Apple was fined 1.8 billion euros ($1.95 billion) on Monday by European Union regulators for hindering competition among music streaming rivals, a severe punishment imposed on the tech giant in a long battle to the powerful role it plays as the guardian of the App Store. .
The penalty, announced by the EU’s antitrust regulator, is the culmination of a five-year investigation launched by one of its biggest rivals, Spotify. Regulators said Apple illegally used its dominance of the App Store to kill rivals.
“For a decade, Apple has abused its dominant market position to distribute music streaming apps through the App Store,” said Margrethe Vestager, the European Commission’s executive vice-president who oversees competition policy.
“From now on,” he said at a press conference, “Apple should allow music streaming developers to communicate freely with their own users.” The size of the fine, he added, “reflects both Apple’s financial strength and the harm that Apple’s conduct has caused to millions of European users.”
The action by the European Commission, the EU’s executive branch, is the latest in a series of regulations and sanctions targeting the App Store. Most of the controversy is because Apple requires apps to use its in-app payment service for sales. It takes up to a 30 percent commission on each transaction, a fee many developers say is excessive.
Regulators in the Netherlands and South Korea have passed laws or orders to force Apple to allow alternative payment services, but Apple has largely ignored the regulators’ challenges. In these countries it allows alternatives but charges a 27 percent commission, a solution disputed by regulators in the countries.
Apple said it would appeal the decision. “While we respect the European Commission, the facts simply do not support this decision,” Apple said in a statement on Monday.
In a briefing last month, Apple said European regulators had been searching for a legal theory for the case for nearly a decade, in fits and starts. Apple disputed the idea that Spotify users couldn’t subscribe to music services through other means, saying Spotify has added more than 100 million subscribers outside of its app over the past eight years.
Apple also accused Spotify of being a monopoly because it has more than a 50 percent share of the music streaming business in Europe. It said Spotify has benefited from software tools provided by Apple, as well as more than 119 billion downloads and updates of its app. This is done while not paying Apple any money in commissions.
“Basically, their complaint is that they’re trying to get unlimited access to all of Apple’s tools without paying anything for the value that Apple provides,” a spokesperson said in a statement.
Spotify, in a statement, said Monday’s sentence “sends a strong message – no company, not even a monopoly like Apple, can exercise power abusively to control how other companies interact with customers their”.
The penalty reinforces the European Union’s position as the world’s most aggressive technology regulator. In recent years, the bloc has passed laws on data privacy, industry competition, content curtailment of online content and artificial intelligence. Antitrust regulators have since investigated or fined Google, Amazon, Microsoft and Meta.
The fine is the most severe penalty against Apple since 2016, when the European Commission ordered the company to repay more than €13 billion in unpaid Irish taxes. In a sign of how long the appeals process can take, this case is still in the EU courts.
In 2022, the 27-nation bloc largely sided with developers by writing the Digital Markets Act that requires Apple to open up the iPhone to competing app stores and allow app makers to accept payments directly. The rules take effect on Thursday.
In the last quarter, Apple reported revenue of about $120 billion and net profit of $34 billion.
Last month, Apple said it would comply with the new law by giving developers three options. They could stay with the status quo App Store system and continue to pay up to 30 percent sales commission. Or they could accept alternative payments and drop their commission to 17 percent, while incurring a new fee of 50 euro cents for every download over a million. Finally, they could avoid sourcing from Apple and distribute through competing stores while still paying Apple’s download fee.
Under Apple’s plan, Spotify and other apps will be able to notify customers in their app about cheaper online subscription prices.
Apple’s proposal for the App Store in Europe has sparked an outcry from developers big and small, who say it doesn’t follow both the letter and the spirit of the law.
Apple said its plan complies with the law while minimizing the risk that iPhone users face malware, spam or fraud.
Spotify has been one of Apple’s most vocal critics. For years, the music streaming service has complained that the App Store’s in-app payment system and 30 percent commission puts it at a disadvantage to Apple Music, which can sell subscriptions directly without a similar fee.
The rules have also hampered Spotify’s efforts to expand into audiobooks and other services. Instead of charging for a book in the app, he tried to avoid Apple’s fees by directing customers outside the app to pay, a process he called cumbersome and difficult.
Apple says Spotify’s decision to link to its site means it doesn’t pay for many of the services that benefit the music streaming service, including software tools and hardware enhancements like advanced media playback. He also complained that Spotify met with European regulators more than 60 times during the investigation.
Daniel Ek, Spotify’s chief executive, has been complaining for years about the slow pace of research in Europe. Throughout the process, he pointed out ways in which Apple’s control of the App Store put competitors at a disadvantage.
“Without action by policy makers, nothing will change” Mr. Ek wrote 2022 in X, the website formerly known as Twitter. “I can’t be the only one who sees the absurdity.”
Monica Prodchuk contributed reporting from Brussels.
