EU Fines Apple $2 Billion Over Anti-Steering Rules
Foo Yun Chee (European Commission, Hacker News, MacRumors):
Brussels on Monday fined Apple, opens new tab 1.84 billion euros ($2 billion) for thwarting competition from music streaming rivals via restrictions on its App Store, the iPhone maker’s first ever penalty for breaching EU rules.
A basic penalty of 40 million euros was inflated by a huge lump sum included as a deterrent - a first for the European Union’s antitrust authorities.
The European Commission charged Apple last year with preventing Swedish streaming service Spotify, opens new tab and others from informing users of payment options outside its App Store, following a 2019 complaint by Spotify.
The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation.
Today, Spotify has a 56 percent share of Europe’s music streaming market — more than double their closest competitor’s — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world. A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world.
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Since the App Store launched more than 15 years ago, Apple has had two simple goals: creating a safe and trusted marketplace for our users, and an incredible business opportunity for developers.
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Today, developers compete on a level playing field on the App Store.
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We’ve even flown our engineers to Stockholm to help Spotify’s teams in person.
It’s not level between developers and certainly not between Spotify and Apple Music.
It’s difficult to tell whether this is marketing spin, legal CYA, or if there are executives at apple who actually believe this obvious laughable disinformation nonsense.
I used to wonder the same thing when they made statements about the cursed butterfly keyboard.
Apple says the EU has found no evidence of consumer harm, and “ignores the reality of a market that is thriving, competitive and growing fast”. In a statement, Spotify welcomed the judgement and its effective implementation.
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The fine is the culmination of an EU investigation that has spanned more than a decade, with Spotify first filing a formal complaint in 2019. The $2bn fine amount is proportionate to Apple’s global revenues and “necessary to achieve deterrence”, according to the EU commission ruling.
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It’s unclear whether the current incarnation of App Store rules are still considered to be in breach of the law, in the eyes of the EU.
Spotify’s corporate communications tend to come across as “entitled brat” more often than not, including their response not taking the win with class (I’m pretty sure using the word ‘monopoly’ is inaccurate at this point in time, but I don’t see the EC telling Spotify to watch their language).
Music app developers can even include information about other offers available outside of their app, along with a link directing users to a website to create and manage their account.
This is quite limited and not available to all app types in all regions.
We introduced the reader rule years ago in response to feedback from developers like Spotify.
Is less than two years really “years ago”?
Apple seems to be taking credit for announcing that it would add the rule in 2021, but it didn’t actually do so until March 30, 2022.
Apple playing hurt baby. The App Store helped Spotify so much!! We provide all the API!!1!
Nobody would buy iPhones without support for apps. It’s in their own best interest to provide a dev toolkit and support.
I’m quite taken aback by this latest press release, which appears to infer certain companies are freeloading, deriving their value primarily from Apple’s platform. But without those apps, the iPhone wouldn’t have much value itself – witness Windows Phone.
And, really, Apple arguing it created value for Spotify by way of Apple’s app review team reviewing 421 versions of the Spotify app so said Spotify app can end up on Apple’s own App Store? Really?
Oh god I’m going to have to a line by line examination of that stupid Apple statement about the European Commission fine, aren’t I?
Apple’s EU statement almost reads as if the App Store was solely responsible for Spotify’s success, largely ignoring how much the Android platform (Google Play Store) contributes as well.
Apple’s EU fine today shows why the DMA is important, too — it took Spotify eight+ years to challenge a single clause of Apple’s developer agreement, and only for a single category of app (music players).
It shows just how much other developers would have to fight to make these improvements available to every app through individual legal actions, and how infeasible it is.
Previously:
- EU to Fine Apple Over Anti-Steering Rules
- Have You Contributed Any Revenue?
- Spotify: Time to Play Fair
Update (2024-03-06): Dion Almaer:
This just shows how Apple has gotten too big for their boots. A healthy platform recognizes that you are investing for your JOINT users.
Many Spotify users want to use iOS, iOS is better because of Spotify.
Yet Apple shows that they think they are so important that everyone should pay for every part of their investment.
Apple has helped Spotify in the same way electricity and audio companies have helped.
Spotify also helped Apple sell devices and services. They needed Spotify for marketing many products and services as something useful.
