Apple will face two competition probes from the EU’s competition watchdog.The first will focus on Apple’s terms and conditions for its payment system Apple Pay, the European Commission announced Tuesday.The second will focus on the levy Apple imposes on in-app purchases through its App Store.Apple hit back saying claims it abuses its market position are “baseless” and come from “a handful of companies who simply want a free ride.”Visit Business Insider’s homepage for more stories.
Apple faces two competition probes from Europe’s competition watchdog.
The European Commission announced the two investigations on Tuesday, with the first set to examine the terms and conditions Apple places on its payment system Apple Pay.
The second will look at how Apple runs its App Store, specifically how the mandatory levy Apple places on some in-app purchases.
While the probes may last for years, Apple faces a multibillion-dollar fine on each if found guilty. The Commission can fine Apple up to 10% of its annual revenue and force it to make changes to its business.Europe’s competition probe into Apple Pay will look at how fair its terms and conditions are
The European Commission will be investigating three elements of Apple Pay’s business, according to its press release:Apple’s terms and conditions for integrating Apple Pay in merchant apps and websites on iPhones and iPads.Apple’s limitation of access to its NFC “tap and go” functionality on iPhones for payments in stores. Competition commissioner Magrethe Vestager said in a statement that Apple restricts “tap and go” to Apple Pay, suggesting this restriction is at the crux of the investigation.Alleged refusals of access to Apple Pay, although the Commission gave no details on where these allegations come from.
“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,” competition chief Margrethe Vestager said in a statement.
“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. I have therefore decided to take a close look at Apple’s practices regarding Apple Pay and their impact on competition.”The second investigation is a big step forward for smaller Apple competitors
The second investigation centers on the rules Apple sets for developers using its App Store, specifically a mandatory levy Apple places on some in-app purchases.
Although developers can place their apps on the App Store for free, Apple takes a 30% comission on certain purchases made within those apps once a user has downloaded them. Specfically, the levy applies to content such as subscriptions, virtual items, shows, and books.
The commission said this investigation was set in motion by a complaint from music-streaming giant Spotify last year and by a complaint from an e-book distributor. Although it does not name the e-book distributor, The Financial Times reported earlier today that Rakuten-owned ebook service Kobo filed a similar complaint against Apple in March of this year.European Competition Commissioner Margrethe Vestager. REUTERS/Francois Lenoir
The two companies complain that Apple essentially forces its competitors to inflate prices for consumers in order to afford the levy on in-app purchases. Alternatively, they say they must disable in-app purchases altogether. Apple does not have to pay an equivalent tax for subscriptions to its own music streaming service Apple Music, or ebook purchases via Apple Books.
“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,” said Vestager. “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. I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”
Spotify said in a statement: “Today is a good day for consumers, Spotify and other app developers across Europe and around the world. Apple’s anticompetitive behavior has intentionally disadvantaged competitors, created an unlevel playing field, and deprived consumers of meaningful choice for far too long.
“We welcome the European Commission’s decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.”Apple shot back against the “baseless” claims
In a statement sent to Business Insider, an Apple spokesman said the company was disappointed the European Commission chose to launch the two investigations.
“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed,” he said.
“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. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality,” Apple’s spokesman added.
This isn’t the first time Apple has run up against Vestager. The company was ordered to pay $14.4 billion in back taxes to Ireland after a ruling in 2016 determined it had avoided paying the correct amount of tax.
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