Apple’s regulatory woes continue as EU slaps it with antitrust warning over App Store levies

April 30, 2021, 12:18 PM UTC

Apple Inc. was handed a European Union warning over its app payment rules, drawing one of the world’s toughest antitrust enforcers into a global battle over fees for downloads on smartphones and tablets.

The European Commission sent a so-called statement of objections to Apple on Friday, laying out how it thinks Apple abused its power as the “gatekeeper” for music-streaming apps on its App Store. The case backs complaints from Spotify Technology SA which accuses Apple of imposing its in-app purchase system to take a cut of its subscription fees.

The EU move comes days before a trial begins in California over Epic Games Inc.’s allegations that Apple’s standard fee violates U.S. antitrust law. Epic, which is also seeking to challenge Apple in the U.K., has garnered support in its U.S. lawsuit from Microsoft Corp. and smaller developers.

Apple’s “significant market power cannot go unchecked” as a key gatekeeper for apps, EU Competition Commissioner Margrethe Vestager told a press conference in Brussels.

The company’s regulatory woes have intensified in recent months as software firms criticize the levies Apple and Alphabet Inc.’s Google charge outside developers for using their digital distribution platforms. The company faces separate antitrust scrutiny from the U.K., the Netherlands and Russia.

Vestager took aim at Apple’s “high commission fees on each transaction in the App Store for rivals” and a ban on them “informing their customers of alternative subscription options.”

Spotify complained in 2019 that Apple unfairly squeezes its music streaming service with ever-changing rules and a large sales commission on the app store. It has said it was forced to “artificially” increase monthly subscriptions for its premium service to cover the extra costs.

Apple hit back, saying the EU’s “argument on Spotify’s behalf is the opposite of fair competition” and it was “proud for the role” it played in making Spotify the largest music subscription service in the world, a spokesperson said in a statement.

“Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store,” it said. “No store in the world” allows alternative deals to be advertised as Spotify is seeking from its iOS app, it said.

“They want all the benefits of the App Store but don’t think they should have to pay anything for that,” Apple said.

Apple reacted last year by halving the fees it charges to most developers who sell software and services on the App Store. It lowered a fee to 15% from 30% for developers who generate as much as $1 million in yearly revenue from their apps and those who are new to the store. Apple says many apps pay no fees in return for the company’s efforts to host and maintain the security of the store.

The move to send Apple a statement of objections raises the risk that the EU could order changes to its App Store or impose fines. Apple will have the chance to argue its case against any EU suspicions before regulators take a final decision. The EU has also been probing Apple over e-books and payments since last year.

The EU and Apple are separately waging a legal battle over a 13 billion-euro ($15.7 billion) tax dispute after the company won a first judgment overturning a landmark 2016 order for it to pay extra tax. The EU had ruled Apple’s tax deals with Ireland illegal. Apple has said it always obeyed the law.

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