The European Commission imposed a fine of more than 1.8 billion euros on Apple. The fine concerns abuse of a dominant market position in the distribution of music streaming applications to iPhone and iPad users (“iOS users”) through its App Store.
In particular, the Commission found that Apple imposed restrictions on app developers, preventing them from informing iOS users about alternative and cheaper music subscription services available outside the app (“anti-addressing provisions”). This is illegal under EU antitrust rules.
The transgression
Apple is currently the only provider of an App Store where developers can distribute their apps to iOS users throughout the European Economic Area (“EEA”).
Apple controls every aspect of the iOS user experience and sets the terms and conditions that developers must meet in order to be present on the App Store and reach iOS users in the EEA.
The Commission’s investigation found that Apple prohibits music streaming app developers from fully informing iOS users of alternative and cheaper music subscription services available outside the app and providing instructions on how to sign up for such offers. In particular, anti-stealth provisions prohibit app developers from:
· Inform iOS users within their apps about the prices of subscription offers available online outside of the app.
· Inform iOS users within their apps of price differences between in-app subscriptions sold through Apple’s in-app purchase mechanism and those available elsewhere.
· Including links in their apps that direct iOS users to the app developer’s website where alternative subscriptions can be purchased. App developers also couldn’t contact their new users, for example via email, to let them know about alternative pricing options after they’ve created an account.
The landmark decision concludes that Apple’s terms infringe Article 102(a) of the Treaty on the Functioning of the European Union (“TFEU”).
These terms are neither necessary nor proportionate to protect Apple’s commercial interests in relation to the App Store on Apple’s smart mobile devices and adversely affect the interests of iOS users, who cannot make informed and effective decisions about where and how to purchase a music streaming subscription for use on their device.
Apple’s conduct, which lasted nearly ten years, may have led many iOS users to pay significantly higher prices for music streaming subscriptions because of the high commission Apple charged developers and passed on to consumers in the form of higher subscription prices for the same service in the Apple App Store.
Additionally, Apple’s terms led to non-monetary harm in the form of a degraded user experience: iOS users either had to engage in a cumbersome search before finding their way to relevant offers outside the app, or they never signed up for a service because they didn’t. they found the right one themselves.
Fine
In determining the amount of the fine, the Commission took into account the duration and seriousness of the infringement, as well as Apple’s total turnover and capitalization. It also took into account that Apple submitted incorrect information as part of the administrative process.
In addition, the Commission decided to add to the basic amount of the fine an additional lump sum of EUR 1.8 billion to ensure that the total fine imposed on Apple is sufficiently dissuasive.
This flat-rate fine was necessary in this case because a significant part of the damage caused by the infringement consists of non-pecuniary damage, which cannot be properly calculated according to the revenue-based methodology as set out in the Commission’s guidelines for the 2006 fines.
In addition, the fine must be sufficient to deter Apple from repeating the present or similar infringement and to deter other companies of similar size from committing the same or similar infringement.
The Commission concluded that the total amount of the fine of more than €1.8 billion is proportionate to Apple’s worldwide revenue and is necessary to achieve deterrence.
The Commission also ordered Apple to delete the specified terms and to refrain from repeating the infringement or from adopting practices with an equivalent object or effect in the future.
Research background
In June 2020, the Commission initiated formal proceedings on Apple’s rules for app developers regarding the distribution of apps through the App Store. In April 2021, the Commission sent Apple a Statement of Objections, to which Apple responded in September 2021.
In February 2023 the Commission replaced the 2021 Statement of Objections with another Statement of Objections clarifying the Commission’s objections, to which Apple responded in May 2023.
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