Brussels slapped Apple with a hefty fine of 1.84 billion euros ($2 billion) on Monday, March 4 marking the tech giant’s first-ever penalty for violating EU regulations.
The fine was imposed due to Apple’s actions hindering competition from music streaming competitors through restrictions imposed on its App Store.
The European Commission accused Apple last year of obstructing Swedish streaming service Spotify and others from informing users about payment alternatives outside of the App Store. This charge stemmed from a complaint lodged by Spotify in 2019.
The Commission declared on Monday that Apple’s restrictions amounted to unfair trading conditions, a relatively new argument in antitrust cases.
This argument was also used by the Dutch antitrust authority in a 2021 ruling against Apple, prompted by complaints from dating app providers.
As part of its decision, the Commission ordered Apple to cease such practices.
Apple announced its intention to appeal the decision. The appeal process, which will take place at the General Court in Luxembourg, Europe’s second-highest court, is anticipated to span several years.
In the interim, Apple is obligated to pay the fine and adhere to the EU’s directives.
Following the announcement, Apple’s shares experienced a 3% decline.
The penalty imposed on Apple also marked the first instance where the Commission had included a deterrent lump sum in addition to an antitrust fine.
This punitive measure far exceeds the initially anticipated fine of 500 million euros, as indicated by sources familiar with the matter.
The fine comprised a basic element of 40 million euros – described by European Competition Commissioner Margarethe Vestager as a “parking ticket” for the U.S. tech giant – plus 1.8 billion euros slapped on top as a deterrent.
She said the 1.84 billion euros total is equal to 0.5% of Apple’s global turnover.
However, Apple criticized the decision, saying in a statement it “was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast”.
“The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation,” it said.
Apple Accused Of Stifling Competition
Vestager said, “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,” she added.
While Spotify welcomed the EU decision, the company acknowledged that there were still other outstanding issues to be addressed in different areas.
“And while we are pleased that this case delivers some justice, it does not solve Apple’s bad behavior towards developers beyond music streaming in other markets around the world,” the company said in a statement.
Despite the substantial amount of the fine, analyst Ryan Reith at the tech and services company IDC stated that Apple can handle it without any immediate financial strain.
“I believe this is another step in the ongoing process of breaking down some of the walled gardens that Apple has created around its ecosystem,” he said.
Vestager’s directive to Apple to eliminate its App Store restrictions aligns with the requirements outlined in the new EU tech regulations known as the Digital Markets Act (DMA), which Apple must adhere to by March 7, 2024.
However, the fine imposed on Apple amounts to only a fraction of the penalties levied by the EU regulator against Alphabet’s Google, totaling 8.25 billion euros across three cases in the past decade.
In a departure from the music streaming dispute, Apple is attempting to resolve another EU antitrust inquiry by proposing to open its tap-and-go mobile payment systems to competitors.
EU regulators, following consultations with competitors and users, are expected to accept Apple’s proposal without imposing any additional fines.
($1 = 0.9217 euros)
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