This is interesting because Apple as a platform provider benefits from having Spotify in the App Store.
Yet, Apple hasn’t acted as if it’s in a symbiotic relationship with developers for years. Instead it acts like a feudal lord and developers are serfs.
Imagine this logic extended to other platforms:
“Spotify has accessed Windows APIs X trillion times and pays nothing”
“Spotify has been downloaded on Android N billion times and pays nothing.”
“Spotify has been opened in Chrome N billion times and pays nothing.”
Ridiculous.
There are plenty of companies that would happily pick up the tab for running their own infrastructure if Apple would let them.
Apple: You HAVE to use our store and it’s super expensive for us ;_;
Industry Fat Cats: We could run our own…
Apple: You ungrateful sob!
Much like roaming, App Stores let private companies subdivide and control the single market to their own financial gain. When much of the digital economy is taking place on phones, tablets, and various other devices that are largely limited to App Stores, this is effectively ceding the single market to a fragmented market that’s entirely under corporate control.
This is against the core operating theory behind the EU. They would be institutionally against this even if the companies in question were European. Many, if not most, of the mobile phone operators affected by the roaming regulations were European. That didn’t earn them a pass on compliance.
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It shouldn’t be a surprise to anybody that the EU is very concerned about preserving the single market in digital services and software. That means they have to do something about Apple’s control over the iOS App Store and exclusion of competing web browsers. From their perspective, they don’t really have a choice.
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To Apple, the App Store is a side line. To the EU, the single market is the foundation of its existence.
And because Apple and its tech punditry refuse to try and understand the party they are dealing with, they get caught looking like childish idiots every time they open their mouths about it.
I hope this serves as a wake-up call and Apple starts looking at the regulatory environment in each of its primary markets and how it can be a good citizen instead of letting its hubris rack up fines, ultimately doing even more damage to the company and its shareholders.
After all the malfeasance and self-preferencing Apple employed to help Apple Music unfairly gain ground against Spotify. It's truly an incredible document. One that I hope marks the sad high water point for Apple's hubris. One we'll point to once this cast of executives currently steering the ship finally depart their positions.
Because I've increasingly come to the conclusion that nothing will fundamentally change at Apple until they have the kind of leadership transition that unlocked so much value at Microsoft. Until they find their Nadella to replace their Ballmer, we should expect more indignant press releases, more threats, more evasion, more malicious compliance.
See also: Dithering, Kosta Eleftheriou.
Update (2024-03-07): BEUC (via Hacker News):
The Commission decided Apple abused its dominant position in the distribution of music streaming apps through its App Store in breach of the EU Treaty antitrust rules’ ban on abuse of monopoly power by preventing consumers from making informed choices in favour of alternative cheaper options. It is an important step that the Commission decided to pursue an ‘exploitative abuse’ case, where a dominant company exploits its market power to impose unfair trading conditions on others to the detriment of consumers.
It’s no secret that I’m often skeptical of antitrust actions, many of which feel like bureaucrats doing a “general punishment” for disliking a successful company, rather than an actual response to abusive, anti-competitive behavior by a large company. However, that does not mean that there is no place for antitrust enforcement. It’s just that it should be in response to actual evidence of companies abusing their market position to make anti-competitive moves in an unfair manner.
And, I’d argue that Apple’s efforts to prevent companies like Spotify from even telling users that they can subscribe directly for less by going to Spotify’s website, seems like… exactly that.
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Apple offers its own competing music service that is a 1-to-1 replacement for Spotify. But, in Apple’s case, it doesn’t have to pay that same 30% fee, since it’s the same company.
And it’s that factor that makes this anti-competitive. It’s using its own market leverage over the app market to force a competing service to pay a much higher fee than it has to pay itself. That seems like a classic situation for antitrust.
This press release has such a massive “bitch and moan” cry baby vibe.
Serious question: What’s the point of publishing something like this? Apple just wants to have the last word?
Seems like a lot of energy was put into this that could be put to better use.
