Brussels seeks to punish Apple’s leadership and its well-known ‘ecosystem’. The European regulator accuses the technology giant of abusing its dominant position in the music download market through its App Store.
Apple, like many other companies in different markets, has become the leader in entertainment thanks to its well integrated ecosystem that includes electronic devices, software and services, but in the eyes of the Europeans, that means the company is disloyal with its market practices.
The European Commission assumes that the App Store plays a central role in the digital economy, since it facilitates access to purchases, news, music or movies through applications. The App Store is home to more than 1.8 million apps.
On the music side, this tech giant wields great market power in accessing music download applications among owners of Apple devices.
In this market, it has a monopoly, the Commission says. Not only does it control the sole access to apps on Apple devices, but it offers its own music streaming service that rivals like Spotify and Deezer cannot access.
And that is where the possible abuse of market position comes, because Apple not only charges 30% commissions to rivals who use the App Store, but also prevents them from contacting customers to inform them of other cheaper possibilities to formulate the subscription, such as going to the web pages of the developers of these applications.
“Our preliminary conclusion is that Apple violates the rules of competition. Apple Music competes with other streaming music services, but Apple charges its rivals in the App Store with high commissions and prohibits them from informing about alternative subscription options. Consumers lose out,” said Margrethe Vestager, Vice President of the European Commission and Head of Competition.
Consumers lose out because they are the ones who ultimately pay the added commission. The Brussels investigation has detected that the costs are passed on to the user by increasing prices, usually from 9.99 euros, to 12.99, while Apple Music maintains its rate at 9.99 euros. As a result, Apple’s conditions negatively affect its rivals, increasing their costs, and reducing their profit margins.
To avoid this extra cost, some platforms, such as Spotify, have decided to stop offering paid subscriptions through Apple’s digital store.
These are the results of the investigation that the European Commission opened in June following a complaint from Spotify, in which it made this double complaint, as Apple charged them a high commission to use their application, and at the same time, it prevents them from contacting their customers.
In practice, this decision by Apple leaves them with two alternatives, either pay the commissions and increase their prices or lose access to Apple devices for paid subscriptions.
Apple’s first reaction has been to deny that it is abusing its position and accuse the whistleblower, Spotify, of wanting to take advantage of its services without paying for it.
“You want all the benefits of the App Store but you don’t think you have to pay for it,” Apple said in a statement.