Apple is now under yet another DMA non-compliance investigation – the fourth one to have been opened in the past two weeks.
Spotify, the company behind the complaint leading to the latest antitrust investigation, has suggested that Apple is now liable to daily fines, though that doesn’t appear to be correct …
What you need to know about Apple and the DMA
Europe’s Digital Markets Act (DMA) requires tech giants to ensure that they are not using a dominant market position to give their own products and services an unfair advantage over competing ones.
The first step in the process was to decide which companies qualified as “gatekeepers” under the law – that is, companies whose power was enough to effectively harm competitors. Apple was found to be a gatekeeper in terms of the App Store, as there was no other way for a developer to sell iPhone apps. That meant the company was obliged to make policy changes to comply with the DMA.
Apple announced that it would allow third-party app stores, but with a mass of asterisks. These included charging a Core Technology Fee for any app sold outside of its own App Store, which could potentially bankrupt small developers.
We said at the time that these proposals were not going to satisfy the EU, and that was soon confirmed. The European Commission initially announced that it was not satisfied with two of Apple’s responses to the new law, later adding a third. A fourth one has now been added following a complaint by Spotify
Apple under 4th DMA compliance investigation
The current situation is … complex! The latest development brings the total number of non-compliance investigations into Apple to four:
- App Store anti-steering policies (see following section)
- Alternative app store fee structure, including the Core Technology Fee (CTF)
- Web browser choice screen, during iPhone setup
- Apple Music being given an unfair advantage over Spotify
The complexity is overlap between the first and last of these – and the fact that Apple has already been fined for the latter issue, under a different antitrust law!
So what’s going on now?
Spotify has long complained that Apple’s App Store policies created an uneven playing field between its app and Apple Music.
Specifically, Apple Music allows in-app sign-up to a paid subscription, and Apple doesn’t have to pay a cut of this to, well, Apple. Spotify, in contrast, would have to pay 30% to Apple, meaning that it cannot compete on equal terms.
Additionally, Apple didn’t allow Spotify to escape this by steering users to its website, to subscribe there instead. It couldn’t link to the website, and couldn’t even specifically tell users that’s where they needed to go to subscribe. (Hence this is known as an anti-steering policy.)
Spotify complained about this back in 2019, and just last month Apple was found guilty of anti-competitive behavior under an older antitrust law. The company was fined €1.8B (roughly $2B). Apple wasn’t happy with this, and has appealed. However, it subsequently loosened its anti-steering policy to comply with the DMA.
But now Spotify has complained that Apple is also breaching the DMA, because the iPhone maker’s loosened rules are still too restrictive to comply with the law. In particular, it is unhappy with the fees surrounding alternative app stores and apps distributed outside of the Apple App Store.
The EU agrees that there is a case to answer here, and has opened a fourth DMA non-compliance investigation into this.
Spotify says Apple can now be fined
Lewis Crofts, editor-at-large of regulatory risk service MLEX, noted Spotify’s allegation that Apple’s changes are insufficient to comply with the DMA.
He subsequently confirmed that the EU is investigating:
GamesFray reports on Spotify’s view that Apple is now subject to daily fines for non-compliance.
Yesterday (Sunday, April 7, 2024), within a fortnight of the above-mentioned announcement, the EC told MLex that it is “currently assessing whether Apple has fully complied with the [March 4, 2024 Spotify antitrust (games fray article)] decision.” MLex also quoted Spotify’s public accusation of non-compliance by Apple. Since Saturday (April 6), the EC can formally enforce the March 4 ruling, such as through daily fines.
But experts disagree
However, app developer and intellectual property activist Florian Müller suggested that Spotify was on shakey ground here. The reason is that the streaming music giant had deliberately filed its complaint in very narrow terms, reasoning that the more specific the charge against Apple, the more likely the iPhone maker would be found guilty.
Müller expressed the view that this excluded a ruling on Apple’s fees, and Crofts agreed.
So while a fresh investigation is open, two experts think it unlikely to succeed; that Apple is not yet subject to fines for non-compliance; and is unlikely to be found so in response to this specific investigation.
However, the existing investigation into the CTF may find it in breach of the DMA.
One thing’s for sure: these matters will take years to be resolved. The EU has said it may take up to a year to make its rulings, and if Apple is found guilty for any or all of it, the company will for sure appeal, setting us up for literally years of court battles.
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