Apple in Breach of EU Competition Law, European Commission Finds

[playtech1]

Opinion?

What high fee? Is the fee higher for competitors than non-competitors?

Because Apple claims certain types of apps pose a security risk? So what is it? Security risk or competition?

I have never seen any legal action relating to supermarkets shelf stocking fees. The fees are a red-herring. If the government tries to step in and regulate them, I sense a SCOTUS challenge.

Legally we will see if this is an issue.

Who knows such things. I wish I too, had a crystal ball.

On the apps being blocked, I was referring to where Apple blocks apps like Geforce Now and Xcloud from the App store for policy reasons that aren't security related.

I split out the fees charged to competitors vs fees charged to non-competitors because, even though the % fee is the same either way, it is a slightly different issue from an antitrust perspective - e.g. if Apple didn't have Apple music, Spotify couldn't say it was being undercut, as it would be on a level playing field with all other iOS music streaming apps.

Apple isn't a supermarket and this isn't about shelf stocking fees - the analogy is a red herring. I have no idea what SCOTUS would have to say about an antitrust decision that went against Apple, but insights or thoughts welcome as to why they would overturn it. SCOTUS not relevant though to the EU case.

 

[Nuno Lopes]

(1) Not really a fallacy. Apple chose not to be a middleman if it cannot control the end-to-end receipt of a service/product. If I buy a refrigerator from the Best Buy app and Apple takes a sales commission, then if there is a problem with my receiving that refrigerator, I would go after Apple since they finalized the sale. Instead, Apple does not handle the transaction but Best Buy does and Apple is out of the sales loop.

(2) For digital content/distribution, Apple does control the sales process and takes a commission.

You seam to know a lot about this, enough to have a strong opinion.

I just have a few questions about your reasoning, to understand it better.

(1) In what way Apple controls the end-to-end receipt of Spotify service, video, audio streams and do on? I mean, do these assets under the subscription sold by Spotify cross Apple communications network, are they being serviced by their Apple data centers, … does Apple subcontracts shipping these assets through the Internet like Best Buy subcontracts transportation and delivery services … so on and so forth, the things necessary to control end-to-end receipt of a digital good sold as you mentioned? If they do not, in what way would it be different if Apple decided that should be awarded a 30% share of a Best Buy in-app purchase?

(2) How does it control the sales in-app when the goods being serviced are digital materials yet not apps or app add-ons? Its seams that is in control of the cash register and that is just it, am I wrong?

It seams to be pretty equivalent if Apple decided to impose in-app-purchase policy to the kinds of Best Buy. the concept of shipping and delivering a refrigerator is not different than shipping and delivering an eBook, video stream, audio stream, articles, text, images, emails, messages, video chats, so on and so forth, you name it … The App Store does ship apps and updates, but that is all. The only difference is that in one case things travel at light speed, one needs to think at that scale to understand what is going on while in the other … well it takes a truck to deliver so it easier to spot the divide. In both cases Apple could simply of course remove the App from their repository, no app, no sale, no receipt right?

I’m sure I’m missing something, can you elaborate on the difference a bit more?

Cheers

 

[bsolar]

e.g. if Apple didn't have Apple music, Spotify couldn't say it was being undercut, as it would be on a level playing field with all other iOS music streaming apps.

That's the reason one of the more extreme measures in the hands of antitrust regulators is to impose the business to be split to separate corporations so that no conflict of interest exists anymore.

As example, back in the day Microsoft did risk being split so that Windows would land in a company and everything else in a different company, exactly with the rationale of preventing their power in the OS market to allow them to distort competition in basically everything else running on their system.

 

[I7guy]

On the apps being blocked, I was referring to where Apple blocks apps like Geforce Now and Xcloud from the App store for policy reasons that aren't security related.

I split out the fees charged to competitors vs fees charged to non-competitors because, even though the % fee is the same either way, it is a slightly different issue from an antitrust perspective - e.g. if Apple didn't have Apple music, Spotify couldn't say it was being undercut, as it would be on a level playing field with all other iOS music streaming apps.

Apple isn't a supermarket and this isn't about shelf stocking fees - the analogy is a red herring. I have no idea what SCOTUS would have to say about an antitrust decision that went against Apple, but insights or thoughts welcome as to why they would overturn it. SCOTUS not relevant though to the EU case.

