Apple: Pioneering innovator or digital gatekeeper?

The Commission announced yesterday the launch of two probes into Apple’s App Store and Apple Pay. These will investigate whether Apple’s (i) rules for developers distributing apps via the App Store and (ii) conduct in connection with its Apple Pay system violate EU competition rules.

App Store

The App Store investigation will focus on competition in EEA markets where developers are competing with Apple’s own apps, in particular in the music streaming and ebook/audiobook markets. This follows complaints by music streaming service Spotify and ebook distributor Kobo on the impact of App Store rules on competition in these markets, amongst others.  

It will investigate restrictions Apple imposes on developers mandating the use of Apple’s own in-app purchase system to distribute paid digital content (charging up to 30% commission) and preventing them from informing users of cheaper ways to purchase content. Margrethe Vestager, European Commissioner for Competition, warned that Apple has “obtained a ‘gatekeeper’ role” in the distribution of apps and content to users of Apple products, and that the Commission must “ensure that Apple's rules do not distort competition in markets where Apple is competing with other app developers”. 

In a preliminary investigation, the Commission found that Apple’s competitors in music streaming have ether disabled in-app subscriptions or raised in-app prices, and could not inform consumers of cheaper alternative subscription possibilities. The Commission also noted that the obligation to use Apple Pay gives Apple control over the customer relationships of its competitors, separating them from their customer data whilst potentially giving Apple valuable data about their activities.

Apple Pay

Apple Pay is Apple’s proprietary mobile payment system, which enables users to pay for goods or services online or instore directly from their iPhone. The Commission will investigate the conditions imposed by Apple on merchants wishing to integrate Apple Pay into their apps, the reservation to Apple Pay of the ‘tap and go’ technology embedded into iOS devices for instore payments and alleged refusals to allow rivals access to Apple Pay, with Vestager noting “It is important that Apple’s measures do not deny consumers the benefits of new payment technologies, including better choice, quality, innovation and competitive prices”.

Reaction

In response, Apple said it was “disappointing” that the Commission was advancing “baseless complaints from a handful of companies who simply want a free ride”, but that it welcomed the opportunity to show the Commission the steps it has taken to ensure customers “have access to the best app or service of their choice, in a safe and secure environment”.

Practitioners and tech companies alike should pay particular heed to the Commission’s approach to market definition and market dominance in these probes. With the Commission simultaneously consulting on new investigative powers seeking to address structural problems in tipping markets (where one powerful player weighs the market heavily towards it) – see here - these investigations mark the opening of yet another new front in its broader efforts to tackle Big Tech.