European Commission fines Apple €1.8 billion for anti-competitive App Store rules

The European Commission has this week imposed a €1.8 billion fine on Apple for abusing its dominant position in the market for the distribution of music streaming apps through its App Store.  The fine, which is the culmination of a five-year investigation following a complaint by Spotify, is notable not only for the fact it is the Commission’s third largest antitrust fine in history, but also because it was increased by the Commission from approximately €40 million – in recognition of the need to ensure deterrence of Apple and other would-be contraveners of similar size.  The fine is also timely – coming days before designated gatekeepers are required to comply with the EU Digital Markets Act, which contains prohibitions on the very conduct engaged in by Apple.

Background

In order to distribute apps to iOS users through the App Store, app developers must comply with Apple’s terms and conditions.  For the past ten years, these have contained so-called “anti-steering provisions”, which restrict developers from informing their users about the possibility of purchasing alternative music subscription services outside of the app or providing any instructions about how to subscribe to such offers.  For example, developers could not inform users within their apps about the prices of subscription offers available outside of the app or about the price differences between in-app subscriptions sold through Apple's in-app purchase mechanism and those available elsewhere.  Developers were also banned from including links in their apps leading users to the developer's website (on which alternative subscriptions could be purchased) or contacting their users (such as by email) about alternative pricing options after they had set up an account.  

In 2019, Spotify, the music streaming provider and a competitor of Apple Music, filed a complaint with the European Commission in relation to these anti-steering provisions and their impact on competition for music streaming services.  In March 2020, an anonymous e-book and audiobook distributor filed a similar complaint in relation to the impact on competition for e-books and audiobooks.  This prompted the Commission to commence a formal investigation in June 2020 to assess whether these provisions contravened EU competition law.  

The Commission’s Decision

In March 2024, the European Commission issued its decision, finding that Apple had, through its anti-steering provisions, abused its dominant position in the market for the distribution of music streaming apps to iOS users through its App Store.  The Commission found that the anti-steering provisions constituted unfair trading conditions in contravention of Article 102(a) of the Treaty on the Functioning of the European Union.  In the Commission’s view, these provisions were neither necessary nor proportionate to protect Apple’s commercial interests and negatively affected the interests of iOS users by preventing them from making an informed decision about where and how to purchase music streaming subscriptions.  

The Fine

In light of these findings, the European Commission imposed a fine of €1.8 billion on Apple.  The fine is notable as the third largest antitrust fine imposed by the Commission in history – following the €4.34 billion fine and the €2.42 billion fine imposed on Google in 2018 and 2017 respectively.  Also of note is the approach taken by the Commission in assessing the quantum of the fine.  The Commission explained that while the standard approach would have resulted in a fine of approximately €40 million (having regard to gravity and 10-year duration of the infringement), it was appropriate in the circumstances to increase the fine to €1.8 billion.  This, in the Commission’s view, would ensure the fine would be sufficient to deter Apple and other would-be contraveners of a similar size from engaging in the same or similar infringements in the future.  The Commission also sought to emphasise the monetary harm caused by the anti-steering provisions – namely the fact that iOS users were forced to pay significantly higher prices for music streaming subscriptions, as well as the non-monetary harm resulting from the degraded user experience.

Implications

In response to the decision, Apple indicated it would appeal and criticised the Commission for failing to “uncover any credible evidence of consumer harm” and ignoring “the realities of a market that is thriving, competitive, and growing fast”.  It also referred to Spotify as the “primary advocate … and the biggest beneficiary” of the decision (having met with the Commission on 65 occasions during the investigation) – in circumstances where, according to Apple, Spotify holds a 56% share of the music streaming market in the EU and owes a large part of its success to Apple and its App Store.

The Commission’s decision is also timely.  It concerns conduct that is also prohibited by the Digital Markets Act (DMA), with which designated gatekeepers are required to comply by 7 March 2024.  Indeed, article 5(4) of the DMA is directed towards anti-steering provisions – imposing an obligation on gatekeepers to allow app developers, free of charge, to promote offers to, and communicate, contract and close transactions with, end users outside of the gatekeeper’s app store.  As a result, and in combination with the significant deterrent effect of the fine imposed on Apple, anti-steering provisions will become increasingly uncommon – if not extinct – as gatekeepers move towards complying with the DMA. 

“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store. They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over €1.8 billion.”  

Margrethe Vestager, Executive Vice-President in charge of competition policy