The European Commission has fined Apple over €1.8 billion for abusing its dominant position on the market for the distribution of music streaming apps to iPhone and iPad users (‘iOS users’) through its App Store. In particular, the Commission found that Apple applied restrictions on app developers which prevented them from informing iOS users about alternative and cheaper music subscription services available outside of the app (‘anti-steering provisions’). This breached EU antitrust rules. This follows a Commission investigation which started in June 2020.
Apple is currently the sole provider of an App Store where developers can distribute their apps to iOS users throughout the EEA. Apple controls every aspect of the iOS user experience and sets the terms and conditions that developers need to comply with to be on the App Store and be able to reach iOS users in the EEA.
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. In particular, the anti-steering provisions ban app developers from:
- Informing iOS users within their apps about the prices of subscription offers available on the internet outside of the app.
- Informing iOS users within their apps about the price differences between in-app subscriptions sold through Apple’s in-app purchase mechanism and those available elsewhere.
- Including links in their apps leading iOS users to the app developer’s website on which alternative subscriptions can be bought. App developers were also prevented from contacting their own newly acquired users, for instance by email, to inform them about alternative pricing options after they set up an account.
The Commission has concluded that Apple’s anti-steering provisions amount to unfair trading conditions, in breach of Article 102(a) of the Treaty on the Functioning of the European Union (‘TFEU’). These anti-steering provisions are neither necessary nor proportionate to protect Apple’s commercial interests in relation to the App Store on Apple’s smart mobile devices and negatively affect the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions to use on their device.
According to the Commission, Apple’s conduct, which lasted for almost ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission fee imposed by Apple on developers and passed on to consumers in the form of higher subscription prices for the same service on the Apple App Store. 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 fine
The Commission set the fine based on the Commission’s 2006 Guidelines on fines. It considered the duration and seriousness of the infringement as well as Apple’s total turnover and market capitalisation.
In addition, the Commission decided to add to the basic amount of the fine an additional lump sum of €1.8 billion to ensure that the overall fine imposed on Apple is sufficiently deterrent. It says this is necessary because a significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for. It also says 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.
The Commission has also ordered Apple to remove the anti-steering provisions and to refrain from repeating the infringement or from adopting practices with an equivalent object or effect in the future.
In accordance with the EU-UK Withdrawal Agreement, the EU continues to be competent for this case, which was initiated before the end of the transition period for the UK. The EU will reimburse the UK for its share of the amount of the fine collected by the EU once the fine has become definitive. This may not be for a while, as Apple has said that it will appeal. As well as EU competition law, Apple will also be required to comply with the Digital Markets Act from 7 March (and eventually, the UK’s Digital Markets, Competition and Consumers Bill, once in force).
