The European Commission has slapped Apple, the iPhone maker with a $2 billion (Sh252 billion) fine for stifling competition from rival music streaming service Spotify.
According to the ruling, the Commission said the tech giant broke the EU antitrust rules by “restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem”.
It says the company abused its dominant position on the market for the distribution of music streaming apps to iPhone and iPad users (‘iOS users') through its App Store.
The two companies have been at war for several years with Spotify luring users away from Apple’s iTunes while accusing it of exploiting its dominance to stifle innovation.
"In their long-running conflict, each has made incursions into the other’s territory," a report by WIRED reads.
When Apple launched its own streaming service, Apple Music, in 2015, Spotify claimed Apple was able to undercut the platform’s prices because Apple did not have to pay the same App Store fees as rivals.
In 2019, Spotify began an ambitious podcast spending spree, splashing out on high-profile shows, in another direct challenge to Apple.
The feud’s early days were civil, with few barbs traded in public.
“We worry about humanity being drained out of music,” said Apple CEO Tim Cook in 2018, a cryptic comment widely interpreted as a jibe at Spotify’s heavy use of algorithmic recommendations, the report further states.
But, Spotify became more outspoken as EU politicians started to call for laws to reign in Big Tech.
The €1.8 billion (Sh278 billion) fine on Apple announced by the European Commission today shows that its tactics are working.
Spotify then lodged a legal complaint with the EU challenging the restrictions and fees Apple places on developers listing their apps in the App Store.
In the ruling, the EU agreed with Spotify saying Apple’s App Store restrictions amount to unfair trading conditions that may have led iOS users to pay significantly higher prices for music streaming subscriptions.
“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” said Margrethe Vestager, the EU’s competition chief, in a statement.
“They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem,” she added.
Apple has since responded by saying it would appeal against the decision.
Apple’s App Store rules restrict music streaming companies and other apps from informing their users on Apple devices about how to upgrade or sign up for subscription offers outside of the app.
Instead, app users can only see sign-up options for in-app subscriptions via Apple’s payments system, where prices are likely to be higher because Apple takes a cut.
Some app makers, including Spotify, do not offer in-app purchases because they don’t want to pay this commission.
"Some consumers may have paid more because they were unaware they could pay less if they subscribed outside the app,” Vestager said.
“This is illegal under EU antitrust rules.” Apple, which says the EU has failed to provide credible evidence of consumer harm, has pledged to appeal. According to the Financial Times, Apple has never been fined before for antitrust infringements by Brussels, but the company was hit in 2020 with a €1.1billion (Sh17 billion) fine in France for alleged anti-competitive behaviour.
The penalty was revised down to €372 million (Sh57 billion) after an appeal.
