Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
EU's Apple antitrust probes signal start of open season on digital ‘gatekeepers’
16 June 2020 00:00 by Michael Acton, Nicholas Hirst, Lewis Crofts
Move over Google, it's Apple's turn in the crosshairs — and this time it looks like the EU has a bigger gun.
Probes into Apple announced today might once have been viewed as a landmark in the world of antitrust enforcement, but now they look more like staging posts on the road to full-scale regulation of Big Tech.
Even as the European Commission’s digital department floats the idea of a behavioral blacklist for dominant platforms, the investigations opened today show the competition department opening up a new front as part of the broader campaign.
Whether these two initiatives complement each other or reveal differing wings of the commission laying their claim to the question of how to tackle "gatekeeper" digital giants is open to debate.
But the probes into the App Store and Apple Pay will shine a bright light on how Apple manages its app ecosystem, a $500 billion world of opportunities for developers and indeed for the iPhone maker’s own services. The question being asked is: To what extent does Apple tilt the rules in its own favor?
A forthcoming set of charges against Amazon — another "hybrid platform" that sits atop its own ecosystem — will keep the spotlight trained on digital titans as consultations continue on new enforcement tools.
Apple vigorously denies the EU regulator’s allegations. Its rules are geared, it argues, to protecting consumers and keeping the playing field level. What’s more, it’s right that companies that benefit from its platform also invest in it, the company says.
While Spotify has been open in its criticism over the last year, what may be more surprising for Apple are signs that the EU enforcer’s eye is turning to other products such as games, cloud storage and audiobooks.
What started last year as a headline-chasing complaint over music streaming has triggered a potentially massive probe encompassing a suite of different apps and services.
And what had been an enforcement priority has now expanded to become a pre-eminent political one too as the EU executive's digital and competition departments race to crack down on the tech giants.
— App Store —
Behind the headlines, there are four separate formal probes into Apple. Three home in on the rules around the App Store, which is the strictly policed clearinghouse for all apps that can be downloaded onto iPhones and iPads.
One probe looks at the way the App Store’s rules affect the market for music streaming. The second focuses on the market for e-books. The third is broader, encompassing other markets where services compete with ones developed by Apple. Examples on the commission’s radar here include video games and cloud storage, two hugely valuable business sectors.
At the heart of the App Store investigations are Apple rules that require all payments in the application to take place using Apple technology, for which it takes a cut. The level of that fee is hotly disputed, with the 30 percent fee quoted by the commission representing the upper limit.
But one concern for EU officials is that users choosing Apple’s own competing services do not have to pay the same fee, meaning they could be cheaper.
And while they accept that Apple is entitled to fees in return for creating and running the ecosystem, they want to know if its fees are set at a level that disadvantages rivals such as Spotify or, for example, the music-streaming service Deezer or e-book seller Rakuten.
At the heart of Spotify’s complaint is Apple’s role as “stadium owner, referee and player,” said Horacio Gutierrez, the music-streaming service’s head of legal.
Another top-line concern for EU investigators is a ban on businesses that use the App Store telling consumers they could pay less by subscribing to their products elsewhere, for example via their websites. Google, which also runs a highly valuable app ecosystem, does not restrict businesses from doing so.
Apple argues that it cannot be a “free billboard” for companies that use its platform to promote their services and then deny it commission by directing customers to buy elsewhere.
Such rules are intended to prevent free-riding, the company contends, and are common.
— Apple Pay —
The commission's fourth probe deals with the rollout of Apple Pay and sees the regulator weigh in on the fast-moving world of mobile payments.
It’s looking at how Apple exploits its platform power to promote Apple Pay in apps and on websites; gives it privileged access to iPhone technology; and has blocked at least one payment service from working with Apple Pay.
Banks, fintech enterprises and the tech giants are racing to simplify how consumers pay for products, with potentially huge rewards.
The inquiry also overlaps with legislative initiatives, notably in Germany where lawmakers have ordered the iPhone maker to let payment providers access the "contactless" near-field communication chip embedded in its devices.
Apple has rejected concerns over access to this iPhone technology, which allows users to pay for goods by tapping their phones on merchants' terminals, as overblown. Apps and scannable codes provide alternative ways for financial companies to muscle into that emerging space, it says.
Another leg of the probe into Apple Pay looks at whether Apple imposes terms on app and website developers, and the businesses behind them, requiring them to make Apple Pay the default payment option.
Apple might respond that it only serves a limited part of the market — certainly less than half of all smartphone users in Europe, of which only a proportion would sign up to Apple Pay. While that may be true, it’s certainly a wealthy customer segment, one that European banks, fintechs and other challengers will covet dearly.
Apple could also argue that scannable codes have powered the rollout of companies such as AliPay and WeChat, the largest providers in China, and access to the contactless chip isn’t the only way to run mobile payments.
— Behavior problems —
Once again, a tech giant has found itself in the sights of the EU’s competition enforcer, accused of acting as both player and referee in a rigged game.
But the political temperature has changed since the record-breaking Google fines of the past few years, which saw the search giant stung for a total of around 8 billion euros ($9 billion) and told to change its behavior over its Google Shopping and Google AdSense services as well as its Android operating system.
Now the commission is facing up to what it has come to see as a broad structural problem of a rather small group of hulking companies that can pay just about any penalty imposed on them but won't stop trying to rig the odds.
Every investigation is a learning exercise. With today’s probes, the EU antitrust regulator has its eyes on much more than hair-raising punitive fines. These may well be part of the journey, but they won't be the end of the line.
With additional reporting from Natalie McNelis.
03 October 2022 00:00 by Claude MarxThe House passed a bill that combined three measures which advocates of stronger enforcement
26 September 2022 16:15 by Simon ZekariaDigital economy presents new scenarios for competition policy for which regulators and courts need "novel" and "creative" approaches
23 September 2022 10:34 by Simon ZekariaUK collective action regime that pursues damages for businesses and consumers over alleged competition-law infringements