EU Commission Releases Interim Report and Bashes Apple Over Antitrust Violations

• The EU Commission has published a report to informed that they have found issues with Apple’s App Store rules.
• The investigation has already yielded worrying results, pointing to antitrust law violations.
• Apple’s anti-steering provisions and in-app purchase requirements are presented as the source of problems.

It appears that Apple is on an anti-trust violations streak, as two days back, the Russian anti-competition authority imposed a hefty fine, Australia’s consumer watchdog released an interim report on its investigation that painted a dark picture, and now the European Commission is doing the exact same thing. According to a press release published today, the commission investigators have found distinct and very worrying antitrust violations that Apple will be called to face and deal with soon.

The investigation was launched almost a year after Spotify filed a relevant complaint with the EU Commission, accusing Apple of setting the stage for stifling competition on the App Store. Apple responded to these unfair competition allegations by rejecting them, but things have moved fast since then. Many more entities have joined Spotify’s side, and anti-competition authorities from around the globe have been called to review Apple’s practices and put an end to those determined to be illegal.

In today’s press release, the Commission informs us that Apple’s App Store rules distort competition in the market of streaming app services by raising the costs for third-parties who wish to compete with the company. These third parties are obliged to raise the cost of their service as a result, so consumers are less likely to select them. In addition, Apple serves as the intermediary for all in-app purchases, so the consumers cannot have a direct billing relationship or even communications with anyone else in the store.

The Commission has found that the problems stem from the following two App Store requirements.

1. The mandatory use of Apple's proprietary in-app purchase system (“IAP”) for distributing paid digital content.
2. “Anti-steering provisions,” which limit the ability of app developers to inform users of alternative purchasing possibilities outside of apps.

The Commission investigated whether the competing third parties absorbed the additional cost but found that the majority raised the prices to cover Apple’s 30% cut. Choosing to absorb the cost and lower the quality of the service would quickly get you out of business in such a competitive space, so most prefer to just pass the fee to the end-user.

If the violations are confirmed in the final report, Apple will have violated Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position. If this is the outcome, Apple will have to deal with a large fine and more pressure to revisit some parts of its App Store rules.