of its annual revenue if it’s found guilty of breaking EU rules, which could be as high as $27 billion based on Apple’s annual revenue of $274.5 billion last year. Apple could also be forced to change its business model, which has more damaging and lasting effects than a fine.
Central to this entire case is what’s known as the “Apple tax,” the 30 percent cut that Apple takes on subscriptions. Companies like Netflix and Spotify have long opposed this cut, but Apple has argued that the revenue contributes toward the costs of maintaining the App Store and enforcing its various content, privacy, and security policies.
Spotify previously claimed that Apple uses its App Store to stifle innovation and limit consumer choice in favor of its own Apple Music service. That complaint was followed up with a similar one by Rakuten, alleging that it’s anti-competitive for Apple to take a 30 percent commission on ebooks sold through the App Store while promoting its own Apple Books service.
Epic Games also joined many developers and companies opposing Apple’s App Store policies, and filed an antitrust complaint with the EU earlier this year. It’s part of an ongoing dispute with Apple, after the Fortnite developer publicly criticized Apple’s App Store policies around distribution and payments. This resulted in Epic attempting to circumvent Apple’s 30 percent cut on in-app purchases in Fortnite, and Apple quickly removing the game from its App Store.
Apple has eased some of its policies over the past year, as the pushback against the App Store grows louder. Apple now lets some video streaming apps bypass the App Store cut, and it has reduced its App Store commission rate to 15 percent for any developer that earns less than $1 million in annual revenue.