Today, Apple has been issued a “Statement of Objections” by the European Commission. Nearly two years after music streaming platform Spotify filed an antitrust complaint with the European Union, raising concerns over the “Apple Tax.” The preliminary conclusion drawn out by the European Commission suggests that Apple is finding itself in breach of the EU competition law.
If Found Guilty Apple May Have to Pay a Massive Fine
The basis of the Statement of Objections lies in Apple’s own in-app purchase mechanism, which sees the Cupertino-based tech giant imposing a 30% tax on competitor’s earnings through the App Store. If Apple is found guilty of abusing the dominant market position under Article 102 of the Treaty on the Functioning of the European Union (TFEU), the potential implications for Apple include a fine of 10% of its annual revenue, which could add up to €22.3 billion ($27 billion).
The news was broke down on Twitter by the Executive Vice-President of the European Commission, Margrethe Vestager, and the Commission also issued a separate press statement detailing the findings. According to the details, the Commission believes the 30% “Apple tax” has resulted in distorted competition and ultimately higher in-app music subscription prices for consumers.
“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.” – EU Commission statement.
Over two years ago, the Swedish music streaming platform, Spotify, filed an anti-trust complaint against the iPhone maker for the same reason described in today’s statement. Other big players like Netflix and Epic Games have also publicly taken a stand against the 30% Apple tax alongside many other developers.
However, Apple has responded to the findings of the European Commission and issued this statement to The Verge.
“Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that. Spotify does not pay Apple any commission on over 99% of their subscribers and only pays a 15% commission on those remaining subscribers that they acquired through the App Store. At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows. Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The Commission’s argument on Spotify’s behalf is the opposite of fair competition.”
Apple has to respond to the European Commission’s preliminary charges within 12 weeks.