Apple and EU, at it again

The European Union says the App Store’s 30% cut is squeezing Apple’s competitors. Apple says its rivals (ahem, Spotify) are asking for “free ride.”

From “EU launches Apple antitrust probe focusing on whether App Store and Apple Pay ‘distort competition’” posted Tuesday on Fortune.com:

Apple faces a twin-pronged attack from European Union antitrust chief Margrethe Vestager amid concerns the U.S. tech giant’s App Store and Apple Pay services squeeze developers and potential rivals.

Just four years after hitting Apple with a record-breaking tax bill, Vestager has switched her attention to the iPhone maker’s market power.

The EU will review whether Apple’s app store violates competition law by requiring developers to accept a 30% commission for every sale on Apple’s platform. Watchdogs will also examine how Apple limits “tap-and-go” functionality to its own Apple Pay product.

“It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices,” Vestager said in a statement on Tuesday. “We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books”…

Apple said that the EU is responding to complaints from rivals that “simply want a free ride, and don’t want to play by the same rules as everyone else.”

“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies,” Apple said in a statement. “At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment.”

My take: Apple tends to lose these battles in the EU. So far the penalties have been nothing they can’t afford.

Update from the WSJ ($):

If found guilty, Apple could face a fine of up to 10% of its annual revenue and be forced to adjust its business practices.

13 Comments

  1. Jonny Tilney said:
    She’s the EU’s unelected, failed politician, that is running riot. Apple “controls” a paltry 14% of markets, there are plenty of alternatives. Forcing Apple to be ‘open’ is a disservice to all its customers, and it is an important reason we choose Apple. She can go after Microsoft with over 80% of desktops, or Google with 80% of search, but please, let Apple get on and innovate.

    The EU needs to reign her in, soon. It’s costing the EU a lot of wasted money. Just let’s wait and see the interest they will pay Apple when they return the $14bn for the cooked up, ridiculous tax call they made.

    6
    June 16, 2020
  2. Robert Stack said:
    PED: I think you mean 30% and not $30…

    1
    June 16, 2020
  3. Gary Morton said:
    Problem for Apple is that even if no European laws say Apple is doing anything wrong, Vestager will just make up her own laws, claiming whatever she says is the way the laws should have been written, so that is what I am going to use in this anti-trust investigation. She did the exact same thing in the tax investigation with Ireland and Apple. This one will also take years, and I would expect many appeals. Trying to work with Vestager and convince her of anything is a waste of time.

    5
    June 16, 2020
  4. Fred Stein said:
    Abuse of power. There are real corporate predators, in the EU, here and everywhere. Go after them.
    1) Apple 30% charge aligns with comparable channel sales costs for nearly every product or service. 1st year b-school stuff.
    2) As Jerry noted, Apple has no monopoly, just access to the best demographic.**
    3) The root cause is that the EU has not produced any giants in the digital transformation.

    **Imagine the App Store as a high-end shopping mall or as one of the exclusive retail streets in Europe, or as DisneyLand. They all provide access to well-heeled customers and they provide security features. They also control, to varying degrees what is sold, for example no cheap knocks, or scammers, or copycat products. That’s a cost and a benefit for customers and retailers.

    4
    June 16, 2020
  5. Fred Stein said:
    Hey Maggie V. How about your VATs, a fee to access EU customers?

    I’d bet the EU politicians make the same argument. The VATs pay for social services, for the common good keeping local economies humming which means good buyers for Apple and everyone else.

    2
    June 16, 2020
  6. Mordechai Beizer said:
    So with what does the EU have a problem? Is it that 30% is too high and the number should be less, or do they think that Apple should not be compensated at all?

    Typical EU bureaucrat, “I don’t like what you’re doing, stop it.”

    1
    June 16, 2020
    • Alan Birnbaum said:
      … and pay a fine out of proportion of presumed act.

      0
      June 16, 2020
  7. Fred Stein said:
    Apple responds. Press release on their site yesterday. The App Store facilitated $519B (USD) sales in 2019. Only 15% were subject the 30% charge.

    Math: Apple gets 30% of 15% or 4.5%. UE VATS get on average 10% (guesstimate).

    More math: Add in VAT on Apple HW, various payroll taxes and indirect real estate taxes and Apple 30% pales in comparison to how much tax various EU countries get.

    Disclaimer: As a liberal, I’m fine with EU countries getting tax revenue. Just don’t complain about Apple getting their fair payments.

    2
    June 16, 2020
    • Steven Noyes said:
      I think it is very important to mention Apple on gets 15% on subscriptions after the first year. This includes Spotify, AutoDesk, CS and many more.

      1
      June 16, 2020
  8. Fred Stein said:
    More… from Apple’s press release:

    “The App Store,… visited by half a billion people each week across 175 countries.”

    To investors, 500,000,000 weekly visitors sounds sweet.

    5
    June 16, 2020

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