LONDON — The European Union handed down its first antitrust fine against Apple on Monday, fining the US tech giant nearly $2 billion for unfairly favoring its own music streaming service by barring rivals like Spotify from telling customers how to pay for cheaper subscriptions outside of iPhone apps.
Apple has prevented streaming services from telling users about payment options available through their websites, which would avoid a 30% fee charged when people pay through apps downloaded from the iOS App Store, the European Commission, the executive arm of the 27- member of the block and the main antimonopoly authority, the Executor.
“This is illegal. And this affected millions of European consumers who could not make a free choice of where, how and at what price to buy a music streaming subscription,” said Margrethe Vestager, EU Commissioner for Market Competition, at a press conference in Brussels.
Apple — which is contesting the decision — did so for a decade, resulting in “millions of people paying two, three euros more a month for their music streaming service than they would otherwise have to pay,” she said.
It’s the culmination of a bitter, long-running feud between Apple and Spotify over music streaming supremacy. A complaint by the Swedish streaming service five years ago triggered an investigation that led to a fine of 1.8 billion euros ($1.95 billion).
The decision comes in the same week that new rules come into effect to prevent tech giants from taking over digital markets.
The EU has led a global effort to crack down on big tech companies, including three fines on Google totaling more than 8 billion euros, accusing Meta of distorting the online classifieds market and forcing Amazon to change its business practices.
Apple’s fine is so high because it includes an additional lump sum to deter it from offending again or other tech companies from similar violations, the panel said.
That’s not the only punishment the tech giant could face: Apple is still trying to resolve a separate EU antitrust investigation into its mobile payment service by promising to open up its tap-and-go mobile payment system to competitors.
Apple hit back at the Commission and Spotify, saying it would appeal the fine on Monday.
“The decision was made despite the Commission’s failure to find credible evidence of harm to consumers and ignores the reality of a thriving, competitive and rapidly growing market,” the company said in a statement.
He said Spotify would benefit from the EU’s move, arguing that the Swedish streaming giant met more than 65 times with the Commission during the investigation, that it holds a 56% share of the European music streaming market and does not pay Apple to use its App Store.
“Ironically, in the name of competition, today’s decision only solidifies the dominant position of a successful European company that is the inevitable leader in the digital music market,” Apple said.
Spotify said it welcomed the EU fine, without commenting on Apple’s accusations.
“This decision sends a strong message — no company, not even a monopoly like Apple, can abuse power to control how other companies interact with their customers,” Spotify said in a blog post.
The Commission’s investigation initially focused on two concerns. One was the iPhone maker’s practice of forcing app developers selling digital content to use its internal payment system, which charges a 30% commission on all subscriptions.
Those fees have turned into a significant part of Apple’s services division, which generated $85 billion in revenue during the company’s most recent fiscal year, which ended in September.
Various legal and regulatory developments in the US and Europe that threaten to reduce Apple’s App Store commissions have weighed on the company’s shares, which have fallen 9% this year, while the technology-driven Nasdaq Composite Index has gained 8%. Apple shares fell 2.5% in US trading on Monday
But the EU later shifted its focus to focus on how Apple prevents app makers from telling their users about cheaper ways to pay for subscriptions that don’t involve using the app.
The investigation found that Apple banned streaming services from telling users how much subscription offers cost outside of their apps, placing links in their apps to pay for alternative subscriptions or even emailing users to inform them of different pricing options.
“As a result, millions of European music streaming users were left in the dark about all the options available,” Vestager said, adding that the Commission’s investigation found that just over 20% of consumers who would have signed up for Spotify’s premium service did not. do so due to limitations.
The fine comes just before the entry into force of new EU rules aimed at preventing tech companies from dominating digital markets.
The Digital Markets Act, set to take effect on Thursday, imposes a set of dos and don’ts on “gatekeeper” companies, including Apple, Meta, Google parent Alphabet and TikTok parent ByteDance — under the threat of hefty fines.
The DMA’s provisions are designed to prevent tech giants from engaging in the behavior at the center of Apple’s investigation. Apple has already revealed how it will comply, including allowing iPhone users in Europe to use app stores other than its own and allowing developers to offer alternative payment systems.
Vestager warned that the commission will carefully examine how Apple follows the new rules.
“Apple will need to open its doors to its ecosystem to allow users to easily find the apps they want, pay for them any way they want, and use them on any device they want,” she said.