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Apple Facing Anti-Trust Battle in the EU

Apple Facing Anti-Trust Battle in the EU

The European Commission has launched an investigation to gauge whether or not Apple Pay and its app store go against the EU’s anti-trust and competition regulations.

According to the European Commission, this probe will specifically look at “Apple's terms, conditions and other measures for integrating Apple Pay in merchant apps and websites on iPhones and iPads, Apple's limitation of access to the Near Field Communication (NFC) functionality (“tap and go”) on iPhones for payments in stores, and alleged refusals of access to Apple Pay.”

At the same time, the EU opened a separate investigation into Apple’s app store and whether it too violated the region’s competition rules.

More specifically, as per the Commission’s press release, this individual probe will study “the mandatory use of Apple's own proprietary in-app purchase system and restrictions on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps.”

Spotify and Rakuten filed complaints back in 2019 with the European Union, accusing Apple of hindering competition via its music and e-book services.

According to The Verge’s Tom Warren, Spotify has said “Apple uses its App Store to stifle innovation and limit consumer choice in favor of its own Apple Music service,” while Rakuten claimed “that it’s anti-competitive for Apple to take a 30 percent commission on ebooks sold through the App Store while promoting its own Apple Books service.”

Margrethe Vestager, who heads the Commission’s competition unit, said: “Mobile payment solutions are rapidly gaining acceptance among users of mobile devices, facilitating payments both online and in physical stores. This growth is accelerated by the coronavirus crisis, with increasing online payments and contactless payments in stores. It appears that Apple sets the conditions on how Apple Pay should be used in merchants' apps and websites. It also reserves the “tap and go” functionality of iPhones to Apple Pay.”

“It is important that Apple's measures do not deny consumers the benefits of new payment technologies, including better choice, quality, innovation and competitive prices. I have therefore decided to take a close look at Apple's practices regarding Apple Pay and their impact on competition,” she concluded.

Apple Anti-Trust EU

Industry Reactions to the EU’s Anti-Trust Investigation into Apple

A spokesperson for Apple dismissed these claims in a statement to The Verge.

“It’s 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,” the statement said, adding that “we don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.”

“At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality,” the Apple spokesperson concluded.

Spotify welcomed the “decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.”

Apple’s competitors make a valid point when it comes to the company’s app store, says Bloomberg Opinion’s Tae Kim.

In his latest op-ed, Kim writes: “The detractors have a point — the Apple App Store has attained excessive power in the marketplace. Companies have no choice but to accept Apple’s terms to get access to the more than 1.5 billion iOS devices in active use and the 500 million people who use the App Store on a weekly basis. Antitrust laws were designed to ensure vigorous competition and protect consumers from harmful anti-competitive business practices. And the Apple App Store’s onerous practices fit that bill.”

Kim believes the EU should aim to slash Apple’s commission from sales on its app store.

Kim writes: “A lower App Store commission rate wouldn’t be the end of the world for Apple. For all the talk about the company’s strategic shift to services, the segment, of which the App Store is only a part, accounted for just 18% of its sales in its most recent fiscal year. But a 50% reduction, for example, would be a tremendous boon for smaller companies — spurring more innovation and lower prices for consumers. That’s an end result regulators should fight for.”

Speaking to the Financial Times, an adviser for one of Apple’s competitors said fines might not be the best way to ameliorate this anti-trust issue.

“It has been shown in other fines against Google, for example, that these are merely the cost of doing business and have no meaningful impact in changing long-term business practices. Fines are not in the interest of Apple rivals or consumers,” the advisor said.

This is not the first instance an American tech giant gets investigated by the European Commission for violating competition rules.

During the past three years, Google received approximately 8 billion Euros in fines as a result of the anti-competitive practices of the company’s Android smartphone’s operating system and Google Shopping, as well as other violations in the advertising sector.