Apple faces a set of probes from Margrethe Vestager that show the European Union’s powerful antitrust chief is trying to rewrite big tech’s rulebooks.
Apple’s “gatekeeper” position for apps and payments makes it the latest target for the Dane, who is also planning to escalate a probe into Amazon.com Inc.’s role in online retail. Regulators “need to ensure that Apple’s rules do not distort competition” where it competes with rival apps for music streaming or books.
When the 52-year-old Vestager received an unprecedented second-term as the EU’s antitrust enforcer last year, she was determined to avoid lengthy probes that levied fines but failed to crack the power of online giants. Google has largely shrugged off some $9 billion in fines and antitrust orders that tried to stoke more competition for search services.
Aitor Ortiz, an analyst at Bloomberg Intelligence, said that the massive penalties in the Google case weren’t successful.
“This is not about the fines,” Ortiz said. “We saw it with Google, the fines don’t really have a deterrent effect.”
The EU will review whether Apple’s app store violates competition law by forcing software makers to use its own in-app payment system that typically takes a 30% cut of subscription fees. It will check if Apple unfairly curbs developers from telling users about other, cheaper payment methods. And it will also investigate whether Apple unfairly blocks other providers from using tap-and-go functionality on iPhones.
Just four years after hitting Apple with a record 13 billion-euro ($14.7 billion) tax bill, Vestager is pivoting to the company’s business behavior. It’s the latest in a growing list of EU probes into Silicon Valley, which have led to criticism from U.S. President Donald Trump and complaints about how tighter EU regulation is trying to tie down American companies.
The case is likely to be “big, complex and sophisticated” as the EU seeks to test new ideas on how some firms play a gatekeeper role for entire industries, said Nicolas Petit, a law professor at the University of Liege.
Apple said that the EU is responding to complaints from rivals that “simply want a free ride, and don’t want to play by the same rules as everyone else.”
“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies,” Apple said in a statement. “At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment.”
Shares of Cupertino, Calif.-based Apple rose 1.6% to $348.59 in New York trading Tuesday morning. CEO Tim Cook has previously called Vestager’s decision in the tax case “political crap” in a longer battle over how digital giants should be taxed in Europe.
Spotify Technology SA last year complained that Apple unfairly squeezes its music streaming service with ever-changing rules and a large cut of sales on the app store. Spotify said the EU investigations made it “a good day for consumers.”
The latest EU probes target a strategic area for company, which has gradually shifted focus from hardware to subscription-based services like Apple TV and Apple Music in search for other revenue streams. For the 2019 fiscal year ending September 28, 2019, revenues for Apple’s services grew 16% to $46.3 billion but they but they were still a fraction of its overall sales of $260.2 billion.
EU scrutiny of Apple’s businesses could widen. Regulators continue to look at parental control apps as well as gaming apps.
Ultimately, the EU may seek to give breathing space to companies facing pressure from tech giants as they expand into new areas, he said.
“The long game of European competition enforcers is to leave enough economic value on the table for smaller players” such as online merchants, app makers and news publishers, Petit said.