21st Century Economic Reporting Intern Reporter Xiao Xiao reports from Beijing
On March 4th local time, the European Commission announced in a statement that Apple is suspected of abusing its dominant position in the music streaming market, constituting an unfair transaction. The European Commission has stated that it will impose an antitrust fine of over 1.8 billion euros (approximately 14 billion yuan) to deter Apple.
The focus of this punishment is on Apple's "anti guidance clause". "Anti guidance clause" refers to Apple's prevention of music streaming from informing consumers of promotional information, product prices, and purchase methods outside of the Apple App Store.
Regarding the penalty decision of the European Commission, Apple has issued a statement stating that the Commission has not found reliable evidence to prove that consumers have been harmed, and therefore the company will file an appeal.
It is worth noting that this penalty was issued on the eve of the implementation of the European Union's antitrust regulation, the Digital Market Law, and the total amount of fines accounted for approximately 0.5% of Apple's global revenue.
Two days later (March 6th local time), the EU's Digital Markets Act will officially come into effect for Apple. The regulatory scope of this regulation is broader, with a maximum penalty limit of 10% of global revenue. The previous adjustment actions and "blatant provocation" attitude of Apple have caused a lot of dissatisfaction, and the impact of the Digital Market Law on the market position of technology giants needs to be paid attention to.
From distorting market competition to exploiting consumers
The punishment for Apple this time originated from a complaint filed by European streaming giant Spotify in 2019.
The complaint claims that the Apple App Store charges developers about 30% of the "Apple tax", forcing developers to increase subscription service prices and preventing developers from sharing information about subscription prices with Apple users. Spotify pointed out that Apple has its own music streaming platform, Apple Music, which serves as both a player and a referee, thus putting other music streaming platforms at a disadvantage.
In June 2020, the European Commission launched an antitrust investigation procedure, with the main concern being distortion of market competition.
In April 2021, the European Commission officially submitted an opposition statement, initially suggesting that the Apple App Store was distorting competition in the music streaming market by forcing competitors to increase costs.
In February 2023, the opposition statement was modified and the scope of the investigation was narrowed - the focus of antitrust measures was no longer on the "Apple tax" harming developers, but rather on Apple stores preventing consumers from learning about other payment methods. For example, Spotify is prohibited from notifying users within the Apple store or app, and members can be opened on Spotify's official website at a discounted price of $3. The EU believes that this behavior constitutes unfair trade and damages the rights and interests of consumers.
"Some consumers may have paid more because they don't know that if they subscribe outside the Apple store, they can pay less. There are also other consumers who may not be able to subscribe to their favorite music streaming at all because they can't find it," the competition director of the European Commission said at a press conference.
In this penalty statement, the EU emphasizes that Apple has concealed key information about prices and service features from consumers, depriving them of their freedom of choice. This behavior has been ongoing for nearly a decade and may have led to many Apple users paying significantly higher prices for music streaming subscriptions, as Apple charges developers high commissions and passes them on to consumers in the form of higher subscription prices.
According to foreign media reports last month, Apple may face an antitrust penalty of 500 million euros for its music streaming business. At that time, Deng Zhisong, a senior partner at Beijing Dacheng Law Firm, told 21 reporters, "The EU's antitrust regulation has always been known for being strict. If Apple is fined 500 million euros, it will once again demonstrate the EU's zero tolerance attitude towards the anti competitive behavior of large technology enterprises."
And the final fine that landed far exceeded expectations. The EU ultimately imposed a fine of over 1.8 billion euros on Apple, and from March 4th, banned Apple from implementing "anti guidance clauses" on music streaming. The EU interprets this as a punishment for non monetary harm to consumers and has a deterrent effect.
Protecting local enterprises in the name of competition?
Regarding the punishment decision of the European Commission, Apple responded with a lengthy statement: the commission has not found any reliable evidence of consumer harm and has ignored the reality of a thriving market, intense competition, and rapid growth.
Apple will focus its firepower on Spotify, pointing out that Spotify's European market share has reached 56%. Apple Services helped Spotify build, update applications, and share their applications with Apple users in 160 countries worldwide. The success was mainly attributed to the Apple Store, but Spotify did not pay any fees to Apple for this.
Apple also stated that Spotify has met with the European Commission at least 65 times since 2015, repeatedly revising the scope of allegations over the past decade and lacking reliable evidence. Therefore, Apple believes that this is "consolidating the dominant position of a successful European company in the name of competition," implying that the European Commission is protecting local businesses. Spotify did not respond to this.
The competition director of the European Commission stated that the intervention in the Apple store is essentially unrelated to Spotify, and she reiterated that the core issue of Apple's behavior is the exploitation of consumers. And she believes that for small music streaming providers such as Deezer, SoundCloud, etc., they can now participate in price competition because users can find them through the Apple Store and have full access to subscription prices.
Does the shift in regulatory focus towards protecting consumer rights in the antitrust investigation of Apple signify a shift in EU antitrust policy? At the aforementioned press conference, the relevant authorities believed that EU regulators have an obligation to continuously develop their understanding of the legal basis and ensure relevance. In other words, she believes that exploitative behavior is highly correlated with antitrust enforcement in emerging digital markets.
Spotify also supports the approach of the European Commission in its response: "The European Commission puts consumers first. This is the basic concept of a free market - customers should know what choices they have and it should be up to them, not Apple, to decide what, where, when, and how to make a purchase."
What is the deterrent effect of the Digital Market Law?
According to the EU statement, the clause on which this punishment is based is the prohibition of abuse of dominant position in the Treaty on the Functioning of the European Union and the European Economic Area Agreement. Another highly anticipated antitrust law, the Digital Market Law, will officially come into effect for Apple on March 6th.
The Digital Market Law is the world's first anti-monopoly law specifically targeting platform technology giants. It lists six companies, including Apple, as "gatekeepers" and imposes a series of more detailed and strict obligations on them, including data information protection obligations, advertising information disclosure obligations, reporting information processing obligations, consumer rights protection obligations, etc. If regulations are violated, technology giants may face fines of up to 10% of global total revenue
Professor Chen Bing, Director of the Competition Law Center at Nankai University, previously pointed out that EU antitrust laws can also regulate unfair trading practices of some leading companies in the digital economy field, but these regulations are post event. The Digital Market Law provides pre supervision for gatekeepers, which can complement the post supervision of EU antitrust laws.
In order to adapt to the Digital Market Law, technology giants have made some notable concessions. For example, Apple has opened a third-party app store for the first time this year, allowing European users to bypass the store and install apps on third-party app stores or web pages. However, these apps will be charged a "core technology fee", and for apps downloaded over a million times, 0.5 euros will be paid annually for each installation.
On March 1st, a consortium of 34 developers, including Spotify and Epic Games, once again filed a complaint, arguing that Apple's open approach is still maintaining or even amplifying its market dominance, as almost no platform can afford Apple's high core technology fees. They urged the European Commission to take prompt, timely, and decisive action against Apple to protect developers and benefit consumers, and to take immediate action when the Digital Markets Act applies.
Spotify stated in a statement that it hopes to address Apple's long-standing unfair behavior in a clear and thorough manner in the future. In a complaint letter from a consortium of 34 developers, it was stated that the EU's response to the complaint will serve as a touchstone for whether the Digital Markets Act can bring benefits to European citizens and the economy. The outcome of Apple's appeal and adjustments by other tech giants will be closely monitored.