Earlier today, the European Commission issued a preliminary view that Apple holds an unfair advantage in the music streaming space over competitors like Spotify. The basis of the finding lies in Apple’s own in-app purchase mechanism which sees Cupertino imposing a 30% tax on competitor’s earning through the App Store. The potential implications for Apple include a fine of 10% of its annual revenue which could add up to €22.3 billion ($27 billion) if the decision is ratified.
Our preliminary conclusion: @Apple is in breach of EU competition law. @AppleMusic compete with other music streaming services. But @Apple charges high commission fees on rivals in the App store & forbids them to inform of alternative subscription options. Consumers losing out.
— Margrethe Vestager (@vestager) April 30, 2021
Margrethe Vestager who serves as the Executive Vice-President of the European Commission broke down the news on Twitter and the Commission also issued a separate press statement detailing the findings. According to the details, the Commission believes the 30% “Apple tax” has resulted in distorted competition and ultimately higher in-app music subscription prices for consumers.
Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices. In addition, Apple becomes the intermediary for all IAP transactions and takes over the billing relationship, as well as related communications for competitors. – EU Commission statement
Over two years ago, Spotify filed an anti-trust complaint against Apple for the very same reason described in today’s statement. Other big players like Netflix and Epic Games have also publicly opposed the 30% Apple tax alongside many other developers.
Apple still insists that the money generated from the tax is used to maintain the App Store and its content privacy and security. Despite its firm position, Apple has made some strides in lowering tax to 15% for developers earning less than $1 million annually. Some video streaming services like Amazon Prime and Canal+ are also able to bypass the App Store and use alternative payment methods for individual movie and TV show rentals.