Apple found in breach of EU competition law over unfair App Store tax policy
Earlier today, the European Commission released a preliminary opinion that Apple has an unfair advantage in the music streaming area over competitors like Spotify. The basis for the finding lies in Apple’s own purchase mechanism in the app, where Cupertino imposes a competitive earnings tax of 30% through the App Store. The potential consequences for Apple include a fine of 10% of its annual turnover, which could amount to up to € 22.3 billion. ($ 27 billion) if the decision is ratified.
Our preliminary conclusion: @Apple is in breach of EU competition law. @AppleMusic compete with other music streaming services. But @Apple charges high commission fees on rivals in the App Store and prohibits them from informing about alternative subscription options. Consumers are losing.
– Margrethe Vestager (@vestager) April 30, 2021
Margrethe Vestager, acting Vice-President of the European Commission, broke the news on Twitter, and the Commission also issued a separate press release detailing the results. According to the details, the Commission believes that the “Apple tax” of 30% has resulted in distorted competition and ultimately higher in-app subscription prices for consumers.
Apple rules distort competition in the music streaming services market by raising the cost 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 to competitors. – Statement by the European Commission
Over two years ago, Spotify filed an anti-trust complaint against Apple for the same reason as described in today’s statement. Other big players like Netflix and Epic Games have also publicly opposed 30% Apple tax along with many other developers.
Apple still insists that the money generated from the fee is used to maintain the privacy and security of the App Store and its content. Despite its firm stance, Apple has made some progress in lowering the tax to 15% for developers earning less than $ 1 million annually. Some video streaming services like Amazon Prime and Canal + are also able to bypass the App Store and use alternative payment methods for individual movie and TV show rentals.