EU Launches Probes of App Store, Apple Pay

The European Commission will look into the two Apple services to determine whether they stifle competition.
Matthew HellerJune 16, 2020
EU Launches Probes of App Store, Apple Pay

The European Commission has opened antitrust investigations of two Apple services, citing concerns that the App Store and Apple Pay stifle competition.

The App Store probe will focus on music streaming and e-books/audiobooks, following complaints by Spotify and e-reader company Kobo over the commissions — 30% in the first year and 15% thereafter — that Apple charges on subscriptions that come through the App Store.

Spotify has claimed Apple uses its App Store to stifle innovation and limit consumer choice in favor of its own Apple Music service.

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“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 Verstager, head of the EU’s antitrust division, said in a news release.

Separately, the EU will also look into whether Apple Pay undermines competition by limiting access to its NFC (near-field communication) “tap and go” functionality on iPhones for payments in stores.

“It appears that Apple sets the conditions on how Apple Pay should be used in merchants’ apps and websites,” Verstager said. “It also reserves the ‘tap and go’ functionality of iPhones to Apple Pay.”

If the EU finds Apple violated antitrust regulations, it can fine Apple up to 10% of its annual revenue and force it to make changes to its business.

Global App Store fees are estimated to generate more than $1 billion for the company every month. Apple said in January that consumer spending on the App Store hit a new single-day record of $386 million on January 1.

“Strong momentum in Apple’s services business has become more important to the company in recent years, especially as iPhone sales have fluctuated,” The Financial Times said. “At about 18 per cent of Apple’s annual sales, services are its second-largest source of income after the iPhone.”

Apple said in a statement that it was “disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else.”