Apple’s response to this decision is barely restrained and looks, frankly, terrible for one of the world’s largest and most visible corporations. There is no friendly soft-touch language here, nor is it a zesty spare statement. This is a press release seasoned with piss and vinegar[…]
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Apple is making its familiar claim that iOS software avoids its in-app purchase model is basically freeloading, but it is very happy for any developer’s success. Happy, happy, happy. Real fuckin’ happy. Left unsaid is how much of this infrastructure — hosting, updates, developer tooling, and so on — is required by Apple’s policies to be used by third-party developers.
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This [reader rule] change was not made because of developer requests [as Apple said]. It was agreed to as part of a settlement with authorities in Japan in September 2021.
I think the thing I find most offensive about Apple of 2024 is this conviction that Apple not only gifts us developers a platform, but also we will always and forever owe them for it. With zero acknowledgement that their platform is equally reliant on us to be competitive.
In the past, Apple acknowledged that 3rd party software sells Apple hardware. That was the basis of their relationship with developers from the start with the Apple II and continued with the Macintosh.
After releasing iPhone without 3rd party software, Apple quickly realized they actually needed it and even went so far as to advertise “There’s an app for that” as a selling point for iPhone.
Yet today, Apple talks as if 3rd party software adds no value other than via direct payment extraction.
But there’s a scale-tipper there: how companies accomplish getting that bigger slice does matter. And while it might not connect as clearly to the profit and loss statements in black and white, you can see its effect no more clearly than in the fact that Apple published a 1500-word essay on its website about why the EU’s contentions are so wrong. Because the question its existence prompts is: who exactly is the intended audience?
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No, this piece is for the public and the press (who will relay said arguments to the broad swath of the public that hasn’t consumed them firsthand). It’s there to point out all the great things that Apple does and cast it as the one being targeted unfairly by Europe. Apple’s just here making the world a better place! Fundamentally, Apple wants you to be party to its point of view here: that it’s the one being taken advantage of.
But that argument falls a bit flat when you boil the argument down to its essence.
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And nowhere are these anti-steering clauses more questionable than when they intersect with things like digital books and, yes, streaming music—markets in which Apple itself is a competitor. To drag optics into this once again, it certainly doesn’t look good when your competitors in a space are subjected to restrictions because they’re doing business on one of your platforms—restrictions your own competing offering doesn’t have.
Sarah Perez (via Nick Heer):
That’s the overall vibe emerging from Apple’s desperate attempt at clinging onto IAP (in-app purchase) revenue by any means necessary[…]
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Essentially, Apple is now claiming that the platform offering developers distribution is not, in fact, the App Store, but rather the entirety of iOS. And developers should surely have to pay tribute to access iOS and its myriad APIs and frameworks, or so Apple believes. (The fact that developers already do so as part of their Apple Developer annual fee seems to be ignored.)
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IAP is arguably the best way to buy things on iPhone and gives Apple a huge competitive advantage. It could stand up to competition, but Apple is behaving as if it could not.
The business model where you sell cheap (ish) hardware and then secretly take a cut out of every transaction made on that device seems inherently anti-consumer to me. Your Netflix, etc. costs more than it otherwise would because the money is going to Roku, Google, Apple and as a user you have no idea what those agreements look like so there's no way to make an informed decision. Apple in particular has fought to keep users in the dark.
It’s even worse than that, since Apple also helps entrench other monopolies. Prime Video is a good example, since they have a sweetheart deal with Apple where they pay way less for IAP. This means that Amazon, a company that needs zero help, gets a huge boost in the AppStore, making it harder to make an startup to compete in the online video space.
Update (2024-03-08): See also: Accidental Tech Podcast, Ryan Jones, Peter Steinberger.
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Side note, but I remember when the term "API" referred to an entire library or framework, not every individual function and constant therein.
Apple would LOVE to spin this into a "Spotify vs Apple" battle. But it isn't. This is all about apples well documented abusive relationship with developers.
It takes a company the size of Spotify (without the complicated business deals Google have with them) to file a public complaint. Any smaller and you'll find your app rejected for bullshit reasons or your humble requests ignored for years and years (remember the Developers Union?)
"But the peasants love me" -said the King
There are many reasons that Apple is increasingly tightening its grip on the sharecropper profits made off the blood, sweat, and tears of its developer community.
$4,000 goggles, $̶1̶0̶0̶,0̶0̶0̶ c̶a̶r̶s̶, and $100 watch bands seem to be struggling to prop up its $2.7T market cap.
