The beginning of March saw the announcement of a long-awaited fine for global tech giants, Apple. This penalty arose as the European Commission found the corporation guilty of anti-steering practices in the music streaming industry, specifically breaching new regulations imposed under the Digital Markets Act (DMA). Only Google has fallen foul to a higher fine from the Commission, though the €1.84 billion sum still only represents 0.5%of Apple’s annual turnover. Questions have been asked of the persuasive ability of such a fine, but the E.U. ensures this is only the first step towards a tighter future regulatory environment for tech “gatekeepers”.
November 2022 saw the adoption of the DMA within the E.U., however it was only in March 2024 that the regulations came into full effect. The legislation was initially presented alongside the Digital Services Act, with the pair now working to form the “centrepiece” of European digital strategy. The DMA specifically aims to regulate so-called tech industry “gatekeepers”, identified as those holding significant economic power, and acting as intermediaries to link large user bases with multiple outside providers.
Put simply, gatekeepers are those who have significant control of the internal market for digital services, and the Apple App Store provides a prime example of these targeted platforms, as it provides the link between all iOS users and thousands of software developers offering their services. The DMA hopes to improve conditions within these markets, increasing competition and punishing gatekeepers found to be harming consumers through anti-competitive practices. Companies failing to comply with DMA regulations will be fined accordingly, up to 10% of their global annual turnover for first time offenders, and a daunting 20% for repeaters.
September 2023 saw the E.U.'s first designated gatekeepers announced, with 22 services (including the App Store) across six companies identified. Expected names such as Meta, Microsoft and Amazon joined Apple in the ranks, and these 6 companies were given six months to comply with DMA regulations, with March 2024 set as the deadline. As the deadline for compliance reached its end, frustrations with Apple arose, specifically in regard to their music streaming practices.
As such, Apple Music’s biggest rival, Spotify, alongside 33 further tech companies, mounted a joint complaint to the Commission, attacking the tech giant’s “lack of compliance” with the DMA, and their “insane” control over the music streaming industry. Spotify had kickstarted the E.U. investigation into Apple’s practices back in 2019, before the DMA was introduced, with the recent complaint simply adding fuel to fire. On March 4 the Commission announced its findings, with Apple guilty as charged, a multi-billion euro charge at that.
So what exactly have Apple done this time? Having recently been instructed to remove similar App Store restrictions after a 3 year-long court case with Fortnite’s Epic Games, one might think Apple would have learned their lesson. The European Commission concluded that Apple has engaged in practices to limit the information provided to iOS users about cheaper alternatives for services outside of the Apple App Store. These “anti-steering” practices have harmed consumers, as they face higher prices and less information on potential purchasing decisions.
E.U. Competition Commissioner Margrethe Vestager reported: “Apple’s rules ended up harming consumers. Critical information was withheld so that consumers could not make informed choices. Some consumers may have paid more because they weren’t aware that they can pay less if they subscribed outside of the app.” Given the global dominance of the iOS mobile system - holding a 29.58 percent market share - Apple’s anti-competitive behaviours have been significant enough to warrant such a fine, with rivals claiming the practices have been limiting fair competition for over a decade.
The fine is the first of its kind under the DMA regulations, and whilst the number itself may seem insignificant in comparison to the finances of the company, Vestager claims the move is a positive reaction, showing that the commission “wants to show resolve,” and emphasises that abuses by dominant companies “will be punished.” Apple however have responded strongly, quickly demonstrating their own resolve to appeal and resist the fine. In a statement released on March 4, the company claims that the EU investigation has “never yielded a viable theory” of how Apple has harmed competition, further stating that the “facts simply don’t support this decision”. In direct retaliation to Spotify’s prompting of the investigation, Apple rightly points out that the Swedish-owned streaming service has been the primary advocate and “the biggest beneficiary” throughout the case, with a 56 percent share of Europe’s music streaming market. Spotify, in turn, have responded with glee at the E.U.’s ruling, but say there is further work to be done.
So what next? The DMA deadline for compliance has passed, as such the E.U. can now fine up to 20% of annual global turnover for repeat offenders, a number alarming enough to pose a genuine deterrence for even the biggest corporations. In assessing this preliminary step towards a stricter regulatory environment, Max Von Thun, Europe director of the Open Markets Institute, claims he sees the €1.84 billion as “kind of small compared to what’s to come.” In a similarly optimistic appraisal, international law firm Dentons believes that the DMA may pave the way for similar legislation across global jurisdictions, and inspire further antitrust cases to be brought against abusive practices within hitherto under-regulated industries. The future is looking hopeful for competition, and murky for Apple.