European Union Orders Apple to Stop Preventing Music-Streaming Apps from Informing Users of Cheaper Deals

In a major blow to the tech giant, Apple Inc. was hit Monday with a €1.8 billion (US$2 billion) penalty from the European Union over an investigation into allegations it shut out music-streaming rivals on its platforms.

EU’s Largest Fine Ever for a US Company

The European Commission also ordered the Cupertino, Calif.-based firm to stop preventing music-streaming apps from informing users of cheaper deals away from Apple’s App Store. The larger-than-expected fine is the first to be handed out to Apple by the EU, and it comes on the eve of a bloc-wide crackdown on big tech companies.

EU’s Investigation into Apple’s App Store

The EU’s investigation was sparked by a complaint nearly five years ago from Stockholm-based Spotify, which claimed it was forced to ramp up the price of its monthly subscriptions to cover costs associated with Apple’s alleged stranglehold on how the App Store operates.

"Anti-Steering" Rules at Center of Controversy

The commission homed in on Apple’s so-called anti-steering rules, saying they were unnecessary and meant customers faced higher prices. According to a person familiar with the matter, Apple began addressing any possible competition concerns by allowing Spotify and other music services to direct users to the web in their apps to sign up for subscriptions.

Impact of EU Fine on Apple

The fine is likely to have significant implications for Apple’s business practices, particularly its App Store policies. The company has already faced criticism from developers over the fees it charges for app sales and in-app purchases.

"Apple’s Rules Result in Withholding Key Information on Prices and Features"

EU antitrust chief Margrethe Vestager said that Apple’s rules prevented consumers from making informed choices, meaning some may have paid more than they needed to. The commission found that Apple’s rules result in withholding key information on prices and features of services from consumers.

EU Crackdown on Big Tech Companies

The EU crackdown on Apple’s App Store has run alongside sweeping, new rules aimed at heading off market abuses before they take root. Under the Digital Markets Act, which comes into full effect this week, it will be illegal for the most powerful tech firms to favor their own services over their rivals.

Key Provisions of the Digital Markets Act

  • Companies will be barred from combining personal data across their different services.
  • They will also have to allow users to download apps from rival platforms.
  • The rules come into full force March 7, and Apple has challenged its designation under the new regime.

Reaction from Industry Players

Spotify welcomed the decision, saying it sends a powerful message that no company can wield power abusively to control how other companies interact with their customers. However, Apple wrote in a post about the EU decision that European consumers have more choices than ever and that the decision cements its dominant position as the digital music market’s runaway leader.

Conclusion

The €1.8 billion fine is a significant blow to Apple and highlights the EU’s commitment to protecting consumers from abusive business practices. As the bloc-wide crackdown on big tech companies continues, industry players will need to adapt their business models to comply with the new regulations.