One of these days, even its "aspirational lifestyle" customer base may tire of it.
[...but AI!]
Infrastructure isn't free. Even for something as simple and self-contained as a food truck, someone still has to pay for the roads.
And it's silly to say that consumers were "harmed" by not showing them a subscription link to Spotify's web site. How oblivious would you have to be to think that you can only buy Mountain Dew at Kroger?
"How oblivious would you have to be to think that you can only buy Mountain Dew at Kroger?"
One of the pillars of Apple's $2T business is obliviousness.
And it is increasingly leaning on that pillar
... Even we -- none other than the exalted cognoscenti -- are oblivious when Apple tells us that:
"It just ain't possible to make a laptop drive two monitors at once."
Then we, what?, stand in awe as Apple performs just that miracle -- in *software* (as long as the lid is closed)!
"Infrastructure isn't free"
Compared to what Apple charges for it, it might effectively be free.
"Infrastructure isn't free"
Are you positing that 30% is purely to cover the cost of running the App Store “infrastructure” and associated services?
Apple has given away Macintosh SDKs, developer tools, and documentation for 40 years without needing to collect rent or subject developers to review to turn a profit, but this is suddenly infeasible for iOS specifically?
No, infrastructure is not even close to free, effectively or otherwise. Add up all the hardware, space, power, cooling, networking, staffing, etc. to do anything like hosting an App Store at any kind of scale beyond "mom and pop", and it gets really expensive, really quickly. Doing it "in the cloud" doesn't help that much (if at all), other than shifting the responsibility for the infrastructure to someone else.
How far the mighty have fallen…
There was a time when every company wanted to be like Apple. They were envious of the positive resonance that Apple and its device users had with each other.
Now Apple is the poster child for corporate greed.
I maintain that the downfall was allowing free apps and stupid stuff like IAP’s and subscriptions to the mixture. The App Store should have been paid apps only. Period.
Let Facebook or (whoever wants to sell an app) figure out if people will pay 99 cents or whatever money onewanted to charge for its app. Hasvibng free apps opened the store up to crazy amounts of crap.
Well deserved. Apple has treated developers more anti-competitively than Microsoft did in the 90s, which is insane since Apple used to be the "good" company
@DJ: infrastructure doesn't have to be hosted by Apple... Spotify obviously has its own infrastructure to stream all that music. They'd be quite happy if they could side-load.
Apple: We’ve even flown our engineers to Stockholm to help Spotify’s teams in person.
Boo! hoo! hoo! You didn't go there out of the kindness of your heart, so stop acting the jilted lover. You went there because they make you a lot of money, and you wanted them to continue making you a lot of money. If they didn't make you any money, you wouldn't have flown out to see them. It's not like you fly out to help small indies.
There are plenty of companies that would happily pick up the tab for running their own infrastructure if Apple would let them.
Apple: You HAVE to use our store and it's super expensive for us ;_;
Industry Fat Cats: We could run our own...
Apple: You ungrateful sob!
"Spotify obviously has its own infrastructure to stream all that music"
Spotify doesn't have any hosting infrastructure. They use Google Cloud, afaik. I'm sure they're paying them quite a handsome amount of money, but at least Google is doing something for them in return, unlike Apple.
It doesn't matter where the physical server boxes (et al) sit. Even if you host it on someone else's cloud, you still have to pay them to host it for you.
And iOS and all those APIs and tools don't just write themselves. That's part of infrastructure, too.
To me, this seems like coming over to use my pool, eating all my snacks, and complaining that the water is too cold. Then charging people to view the selfies and videos that you took while you were there.
Actually, DJ...
Ironically it was Apple who came over to our pool, ate our snacks, and then complained about the water being too cold. They used our GPL'd gcc, bash, glibc, gdb, etc to build NeXT and then MacOSX. And then, because they didn't own it all, they used that foundation to build their own crap, lldb, swift, etc, which doesn't work all that well. And then they decided to make their AppStore incompatible with the GPL, banning the very software they built their success upon. History is very different if you decide to ignore what happened before some magical date that makes you right.
