LONDON – The European Union leveled its first antitrust penalty against Apple on Monday, fining the U.S. tech giant nearly $2 billion for unfairly favoring its own music streaming service by forbidding rivals like Spotify from telling users how they could pay for cheaper subscriptions outside of iPhone apps.
Apple muzzled streaming services from telling users about payment options available through their websites, which would avoid the 30% fee charged when people pay through apps downloaded with the iOS App Store, said the European Commission, the 27-nation bloc’s executive arm and top antitrust enforcer.
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“This is illegal. And it has impacted millions of European consumers who were not able to make a free choice as to where, how and at what price to buy music streaming subscriptions,” Margrethe Vestager, the EU's competition commissioner, said at a news conference in Brussels.
Apple — which contests the decision — behaved this way for a decade, resulting in "millions of people who have paid two, three euros more per month for their music streaming service than they would otherwise have had to pay," she said.
It's the culmination of a bitter, yearslong feud between Apple and Spotify over music streaming supremacy. A complaint from the Swedish streaming service five years ago triggered the investigation that led to the 1.8 billion-euro ($1.95 billion) fine.
The decision comes the same week new rules take effect to prevent tech giants from cornering digital markets.
The EU has led global efforts to crack down on Big Tech companies, including three fines for Google totaling more than 8 billion euros, charging Meta with distorting the online classified ad market and forcing Amazon to change its business practices.
Apple's fine is so high because it includes an extra lump sum to deter it from offending again or other tech companies from carrying out similar offenses, the commission said.
It's not the only penalty that the tech giant could face: Apple is still trying to resolve a separate EU antitrust investigation into its mobile payments service by promising to open up its tap-and-go mobile payment system to rivals.
Apple hit back at the commission and Spotify, saying it would appeal Monday's fine.
“The decision was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast,” the company said in a statement.
It said Spotify stood to benefit from the EU's move, asserting that the Swedish streaming giant met over 65 times with the commission during the investigation, holds a 56% share of Europe’s music streaming market and doesn’t pay Apple for using its App Store.
“Ironically, in the name of competition, today’s decision just cements the dominant position of a successful European company that is the digital music market’s runaway leader,” Apple said.
Spotify said it welcomed the EU fine, without addressing Apple's accusations.
“This decision sends a powerful message — no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers,” Spotify said in a blog post.
The commission's investigation initially centered on two concerns. One was the iPhone maker's practice of forcing app developers selling digital content to use its in-house payment system, which charges a 30% commission on all subscriptions.
Those fees have turned into a significant part of Apple’s service’s division, which generated $85 billion in revenue during the company’s last fiscal year ending in September.
Various legal and regulatory developments in the U.S as well as Europe that are threatening to undercut the Apple's commissions from the App Store have been weighing on the company's stock, which has fallen by 9% so far this year while the tech-driven Nasdaq composite index has gained 8%. Apple's shares declined 2.5% in Monday's trading in the U.S.
But the EU later pivoted its focus to concentrate on how Apple prevents app makers from telling their users about cheaper ways to pay for subscriptions that don’t involve going through an app.
The investigation found that Apple banned streaming services from telling users about how much subscription offers cost outside of their apps, putting links in their apps to pay for alternative subscriptions or even emailing users to tell them about different pricing options.
“As a result, millions of European music streaming users were left in the dark about all available options,” Vestager said, adding that the commission's investigation found that just over 20% of consumers who would have signed up to Spotify's premium service didn't do so because of the restrictions.
The fine comes just before new EU rules are set to kick in that are aimed at preventing tech companies from dominating digital markets.
The Digital Markets Act, due to take effect Thursday, imposes a set of do's and don'ts on “gatekeeper” companies including Apple, Meta, Google parent Alphabet, and TikTok parent ByteDance — under threat of hefty fines.
The DMA's provisions are designed to prevent tech giants from the sort of behavior that's at the heart of the Apple investigation. Apple has already revealed how it will comply, including allowing iPhone users in Europe to use app stores other than its own and enabling developers to offer alternative payment systems.
Vestager warned that the commission would be carefully scrutinizing how Apple follows the new rules.
“Apple will have to open its gates to its ecosystem to allow users to easily find the apps they want, pay for them in any way they want and use them on any device that they want," she said.