It depends. In the US, this could blow away like grains of sand in the wind, while in another part of the world get traction (or vice-versa). What Apple will do is undetermined.

And if this is viewed as a grocery store or not is also undetermined. And where this thing will go as time marches on is undetermined.

What I believe is Apple based on various decisions knows what it will do and how it will handle it. These eventualities have been in place for a while. Apple is not a stupid company.

 

[Analog Kid]

I can’t say I agree with this— for one thing it’s not really fair to compare the $9.99 Spotify gets with the $9.99 Apple charges because Apple still has to cover sales and marketing costs even for their own services— but I always felt Apple was more exposed where they sell competing products such as Music.

Still, I don’t see where this is an anti-trust question. Users can buy Android and Spotify can refuse to support iOS. Oh well…

 

[jlc1978]

On one hand, yeah, Spotify would need to have a higher price to offset Apple’s commission which would lose customers. On the other hand, it takes money to host the app on Apple’s servers and distribute them over their network. One solution is maybe allowing side loading apps, or allow other app stores. Maybe let Apple issue a warning on 3rd party app stores along the lines of “Apple does not control the apps on this store, so do not hold Apple liable for any issues caused by the apps available here”

The problem is many users would still blame Apple, and Apple get the bad press from malware / etc. even if it is from a 3rd party store.

The operative costs you mention are peanuts for a company like Apple. Furthermore, Eddy Cue himself stated that the operative costs are not the main reason in the consideration of Apple's cut (emphasis mine):

So? Costs have nothing to do with what you can charge other than if you can't cover costs you won't last long term.

 

[Analog Kid]

I wonder if Apple could hypothetically sue Spotify if Spotify doesn’t maintain feature parity with their Android service (or whatever else). If Spotify users were given a lesser experience on iPhone, couldn’t that be seen as an attempt by Spotify to undercut iOS as a platform? 🤔

 

[daftpunker909]

Oh, the old EU bureaucrats doing their thing.....

"App store & forbids them to inform of alternative subscription options"
Yes, because regular walk in (or online) stores all display "cheaper" alternatives or alternative places where customers can get the same product, right? Typical idiotic EU practices acting as they care about consumers and not for their fat pockets.

sorry what are the politicians getting out of it? Obviously, there are a lot of other injustices with the same practice - this one is high profile. Please try the "but others do it too" argument in court 😂😂😂😂😂

 

[CaTOAGU]

At what point does apple pull out of europe?

Not at this point.

 

[BvizioN]

sorry what are the politicians getting out of it? Obviously, there are a lot of other injustices with the same practice - this one is high profile. Please try the "but others do it too" argument in court 😂😂😂😂😂

Mind telling us where did I say "but others do it too"? Yes... that's right, I did not say it.

 

[Nuno Lopes]

Not at this point.

What about Australia Mr CEO? With that kind of attitude MS does not look half has bad Mr. CEO.

Honestly do you think EU, Australia or Canada are worried about Apple leaving them? How happy would be shareholders?

It would just be more for Android and MS. Windows Phone would be back in a blink and with full dev support. Unless the Trump re-elected and created an embargo of some kind against allies … which only the US would comply … no allies.

The cause is just and foresighted man.

 

[78Bandit]

The solution is agonizingly simple. Split payment processing from app distribution and make it optional. They already do so for apps selling physical goods and services. Uber, Airbnb, etc. all are able to allow user account setup and payments from directly within the app. Do the same for Spotify. Anyone that finds a benefit to using Apple's payment processing service is still perfectly free to do so and pay whatever percentage Apple sets, but at least it will be competitive.

Now, as for how Apple will make enough money to keep the App Store operational, there are a multitude of possibilities. Charge developers a per-download fee. Build the cost into the developer license. Make it work from iPhone and iPad sales revenue. Many things will work and spread the cost out among all the app developers and not just those that are forced to use Apple's payment processing system.

 

[Td1970]

You can’t keep saying “use your phone locked down, nothing will change”, yet we have seen proof time and time again that Epic on PC takes games and has them exclusively on the aspic Game Store. So how can I keep my phone locked when this happens on iOS?

