European regulators are reportedly set to slap a 500 million euro ($539 million) penalty on Apple over allegations of breaching the bloc’s competition law, the Financial Times reported on Sunday, citing unnamed sources familiar with the matter.
Last year, the European Commission accused the Silicon Valley behemoth of distorting competition in the music-streaming industry by failing to inform iPhone users of other, cheaper, alternative music-streaming platforms that were available outside the App Store.
Spotify Accused Apple Of Hindering Third-Party Music Services To Favor Apple Music
Brussels started its investigation into the company after Spotify filed a formal complaint to regulators in 2019, alleging that Apple hindered third-party music services on its devices to favor its music streaming platform, Apple Music.
In most regions around the world, Apple’s App Store prohibits companies like Spotify from billing users for subscriptions directly within their apps. Instead, the platforms are forced to use the App Store’s billing service, from which Apple takes a cut of up to 30% as commission.
Spotify, which is Apple Music’s biggest competition, is one of the most popular music streaming platforms in the US and UK, among other countries, according to a report by economists at Analysis Group.
According to estimates, iPhone users in the US spend 50% more time on Spotify than Apple Music. Meanwhile, in the UK, the gap between both platforms is even larger.
EU regulators formally charged Apple in an anti-competitive probe in 2021 but narrowed the scope of the investigation in February last year.
Initially, Brussels alleged that the company had “abused its dominant position” by imposing its in-app purchase payment technology on music streaming apps and developers, and restricted their ability to inform iOS users of other music subscription services that were available.
The Commission later dropped the former charge and said it would focus on Apple’s anti-steering obligations. This means the probe will now look at whether Apple had restricted apps from informing their users about cheaper subscription alternatives outside of its native App Store and thus violated EU competition laws.
Sources told FT that the findings of the investigation will lead to the Commission accusing Apple of abusing its position of power and banning its “unfair trading conditions” concerning its subscription policies for music streaming services.
If found guilty, the fine would be one of the most substantial financial penalties to be imposed by the EU on a major tech company. Brussels has previously imposed large anti-trust fines against Google and Microsoft but has never penalized Apple.
Apple Faced With 370 Million Euro Fine in France For Anti-Trust Behavior
However, this is not the first time Apple has been charged for antitrust behavior. In 2020, the French competition watchdog imposed a 1.1 billion euro fine on the tech giant for allegedly pressuring premium resellers into fixing prices of its products other than the iPhone, such as Mac and iPads, and abusing the economic dependence of its outside resellers.
The regulator accused Apple and two global electronics wholesalers – Tech Data and Ingram Micro – of agreeing not to compete with each other while preventing independent resellers from competing, thereby “sterilizing” the wholesale market for Apple products.
Apple successfully appealed the ruling and managed to lower the fine to 371.6 million euros, which is roughly a third of the value of the original penalty. This was possible because the court decided to drop one of the charges related to price fixing, lowering the rate originally used to calculate the fine.
Also Read: Apple Begins Special Training For Employees As Vision Pro Launch Edges Closer
EU Set To Enact Digital Markets Act In March That Will Unlock iOS For Developers
The latest fine is part of the enactment of the Bloc’s landmark Digital Markets Act, which is scheduled for March. The new law aims to address anti-competitive practices from big tech players deemed as “gatekeepers” of the tech market, which includes companies such as Apple, Google, Amazon, and Meta.
The Digital Markets Act will force Apple to allow third-party developers to distribute their apps outside of the App Store and for those applications to bill customers directly, instead of using Apple’s billing service.
Apple has already started to make moves in that direction by announcing new changes to its iOS operating system, Safari browser, and the App Store in the EU, allowing developers to distribute their apps to iPhones and other Apple devices via third-party marketplaces.
The EU Commission’s fine on the Cupertino, California-headquartered company is expected to be announced early next month.
