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Apple Pay and the App Store are under EU antitrust investigation

It follows complaints lodged by Spotify and an unnamed ebook distributor.
Nick Summers, @nisummers
June 16, 2020
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HONG KONG, HONG KONG - JULY 13:A man holds a smart phone with Apple Pay application is displayed on July 13 2018 in Hong Kong, Hong Kong. (Photo by S3studio/Getty Images)
S3studio via Getty Images

The European Commission has launched two separate antitrust investigations into Apple, focused on the App Store and Apple Pay.

The executive branch of the European Union said it would consider App Store rules that force developers to use its own payment and in-app purchase system. In a press release, the Commission referenced a complaint filed by Spotify more than a year ago. At the time, CEO and founder Daniel Ek argued that the 30 percent cut that Apple takes on all transactions — including in-app purchases, which includes Free to Premium Spotify conversions — meant that it would have to raise its prices beyond those offered by Apple Music.

“To keep our price competitive for our customers, that isn’t something we can do,” he explained in a blog post. Of course, it’s possible for Spotify users to upgrade their account on a different platform, including the web. But if you try to sidestep Apple’s payment system, the company will limit your marketing and communications with customers, Elk argued. “In some cases, we aren’t even allowed to send emails to our customers who use Apple,” he wrote. “Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.”

The Commission said it had completed a “preliminary investigation” and found “concerns” that discouraged competition against Apple’s own services. “Apple’s competitors have either decided to disable the in-app subscription possibility altogether or have raised their subscription prices in the app and passed on Apple’s fee to consumers,” the executive branch explained in its press release. “In both cases, they were not allowed to inform users about alternative subscription possibilities outside of the app.”

The antitrust investigation will focus on Apple’ in-app purchase suite, and the restrictions that stop developers from explaining how customers can buy or upgrade through another platform. “We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers,” Margrethe Vestager, executive vice-president of the European Commission said.

Spotify isn’t the only one to lodge this complaint. In its press release, the Commission revealed that an “e-book/audiobook distributor” (three guesses who that could be) had raised similar complaints about Apple Books and the company’s App Store rules on March 5th, 2020.

The second antitrust investigation will look at Apple Pay, which is effectively the only mobile payments solution available to iPhone and iPad users.

Following a preliminary investigation, the Commission has “concerns” that the situation is stifling competition and reducing consumer choice on the platform. Vestager noted that mobile payments will likely increase even further as European citizens looks to minimize physical contact with physical money and store clerks.

“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,” she argued. “I have therefore decided to take a close look at Apple’s practices regarding Apple Pay and their impact on competition.”

Apple isn’t pleased with the Commission’s decision to launch dual investigations. In a statement, the company said it was following the law and embraced competition “at every stage because we believe it pushes us to deliver even better results.”

The Commission was advancing “baseless complaints,” it argued, “from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else.” The company added: “We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed. At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality.”

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