If you say I don’t need to use the app, then you don’t need to use the App Store. There really is no life and death apps that are NEEDED to live.

You keep your phone “locked” by paying attention to what you download and install.

who cares what epics does with the Epic store. If you want to use Epics apps you get them from their store. Easy peasy. Is it as convenient? Nope but certainly not that hard.

 

[bsolar]

So? Costs have nothing to do with what you can charge other than if you can't cover costs you won't last long term.

I think you are missing the context of my reply. The post I replied to was not arguing about Apple's profit margins, but operative costs.

 

[weckart]

Well it looks like Steve was right. They should have excluded 3rd parties from running natively. If Apple chose to keep all 3rd parties on web Apps as initially designed these companies would not exist at this level and this case would not be happening.

Maybe this case wouldn't be happening because the iPhone stuck on webapps wouldn't be happening either. Why would anyone bother paying Apple's high prices to be stuck with that when high end Android devices could do so much more?

I don’t think europe is nearly as lucrative as china, especially with the UK not being part of the EU.

In Apple's case, nothing much has changed really. Our stuff is still sold from the Irish HQ. Apple has yet to set up a UK arm of its empire.

Could someone please explain to me under what laws Apple has any obligation to carry any 3rd party software in its App store? I'm just having trouble wrapping my head around all the arguments that somewhere along the way Apple surrendered the right to dictate how a product it designed, built and marketed should work. When did that happen?

The law of economics. No apps, no point to the iPhone. Have fun spending £1500 on a high end iP12 Pro Max just to run Preview or Find My iPhone. The idea that Apple is "forced" to carry the 3rd party apps it courted heavily in order to sell its hardware is beyond ludicrous.

Apart from that, when were competition laws wiped from the legislature of wherever you come from? You sound bewildered that companies just don't get to do whatever they want.

 

[Ethosik]

You keep your phone “locked” by paying attention to what you download and install.

who cares what epics does with the Epic store. If you want to use Epics apps you get them from their store. Easy peasy. Is it as convenient? Nope but certainly not that hard.

And if Epic purchases exclusivity rights to a popular app, I would be forced to “unlock” my device to allow side loading.

 

[randfee2]

to all the naysayers. Vestager is right on most of the things she says in her job as europe's 'head of digital affairs'. It's about customer protection and yes, company protection too. Finally, it's about the law.
Apple did what it always has done. Some companies had a great idea (music streaming service) instead of purchase (iTunesStore, which by the way copied other purchasing stores before), and then Apple offers an alternative. Fine, they might even do it better, nobody is arguing their right to copy (they should also be respectful to others coping them then!!!).
BUT, Apple Music doesn't have to pay the iPhone company a fee for using the store, they don't have to pay a fee for the subscription to the Marketplace. Apple Music gets special promotion by Apple iOS. It comes preinstalled and even worse, it got special treatment on the integration side and was the first choice and for a long time the only choice for playing back music from the iOS locations and services. So it got access to API Apple didn't offer to prior customers like Spotify, who now were suddenly competitors.

That's simply not right!

The entire problem with the closed system is: Apple doesn't own the iPhones people purchase, yet they act like it.
The iOS devices are ... what?... computers!!! Now why should the computer manufacturer get a fee every time one purchases and install a software? That sounds like mafia. I understand they offer a service (the store with security checks and all), fine, but what if I don't want that service? What if I want to run my own code on the computer?

What I hate the most is how people are defending a system that clearly limits their own possibilities and freedom of choice about a piece of hardware THEY paid a princely sum for? You would never allow this with your car, house, COMPUTER.

 

[idrewuk]

to all the naysayers. Vestager is right on most of the things she says in her job as europe's 'head of digital affairs'. It's about customer protection and yes, company protection too. Finally, it's about the law.
Apple did what it always has done. Some companies had a great idea (music streaming service) instead of purchase (iTunesStore, which by the way copied other purchasing stores before), and then Apple offers an alternative. Fine, they might even do it better, nobody is arguing their right to copy (they should also be respectful to others coping them then!!!).
BUT, Apple Music doesn't have to pay the iPhone company a fee for using the store, they don't have to pay a fee for the subscription to the Marketplace. Apple Music gets special promotion by Apple iOS. It comes preinstalled and even worse, it got special treatment on the integration side and was the first choice and for a long time the only choice for playing back music from the iOS locations and services. So it got access to API Apple didn't offer to prior customers like Spotify, who now were suddenly competitors.

