EU regulators on Friday accused Apple of disrupting competition in the music streaming market and chose Spotify in a case that could lead to a hefty fine and changes in the iPhone maker’s lucrative business practices.
The tech giant has been accused of “abusing its dominant market position” by letting music app developers use Apple’s in-app purchasing system to distribute their services.
App developers must pay Apple a 30% commission on all subscriptions coming in through the App Store under the license agreement.
The EU’s preliminary findings mark the first time Brussels has filed anti-competitive lawsuits against Apple, although the two sides have faced serious clashes in the past, most notably a multi-billion dollar tax dispute involving Ireland.
Apple, Spotify and other parties can now respond. If the case goes through, the EU could demand concessions and possibly fine up to 10% of Apple’s global sales – a whopping $ 27 billion, although it rarely imposes the maximum fine.
EU regulators on Friday accused Apple of distorting competition in the music streaming market and chose Spotify in a case that could lead to a hefty fine and changes in the iPhone maker’s lucrative business practices.
Apple found itself in the crosshairs of the European Commission after Sweden-based Spotify complained two years ago that the US technology giant unfairly restricted rivals to its own music streaming service Apple Music on iPhones.
The EU competition authority, in its so-called statement of objections setting out the charges, said the issue was related to Apple’s restrictive rules for its App Store that force developers to use their own in-app payment system and keep them from inform users about other purchasing options.
European Competition Commissioner Margrethe Vestager said there were clear signs that Apple’s App Store rules were affecting the business development of music streaming rivals and that app developers were influencing more widely.
They (app developers) depend on the Apple App Store as gatekeepers to access users of Apple’s iPhones and iPads. This significant market power cannot go unnoticed, as the conditions for accessing the Apple App Store are essential to the success of app developers, ”she told a news conference.
Vestager said Apple should end restrictive practices and refrain from anything that would replicate them.
She also said other authorities were investigating the matter.
“We are in contact with other jurisdictions doing similar business, which could be the Dutch, the Australians, the Americans,” she said, adding that she was also interested in the app gaming market, although it was still early days.
Margrethe Vestager, European Commissioner for Competition, said there were clear signs that Apple’s App Store rules were affecting the business development of music streaming rivals and that app developers were influencing more widely.
Apple dismissed the EU charge.
“Spotify has become the largest music subscription service in the world and we are proud of the role we have played in it,” said a statement.
‘They want all the benefits of the App Store, but feel they don’t have to pay for it. The Commission’s argument on behalf of Spotify is the opposite of fair competition, ‘it added.
Spotify welcomed the EU’s move, describing it as “a critical step to hold Apple accountable for its anti-competitive behavior, to ensure meaningful choice for all consumers and a level playing field for app developers.”
One of Europe’s few global consumer technology success stories, Spotify is the market leader in music streaming with 356 million active users and 158 million paid subscribers.
Apple Music, launched more recently in 2015, is estimated to have more than 70 million subscribers, although the company does not provide a separate figure for that portion of its business.
Apple found itself in the crosshairs of the European Commission after Sweden-based Spotify complained two years ago that the US technology giant falsely restricted its rivals to its own music streaming service Apple Music on iPhones
Competition between the two companies has intensified in recent weeks, with both seeking to build their customer base through supremacy in the podcast market.
“European consumers expect and deserve access to a full range of music streaming services without restricting their choices or unfairly inflating prices by internet gatekeepers,” said European consumer organization BEUC.
The EU indictment comes a week before Apple confronts Epic Games in a US antitrust lawsuit following a lawsuit from the ‘Fortnite’ maker alleging that Apple abused its dominance in the mobile app market.
Epic has complained to the Commission on the same issues.
Last month, the UK’s Competition and Markets Authority opened an investigation into Apple after complaints from the iPhone maker about terms and conditions for app developers were unfair.