The European Commission has just confirmed that it has opened two formal antitrust investigations against Apple. The objective is to assess whether the rules for the distribution of applications through the App Store and practices with Apple Pay are in breach of the Treaty on the Functioning of the European Union, specifically Articles 101 and 102.
In the first investigation, the Commission focuses on two particular cases: the mandatory use of Apple’s own payment gateway and the restrictions on informing users about cheaper purchasing alternatives outside of apps. In the second case, the Commission seeks to ensure “whether Apple’s conduct in relation to Apple Pay violates EU competition rules”, such as limiting the NFC.
Apple and its apparent gatekeeper position
Magrethe Vestager, executive vice president in charge of competition policy, said that “Apple sets the rules for the distribution of applications to iPhone and iPad users” and that it appears that the Cupertino company “has obtained a ‘gatekeeper role ‘when it comes to the distribution of applications and content to users. ” The clearest example is that iPhone and iPad users can only install native apps through the App Store.
Apple also competes against companies like Spotify or Kobo with services like Apple Music or Apple Books, so the Commission has decided to ensure that “Apple’s rules do not distort competition in markets where Apple competes with other application developers. ” These rules are specifically two:
(i) The mandatory use of the purchase system in Apple’s own application “IAP” for the distribution of paid digital content. Apple charges app developers a 30% commission on all subscription fees through IAP.
(ii) Restrictions on the ability of developers to inform users about alternative purchasing possibilities outside of applications. While Apple allows users to consume content such as music, e-books, and audiobooks purchased elsewhere (for example, on the app developer’s website) in the app as well, its rules prevent developers from informing users about such purchasing possibilities, which are generally cheaper. ”
The first case is not the first time it has come to light, since Netflix, for example, abandoned the Apple payment gateway in favor of its own system, since Apple, as stated by the Commission, is left with 30% of the total.
The Commission notes that “Apple’s competitors have decided to either disable the ability to subscribe to the app entirely, or have increased their subscription prices in the app and transferred Apple’s fee to consumers.” In both cases, the agency continues, “users were not allowed to inform about possible subscription alternatives outside the application.”
In this way, Apple would have had “full control” in the relationship of its competitors with customers, “which disintermediates its competitors from important customer data, while Apple can obtain valuable data on the activities and offers of its competitors”. This is, for example, what was raised by the complaint that Spotify filed on March 11, 2019.
Kobo, for his part, filed a complaint on March 5, 2020 that “raises concerns similar to those investigated in the Spotify case, but with respect to the distribution of e-books and audiobooks.”
Open investigation into Apple Pay
Parallel to the investigation into the App Store, Vestager has launched a second antitrust investigation “to assess whether Apple’s conduct in relation to Apple Pay violates EU competition rules.” Specifically, it refers to Apple’s terms, conditions and other measures to integrate Apple Pay into commercial applications and websites on iPhone and iPad, the limitation of access to the NFC and alleged denials of access to Apple Pay.
According to the Commissioner, “It appears that Apple sets the conditions for how Apple Pay should be used in merchant applications and websites. It also reserves the” touch and go “functionality of iPhones to Apple Pay.” He ensures that “it is important that Apple’s measures do not deny consumers the benefits of new payment technologies, including a better option, quality, innovation and competitive prices.”
Apple Pay is the only mobile payment system that can access the iPhone’s NFC chip, so the investigation will focus on the “alleged restrictions of access to Apple Pay for specific products of its rivals in smart mobile devices iOS and iPadOS” , as well as its possible impact. If these practices were confirmed, it would be violating Articles 101 and 102 of the TFEU. The Commission will give priority to this investigation and reminds that starting the process does not prejudge the result.