Apple music streaming app breaches competition rules, says EU

(BRUSSELS) - Apple's App Store has abusesd its dominant position for the distribution of music streaming apps by distorting competition in the music market, the EU Commission said Friday in a preliminary finding.

The Commission's issue is with the mandatory use of Apple's own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple's App Store.

The EU executive says it is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.

The Statement of Objections concerns the application of these rules to all music streaming apps, which compete with Apple's music streaming app "Apple Music" in the European Economic Area (EEA). It follows-up on a complaint by Spotify.

"By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition," said EC vice-president Executive Vice-President Margrethe Vestager: "This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options."

Apple's App Store is part of an 'ecosystem' and the only app store that iPhone and iPad users can use to download apps for their mobile devices. The Commission found that users of Apple devices stay loyal to the brand and do not switch easily. As a consequence, in order to serve iOS users, app developers have to distribute their apps via the App Store, subject to Apple's mandatory and non-negotiable rules.

The Commission's concerns, as outlined in the Statement of Objections, relate to the combination of the following two rules that Apple imposes in its agreements with music streaming app developers:

• The mandatory use of Apple's proprietary in-app purchase system ("IAP") for the distribution of paid digital content. Apple charges app developers a 30% commission fee on all subscriptions bought through the mandatory IAP. The Commission's investigation showed that most streaming providers passed this fee on to end users by raising prices.
• "Anti-steering provisions" which limit the ability of app developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to use music subscriptions purchased elsewhere, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper. The Commission is concerned that users of Apple devices pay significantly higher prices for their music subscription services or they are prevented from buying certain subscriptions directly in their apps.

The Commission's preliminary view is that Apple's rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices. In addition, Apple becomes the intermediary for all IAP transactions and takes over the billing relationship, as well as related communications for competitors.

If confirmed, this conduct would infringe Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position.

The Commission stresses that the sending of a Statement of Objections does not prejudge the outcome of an investigation.

More information on the investigation is available on the Commission's competition website, in the public case register under case number AT.40437.