Apple hit with first ever EU fine following Spotify complaint

Apple has been hit with a fine of €1.84 billion (about $2 billion) by European Union antitrust regulators over its App Store rules, and has been told it cannot stop music services from advertising cheaper subscription deals outside of Apple’s store. News of today’s fine was earlier reported by the Financial Times, and comes ahead of Apple’s huge shakeup of the iPhone’s app distribution rules due to the EU’s Digital Markets Act.

In a press release on Monday, the EU Commission said its 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,” in addition to preventing instructions for subscribing to such offers.

“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” said Margrethe Vestager, Executive Vice-President in charge of competition policy. “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.”

The Commission said it took into account the “duration and gravity of the infringement” when setting the fine, as well as Apple’s total turnover and market capitalization, while also factoring in “incorrect information” submitted by Apple during the administrative procedure.

The EU’s investigation dates back to 2020 and was announced after Spotify filed an antitrust complaint over Apple’s so-called “Apple Tax.” As well as complaining about the 30 percent commission, Spotify took issue with App Store rules that it said restricted communications with its customers and limited its ability to market and promote deals.

Over time, the commission’s investigation has homed in on App Store rules that prevent developers from telling their users about alternatives to Apple’s own payment options. In February 2023, the commission said its “preliminary view” was that Apple’s “anti-steering obligations” represent “unfair trading conditions” and argued that its App Store policies were “neither necessary nor proportionate,” could result in users paying more, and limited consumer choice.

Apple has already made some concessions. In 2021, it said that developers could advertise payment methods outside of the iOS app via communications such as email. Then, in early 2022, it started allowing developers to link out to their own sites from within the iOS apps themselves. But this second change only applied to so-called “reader apps” for services like Netflix, Kindle, or Spotify that are designed primarily to provide access to digital content, and developers needed to request an “entitlement” before they could add an external link. Bloomberg, which earlier reported on the EU’s antitrust fine, said Spotify criticized Apple’s rule changes as being “just for show.”

The EU’s fine comes as Apple is preparing to overhaul its app distribution rules in the EU in order to comply with the Digital Markets Act (DMA) from March 7th, for the first time allowing third-party app marketplaces on the iPhone. But app developers have been critical of Apple’s approach, which includes charging a commission of up to 17 percent for developers who use their own payment method or link out to their own website, plus an annual €0.50 fee per app install after the first million. Spotify said the changes are “an unworkable alternative that will stifle [developers’] businesses immediately.”

On March 1st, Spotify also published an open letter backed by 33 other companies and associations that spotlighted concerns with Apple’s DMA compliance. In the letter, Spotify claimed that the EU’s response to the proposal will “serve as a litmus test of the DMA and whether it can deliver for Europe’s citizens and economy.”

Meanwhile, US courts have also ruled that Apple has to allow developers to link out to other payment methods as a result of a legal challenge from Fortnite developer Epic Games. But when Apple did start allowing developers to link out, it maintained that it would still take a cut of up to 27 percent from any digital purchases — a small reduction over its typical 30 percent rate. Apple’s critics called out the changes, with Spotify saying they showed that Apple “will stop at nothing to protect the profits they exact on the backs of developers and consumers under their app store monopoly.”

Alongside its investigation into Apple’s App Store policies, the European Commission has also been looking at Apple’s policy of restricting the iPhone’s tap-top-pay NFC (near-field communication) to its own wallet and payment services. As a result of the investigation, Apple has offered to let third-party mobile wallet and payment providers use the iPhone’s NFC feature for payments.