Brussels, 4 March 2024
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 preventing them from informing iOS users about alternative and cheaper music subscription services available outside of the app (‘anti-steering provisions’). This is illegal under EU antitrust rules.
The infringement
Apple is currently the sole 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 need to abide by to be present 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.
Today’s decision concludes 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 for the protection of 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 for use on their device.
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.
Fine
The fine was set on the basis of the Commission’s 2006 Guidelines on fines (see press release and MEMO).
In setting the level of the fine, the Commission took into account the duration and gravity of the infringement as well as Apple’s total turnover and market capitalization. It also factored in that Apple submitted incorrect information in the framework of the administrative procedure.
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. Such lump sum fine was necessary in this case because a significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for under the revenue-based methodology as set out in the Commission’s 2006 Guidelines on Fines. In addition, 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 concluded that the total amount of the fine of over €1.8 billion is proportionate to Apple’s global revenues and is necessary to achieve deterrence.
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.
Background to the investigation
In June 2020, the Commission opened formal proceedings into Apple’s rules for app developers on the distribution of apps via 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 by another Statement of Objections clarifying the Commission’s objections, to which Apple responded in May 2023.
Procedural background
Article 102 of the TFEU and Article 54 of the European Economic Area Agreement prohibit the abuse of a dominant position.
Market dominance is, as such, not illegal under EU antitrust rules. However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.
Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. These proceeds are not earmarked for particular expenses, but Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU and reduce the burden for taxpayers.
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 (“continued competence case”) 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.
More information on this case will be available under the case number AT.40437 in the public case register on the Commission’s competition website, once confidentiality issues have been dealt with.
Action for damages
Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the company concerned, damages may be awarded by national courts without being reduced on account of the Commission fine.
The Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages. More information on antitrust damages actions, including a practical guide on how to quantify antitrust harm, is available here.
Quote(s)
For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store. They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over €1.8 billion.
Margrethe Vestager, Executive Vice-President in charge of competition policy
Remarks by Executive Vice-President Vestager on the adoption of an antitrust decision against Apple over abusive App store rules for music streaming providers
Brussels, 4 March 2024
Today, the Commission has fined Apple €1.8 billion for abusing its dominant position on the market for the distribution of music streaming apps.
Apple did so by restricting app developers’ ability to inform users of Apple devices about alternative, cheaper options to purchase music available on the internet outside of the Apple ecosystem.
This is illegal. And it has impacted millions of European consumers, who were not able to make a free choice as to where, how, and at what price to buy music streaming subscriptions.
But let’s take a step back. What is this case all about and in what way did Apple impose such restrictions?
This case is about something that many of us do on a daily basis: we would listen to music on our your iPhone or iPad through a music streaming service.
You go to the Apple App Store, you download your favourite music streaming app, and you start listening to music with a free trial to get started.
After a while, you get to enjoy the music, you like your app. And you would be willing to pay for the service to get additional features or to avoid advertising.
And the music streaming service of course is also very interested in upgrading you to a paying customer. Both to be able to provide better services and be paid for it.
For you as a user, there are essentially two options: you take out a monthly subscription inside the app, if the music streaming app developer allows for such in-app subscriptions. In this case, Apple would charge the music streaming service a 30% commission fee on every single Euro that you would pay. The music streaming service provider passes that fee to you as a user. So the in-app subscription gets more expensive.
Or you can subscribe through the website of the music streaming provider. If you do so, Apple would allow you to use that subscription in the app under the so-called reader and multiplatform rules. Apple does not charge any fee in this case, so the out-of-app subscription price is lower.
One might think that this is a pretty straight-forward case of consumer choice: the user can either use Apple’s in-app purchasing services and pay the additional 30%. Or the consumer can choose not to pay for those services and subscribe through the internet without paying the fee.
Exercising this choice is exactly what Apple made more difficult with its so-called ‘anti-steering rules’.
For a decade, Apple has restricted music streaming app developers from informing their consumers about cheaper options available outside of the app. Apple has done so by contractually imposing ‘anti-steering rules’ on music streaming app developers.
Let me give you three examples of Apple’s anti-steering obligations:
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- First, music streaming developers were not allowed to inform their users, inside their own apps, of cheaper prices for the same subscription on the internet.
- Second, they were also not allowed to include links in their apps to lead consumers to their websites and pay lower prices there.
- And third, they were also not allowed to contact their own newly acquired users, for instance by email, to inform them about pricing options after they set up an account.
As a result, millions of European music streaming users were left in the dark about all available options. And Apple’s anti-steering rules also made consumers pay more for such services because of the high commission fee imposed on developers and passed on to consumers.
Apple imposed these anti-steering obligations on the music streaming providers. They had no other choice than to accept these terms, or else abandon the App Store. Apple with its App Store currently holds a monopoly in the market for the distribution of music streaming apps on Apple devices. For music streaming developers to reach Apple users in Europe, they have to be present on Apple´s App Store. And to do so, they have to comply with the mandatory and non-negotiable terms and conditions imposed by Apple.
Apple’s rules ended up in harming consumers. Critical information was withheld, so that consumers could not effectively make an informed choice. Some consumers may have paid more because they were unaware that they could pay less if they subscribed outside the app. And other consumers may not have managed to subscribe to their preferred music streaming provider at all, because they simply couldn’t find it.
The Commission found that Apple’s rules result in withholding key information on prices and features of services from consumers. As such, they are neither necessary nor proportionate for the provision of the App Store on Apple’s mobile devices.
We therefore consider them to be unfair trading conditions, as they were unilaterally imposed by a dominant company. They were capable of harming consumers’ interests. EU competition rules, and in particular Article 102 of the Treaty, prohibit these kinds of unfair trading conditions.
This is why, with today’s decision, we have ordered Apple to remove the anti-steering provisions and to refrain from similar practices in the future.
From now on, Apple will have to allow music streaming developers to communicate freely with their own users, be it within the app, or by email, or any other way of communicating.
Now, it is of fundamental importance to hold companies like Apple accountable for their violations of EU law.
If Apple abuses its dominant position, we will detect such illegal behaviour, we will bring it to an end and we will punish Apple for it.
That is why we decided to impose a fine of over €1.8 billion on Apple. The fine also includes an additional so-called “lump sum” to account for the non-monetary harm caused to consumers and to achieve deterrence.
The fine we impose today reflects both Apple’s financial power and the harm Apple’s conduct inflicted on millions of European users.
I think this case shows that competition law has a central role to play in our Digital Single Market.
Competition law is an important part of a wider toolbox of enforcement powers that we have at our disposal.
But it is not the only one. As you know, the Digital Markets Act – the DMA – is now also offering more choice, more freedom to both end users and business users of companies such as Apple, whose services were designated by the Commission as “gatekeepers”.
And, in a couple of days, on 7 March 2024, Apple will have to comply with the full list of “dos” and “don’ts” under the DMA. Among others, Apple can no longer impose rules, such as the anti-steering obligations, which were at the core of our investigation in this case. And this holds for any app on the App Store, not just music streaming apps.
You may have seen that Apple has recently announced a number of changes to its App Store business model.
At this stage, I cannot really comment on them in detail, but let me stress that we will carefully look into the details, to assess the changes and to take into account also the market feedback. Is it actually compliant with the DMA?
Apple will have to open the gates to its ecosystem, to allow end users to easily find the apps they want, pay for them in any way they want, and use them on any device they want.
Today’s decision shows that competition law continues to provide a very powerful basis to tackle illegal behaviour by companies like Apple to the benefit of consumers. And it will work hand in hand with the DMA to ensure that digital markets work and deliver for people.
Thank you.
Source: EU Commissi0n