That's simply not right!

The entire problem with the closed system is: Apple doesn't own the iPhones people purchase, yet they act like it.
The iOS devices are ... what?... computers!!! Now why should the computer manufacturer get a fee every time one purchases and install a software? That sounds like mafia. I understand they offer a service (the store with security checks and all), fine, but what if I don't want that service? What if I want to run my own code on the computer?

What I hate the most is how people are defending a system that clearly limits their own possibilities and freedom of choice about a piece of hardware THEY paid a princely sum for? You would never allow this with your car, house, COMPUTER.

Because we knew it was limited and that’s how we like it. Quite simple. Stop presuming we are dumb when we’re not. I like iPhones and iOS for the very reason it’s tailored around the ‘walled garden’. If you don’t, that’s fine, just go and buy a different product.

 

[Kierkegaarden]

If Spotify can be signed up for on their website, and they have access to the Watch, Siri, etc. — what is the issue?

If Spotify claims they have more conversion on the App Store, doesn’t this mean that the App Store is providing a value? Should this value be provided for free? If a cost is permitted, who should determine what is reasonable?

 

[Yojimbo007]

Oh, you mean upholding the law?

Upholding protectionism and freeloading at cost of competition.

 

[deevey]

The solution is agonizingly simple. Split payment processing from app distribution and make it optional. They already do so for apps selling physical goods and services. Uber, Airbnb, etc. all are able to allow user account setup and payments from directly within the app. Do the same for Spotify. Anyone that finds a benefit to using Apple's payment processing service is still perfectly free to do so and pay whatever percentage Apple sets, but at least it will be competitive.

Now, as for how Apple will make enough money to keep the App Store operational, there are a multitude of possibilities. Charge developers a per-download fee. Build the cost into the developer license. Make it work from iPhone and iPad sales revenue. Many things will work and spread the cost out among all the app developers and not just those that are forced to use Apple's payment processing system.

I'd have to disagree. If they want to sell without using Apples payment solution at best they should only able to offer an off-app link to their website.

I would also force companies to choose between IAP's or off-app payments. If companies want to allow gain the benefits of IAP's, don't be shy, pony up the 15 or 30% fee.

Make your bed and lie in it.

 

[deevey]

If Spotify can be signed up for on their website, and they have access to the Watch, Siri, etc. — what is the issue?

If Spotify claims they have more conversion on the App Store, doesn’t this mean that the App Store is providing a value? Should this value be provided for free? If a cost is permitted, who should determine what is reasonable?

100% correct - they see the benefit of IAP's vs traditional marketing, but wish to pay for neither.

 

[Yojimbo007]

Apple has an ecosys designed and managed by Apple … and Consumers are willing to pay a premium to be in it voluntarily and knowingly. There are nonApple options out there… why pick on Apple.. if Apple does not offer value overall.. then let the consumer make other choices.

Why does EU think that Apple is obligated to alter their ecossys and business model to accommodate a business that runs on a flawed model and cant make money , Spotify!( or alike)…… or Is it that EU’s definition of dealing with competition is to kill the competition! EU is full of contradictions and inefficient protectionist buracracies. Hence where they are Economically!
Penalize the succesful and the rich. Yep …That is the healthy mindset.

 

[Abazigal]

The EU has always represented Apple's weakest link in its App Store regulatory battles. However, that doesn't mean that the EU is always right or logical in its views.

It’s clear that the EU is bent on protecting Apple’s competitors even when it doesn’t sound logical.

Continue to fight and continue to win, Apple. If the EU wants their victory, at least make them fight tooth and nail for it.

 

[bsolar]

100% correct - they see the benefit of IAP's vs traditional marketing, but wish to pay for neither.

Actually they wish for IAP but their own implementation of it. Apple is not only offering IAP, but also preventing third-parties from implementing competing alternatives to its own.

It's not clear yet what the EU will request to Apple, it might be allowing third-party links or information in the apps, or even allowing third-parties to roll-out their own competing IAP solutions.