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EU opens antitrust cases against Apple’s App Store and Apple Pay

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The European Commission, on Tuesday, opened two antitrust investigations into Apple’s App Store and Apple Pay practices. One of these investigations will assess whether Apple’s rules for app developers on the distribution of apps via the App Store violate EU competition rules. The other will look into why Apple limits a certain technology to only its payments system.

Incidentally, both these antitrust investigations come just a day after Apple promoted findings from a study which claimed that the App Store was responsible for an estimated $519 billion in total billings and sales of physical products and services and digital goods in 2019.

What the investigations are about

1. The first investigation is about Apple’s App Store policies, particularly: 

  • The mandatory use of Apple’s own proprietary in-app purchase system (IAP) for the distribution of paid digital content. (Apple charges app developers a 30% commission on all subscription fees through IAP).
  • Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps. Apple’s “rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper,” the Commission said.

This follows after complaints from Spotify and an “e-book and audiobook distributor”, alleging that App Store policies limit consumer choice and stifle innovation. Spotify had filed an antitrust complaint against Apple in the EU in March 2019, saying it’s unfair that Apple Music doesn’t have to pay a similar fee, and that Apple doesn’t let Spotify link users out of the app to purchase a subscription, or even advertise deals to users.

While the Commission didn’t specifically reveal who the “e-book and audiobook distributor” is, it is most likely referring to Rakuten, which, in March 2019, had filed a complaint against the 30% commission that Apple charges from third-party e-book services while promoting its own Apple Books service, as reported by the Financial Times.

“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,” Margrethe Vestager, the Commission’s executive vice president said in a statement.

2. The second investigation concerns Apple’s terms on Apple Pay, particularly:

The conditions and other measures that Apple sets for integrating Apple Pay in merchant apps and websites on iPhones and iPads, and why Apple Pay is the the only payment option on iPhones that can utilise Near Field Communication (NFC) tap and go technology. The investigation will also focus on alleged restrictions of access to Apple Pay for specific products of rivals on iOS and iPadOS smart mobile devices.

“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,” Vestager said.

In November last year, lawmakers in Germany voted for a law that requires any operator or an electronic money infrastructure to offer access to rivals at a reasonable fee. While it didn’t reportedly specifically mention Apple, it is clear that Apple will have to allow NFC access to other payment system providers’ apps on the iPhone, under the law.

Last week, it was reported that the European Union may file formal antitrust charges against Amazon due to its treatment of third-party sellers.

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