Following a prolonged investigation, Apple has come under scrutiny by the European Union's competition authority, yet some experts question the significance of the hefty fine imposed.
On Monday, the European Union's European Commission (EC) fined Apple 1.84 billion euros (about $2 billion) for allegedly harming its competitors in the music streaming service. The EC argued that Apple failed to make payment options available to users who downloaded streaming music apps like Spotify and instead made them believe that paying for a Spotify subscription through its payment service was their only option.
Spotify filed a complaint with the EC in 2019, saying that Apple was playing unfairly in the streaming music market in which it competes with its service, Apple Music. While users can subscribe to Spotify on the company's website and via the Spotify app, Apple restricted payments on its platforms to secure a commission on the sale of each subscription, Spotify argued. Last year, the EC charged Apple with violating competition laws in its battle against Spotify.
A Costly Appeal
Not surprisingly, Apple said on Monday that it disagrees with the EC's decision and will appeal the ruling. In the meantime, Apple will be required to pay the $2 billion fine and await a decision from the Luxembourg-based General Court, which typically takes years.
That appeal process should be interesting to watch. While Apple has maintained its innocence, some bystanders were surprised by how much the EC fined Apple, considering the statute on penalties calls for a base fine of 40 million euros. The EC's fine is nearly 50 times that amount.
In an interview with Tech Times, Clinical Professor at Northwestern University's Kellogg School of Management Mark McCareins said Apple will most assuredly maintain its innocence on appeal but also argue that the fine the EC levied was unjust.
"Apple will raise valid and legitimate appeal points both on liability and the question of damages," McCareins said.
Whether the higher court will want to hear that argument and agree with the iPhone maker is unknown. But Chris Sagers, Professor of Law at Cleveland State University, told Tech Times in an interview that the court will likely be at least willing to hear Apple's side.
"It seems possible that Apple will secure some relief on appeal, but I would be surprised if the EU courts entirely reverse the result," Sagers said.
A Widespread Risk?
Regardless of the court's decision on the fine amount, it's unlikely to affect Apple materially: the company ended its last fiscal year with $162.1 billion in cash. And with outsize profits each quarter, $2 billion means nothing.
Apple may be more concerned about how the EC's ruling may encourage other countries worldwide to act on its competitive practices. Indeed, while the U.S. has been largely quiet on big tech's competitive practices, the same can't be said for the Netherlands, India, and several other countries worldwide. And some of those countries may follow the EC's lead.
"Many world jurisdictions have more aggressive competition policies than the United States," Sagers said. "Notably, Japan has a law against 'abuse of superior bargaining position' that is unusual in some respects, and Japan is reportedly interested in Apple's policies."
McCareins, meanwhile, believes the EC's decision on Monday exposes Apple to broader issues with the competition agency. He considers the EC, which is currently investigating Apple across a wide array of competition issues on its iOS policies, is only starting to become a thorn in the company's side.
"This latest EU attack on Apple's App Store is only part of a broader antitrust attack on Apple's pricing, restrictions, and use of its App Store," McCareins said. "It will be interesting to see how Apple manages this bigger issue going forward."
Will Apple Change Its Ways?
But managing the problem could be fraught with risk. Apple has been notorious for its iron-like grip on its operating systems and App Store, forcing third-party developers to play by its rules or else. The EC is trying to break Apple off that - a task that may not be easy.
"Apple will probably not change its practices in the short term, certainly not while any appeal is pending," McCareins argued.
Sagers, however, said Apple has no choice but to change how it does business because of "substantial legal risks on many fronts" across the world. In January, he noted that Apple announced an updated App Store policy that will allow developers to use alternative payment processors to sidestep Apple's fees. Apple also said that EU app developers will now pay a lower cost of 10 percent to 17 percent, depending on the transaction type.
Sagers argues it's just the tip of the iceberg as Apple works to quell regulator unrest and improve market competition. As much as Apple may want to control iOS and earn income on every download, it's a non-starter for competition watchdogs worldwide. And either Apple plays nicely or faces a very nasty and costly outcome.
"The safe money is that Apple will finally, meaningfully loosen restrictions around mobile software distribution," Sagers said.
About the author: Don Reisinger is a longtime freelance writer who has written on topics as far-ranging as technology and business to science topics. His work has appeared in a variety of publications, including Fortune, Inc., The New York Times, Business Insider, Tom's Guide, and many others. Follow him at https://muckrack.com/donreisinger and https://twitter.com/donreisinger
