If found guilty, Cupertino could have to cough over $27bn
The European Commission today said it believes Apple has abused its absolute control of app distribution on iOS, resulting in the disadvantage of third-party streaming services that compete with Apple Music. In its Statement of Objections, the Commission took umbrage with Apple’s strict (and non-negotiable) terms that all developers must comply with, as well as the App Store’s position as the sole available method of app distribution on iOS (and other similar platforms, like iPad OS). Per the App Store’s terms, Apple has forced developers to use its own payment infrastructure, where it takes a 15 to 30 per cent cut. Additionally, the use of other in-app payment systems (like PayPal or Stripe) are strictly prohibited, and inevitably result in an app being removed until it re-enters compliance. The Commission noted that Apple users tend to be loyal to the platform, and seldom switch to competing operating systems, resulting in developers having limited (if any) leverage in disputes. Although Apple’s terms allow for subscriptions bought beyond the walled garden of the App Store to be used, developers are banned from marketing them to users within the app, which the Commission described as an “anti-steering provision.” The EU can fine Apple up to 10 per cent of its annual revenue, a sum which could amount to over $27bn based on fy2020’s top line; it can also force Apple to change its rules for users resident in the bloc. In the background, the EC is also conducting a separate probe into Apple over how it treats payment providers and developers in its Apple Pay system. Streaming services (and any other third party that relies on monthly subscription revenue) routinely charge more for subscriptions bought through the App Store, to account for Apple’s hefty cut. Given streaming apps made by Apple aren’t subject to this “tax,” they’re able to more effectively compete on price. The Commission said it believes that Apple’s policies have distorted the market for music streaming services, resulting in higher costs for consumers.
