European Union Launches Antitrust Probes Into Apple Pay, App Store

European Union
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European Union

The European Union said on Tuesday that it has launched antitrust investigations into Apple’s rules for developers on the distribution of apps via its App Store, as well as Apple Pay. The decision by the European Commission, the executive arm of the EU, to look into whether Apple's rules for app developers "violate EU competition rules" comes after complaints by music streaming giant Spotify and an unnamed e-book/audiobook distributor.

That investigation will center on concern about "the mandatory use of Apple's own proprietary in-app purchase system and restrictions on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps,” it said. "The investigations concern the application of these rules to all apps, which compete with Apple's own apps and services in the European Economic Area."

Said EU commissioner Margrethe Vestager, who is in charge of competition policy: "Mobile applications have fundamentally changed the way we access content. Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple's popular devices. We need to ensure that Apple's rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books."

The Commission said it would investigate in particular two restrictions imposed by Apple: the mandatory use of Apple's proprietary in-app purchase system "IAP" for the distribution of paid digital content, where Apple charges developers a 30 percent commission on all subscription fees; and "restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps."

Apple allows users to consume content, such as music, e-books and audiobooks purchased elsewhere, such as on the web site of the developer, in the app, but its rules "prevent developers from informing users about such purchasing possibilities, which are usually cheaper," the Commission noted.

The probes into the Apple app developer rules will focus on any potential negative impact for consumers. "These practices may ultimately harm consumers by preventing them from benefiting from greater choice and lower prices," the Commission explained.

The Apple Pay probe comes as "mobile payment solutions are rapidly gaining acceptance among users of mobile devices," said Vestager. " This growth is accelerated by the coronavirus crisis, with increasing online payments and contactless payments in stores. It appears that Apple sets the conditions on how Apple Pay should be used in merchants' apps and web sites. It also reserves the 'tap and go' functionality of iPhones to Apple Pay. 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."

Update (12:25 pm EST): Following the Commission's announcement, Spotify released a statement applauding the investigation.

“Today is a good day for consumers, Spotify and other app developers across Europe and around the world," Spotify's head of global affairs and chief legal officer Horacio Gutierrez said. "Apple’s anticompetitive behavior has intentionally disadvantaged competitors, created an unlevel playing field, and deprived consumers of meaningful choice for far too long. We welcome the European Commission’s decision to formally investigate Apple, and hope they'll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.”

And in a call with reporters, Gutierrez expanded on Spotify's position. "At the heart of our case is the fact that Apple acts as stadium owner, referee and player and tilts the playing field in favor of its own service," he said, describing the company's App Store practices, and urging the Commission to act "with urgency." "We don’t want special treatment or a free ride. We want fair treatment."

This article was originally published by The Hollywood Reporter.

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