Antitrust Law Daily EC launches antitrust investigations against Apply Pay and Apple App Store
Tuesday, June 16, 2020

EC launches antitrust investigations against Apply Pay and Apple App Store

By J. Preston Carter, J.D., LL.M.

The EC will investigate whether Apple’s conditions for developers using Apple Pay and App Store distort competition.

The European Commission (EC) has opened formal antitrust investigations into Apple Pay and the Apple App Store’s rules. The investigations are to assess whether Apple's conduct in connection with Apple Pay and whether Apple's rules for app developers on the distribution of apps via the App Store violate EU competition rules.

Apple Pay. The Apple Pay investigation concerns Apple's terms, conditions, and other measures for integrating Apple Pay in merchant apps and websites on iPhones and iPads; Apple's limitation of access to the Near Field Communication (NFC) functionality ("tap and go") on iPhones for payments in stores; and alleged refusals of access to Apple Pay. Apple Pay is Apple's proprietary mobile payment solution on iPhones and iPads, used to enable payments in merchant apps and websites as well as in physical stores.

The EC press release stated that, following a preliminary investigation, the Commission has concerns that Apple's terms, conditions, and other measures related to the integration of Apple Pay for the purchase of goods and services on merchant apps and websites on iOS/iPadOS devices may distort competition and reduce choice and innovation. Also, Apple Pay is the only mobile payment solution that may access the NFC "tap and go" technology embedded on iOS mobile devices for payments in stores. The EC will investigate alleged restrictions of access to Apple Pay for specific products of rivals on iOS and iPadOS smart mobile devices and the possible impact of Apple's practices on competition in providing mobile payments solutions.

EC Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "Mobile payment solutions are rapidly gaining acceptance among users of mobile devices, facilitating payments both online and in physical stores. This growth is accelerated by the coronavirus crisis, with increasing online payments and contactless payments in stores." She added that, with Apple setting the conditions of its use and reserving the "tap and go" functionality, "it is important that Apple's measures do not deny consumers the benefits of new payment technologies, including better choice, quality, innovation and competitive prices."

App Store. The EC investigations into Apple’s App Store concern the mandatory use of Apple's own proprietary in-app purchase system and restrictions on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps. The investigations follow-up on separate complaints by Spotify and by an e-book/audiobook distributor on the impact of the App Store rules on competition in music streaming and e-books/audiobooks.

The press release states that the EC will investigate two restrictions imposed by Apple in its agreements with companies that wish to distribute apps to users of Apple devices:

  1. The mandatory use of Apple's own proprietary in-app purchase system "IAP" for the distribution of paid digital content. Apple charges app developers a 30% commission on all subscription fees through IAP; and
  2. Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps. The release noted that, although Apple allows users to consume content such as music, e-books, and audiobooks purchased elsewhere (for example, on the website of the app developer) also in the app, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper.

Regarding this investigation, Vestager said, "Mobile applications have fundamentally changed the way we access content. Apple sets the rules for the distribution of apps to users of iPhones and iPads." She added that "[W]e 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."

The EC release noted that, following Spotify’s March 2019 antitrust complaint, its preliminary investigation raised concerns that Apple's restrictions may distort competition for music streaming services on Apple's devices. Also, the March 2020 antitrust complaint filed by an e-book and audiobook distributor raised similar concerns to those under investigation in the Spotify case.

Companies: Apple Inc.; Spotify AB

MainStory: TopStory Antitrust ConsumerProtection GCNNews

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