Anyway, Apple just banned EPIC who was one of the few who wanted to build an alternative AppStore... because it criticized Apple. You can't make this shit up. https://www.epicgames.com/site/en-US/news/apple-terminated-epic-s-developer-account
Sure, you can go back and litigate Apple's GPL roots. Not sure many/any people think much about that anymore, but maybe they do.
But (and we've covered this before), Apple created a platform in iOS, and developers said, "It sure would be nice if we could develop apps for that." And Apple said, "Yes, that would be nice. Here are some tools for doing that, and here are the rules you have to follow." And developers said, "OK", and proceeded to develop apps. There were varying amounts of grumbling about some of the rules, but that didn't stop WWDC from selling out every year in minutes (or seconds), with capacity crowds packing Moscone Center. I was there for several of those (before and after iPhones became a thing), until my job drifted away from having a (legit) reason to go.
And then, it seems, some squeaky wheels got the attention of some know-nothing-about-tech politicians who had enough leverage to pass legislation for things like this and standardization on USB-C. These are the same types of politicians who keep pushing for rules around E2EE to allow governments to have backdoors (what could possibly go wrong?). "We don't like the rules anymore, so we'd like you to pass some laws to change them."
[Meanwhile, back at the pool...] Sure, I may have built my pool based originally on GPL'd pool designs, but it's a different pool. I've been fine with you using my pool, but now you want to bring in a pool heater, plug it into my power outlet, and I'm supposed to be OK with that? Maybe it's time for you to go swim somewhere else if you don't like my pool. The guy down the street has one about the same size -- just watch out for viruses in the water. And I hear he sells people's swimming habits to the highest bidder.
@DJ Apple said “here are the rules” and then changed them. What Spotify wants to do was originally allowed, just like you used to be able to buy Kindle books in the app.
@DJ Apple has changed the rules many times and always at cost to developers, particularly indie ones.
Nothing lasts forever. Apple used to be good to the community as it understood that there is a reciprocal relationship that must be kept healthy for all parties, Apple, users and developers, to prosper together.
The current Apple is hell bent on squeezing out every penny it can from the community while gaslighting them. It will not end well for Apple as technology moves on and someone else will ride the next wave as Apple may get left behind.
Remember Windows Mobile? The developer community did not support them with apps as they were pissed at how Microsoft jerked them around in the age of the desktop and that platform is dead. Satya seems to have turned it around with OpenAI but there was no guarantee of that was there?
If Apple does not learn the right lesson from this debacle then it may also die one day. And I won’t be sad as someone else will have made new toys for me to use. I am an avid Apple device user but I also use Google devices and Microsoft devices.
I have no loyalty to Apple besides a reciprocal one. They are behaving moronically and will lose my support as soon as someone can displace them if they don’t stop being morons.
@DJ: Apple wants to swim in the EU's pool, and no one gets to play in the EU's pool while keeping their monopolistic behaviors.
Apple can always peddle their wares in some other guy's pool. Let's consider their options.
There's one that Apple is very familiar with. Unfortunately Apple's home turf may soon be at war with it. As a result its local government would prefer people to buy locally designed products. Also it has fewer IP protections, and people there don't make as much money to buy Apple's expensive wares. On the plus side, that is why Apple makes it "magical products" there even if its "contractees" seem to end up end up so depressed that they jump off buildings. So having shat in that pool, I understand why Apple might not want to linger in it anymore. You don't eat where you shit, and all that.
Then there's another pool, where Apple can throw money at lobbyists, politicians and judges to get they want. Problem is, they've already captured most of the market, so there's not much room for growth, harming their precious share price.
So that leaves the EU's pool. And the EU's entire point is to be a successful market. It doesn't care about whether you think "tech is special", "they are tech-ignorant", or any other supercilious attitude you, your ilk of Apple fan-boys, or Apple itself might have. Apple either behaves by the rules, or it gets fined up to 20% of its global turn over, or it leaves. So, it either behaves by the rules, or its share price goes down.
> "Since the App Store launched more than 15 years ago, Apple has had two simple goals: creating a safe and trusted marketplace for our users, and an incredible business opportunity for developers."
I think there's a paragraph missing:
"Then just a year later, Apple optimized these 2 goals into one single goal: make sure this is only an incredible business opportunity for Apple."