The Reason Apple Is Facing Growing Anti-Trust Pressure In US and Europe

What should be most worrisome for Apple is that the US and EU, though coming from different philosophical approaches to anti-trust, both are focused on issues core to the company's increasingly service-oriented financial strategy.

The concern in both investigations is that Apple - and other big tech companies - are threatening competition and stifling innovation, which is believed will cause long-term harm to the global economy. JL

Sara Morrison reports in Re/code:

The European Commission opened two investigations into antitrust violations in its App Store and its Apple Pay service. At the same time, (Congress) is ramping up its antitrust probe of Apple, Google, Facebook, and Amazon. Amazon CEO Jeff Bezos agreed to testify, leaving Apple CEO Tim Cook the last holdout. As has been the case with Apple’s US antitrust trouble, the issue in the EU (is) forcing apps to pay commissions on in-app sales and giving Apple Pay exclusive access to (NFC) technology, which allows the user to tap their device on a reader to make payments on iOS devices.

The antitrust walls might be closing in on Apple. On the heels of news that the company is facing a pair of new antitrust investigations in the European Union, Apple CEO Tim Cook is facing calls to testify before Congress. Though Cook has not responded, Apple said of the European scrutiny, “We welcome the opportunity.”

Apple’s antitrust issues in the United States have been brewing for some time, but the European Union’s investigations could actually coincide with fresh trouble in the US. This week, the EU’s European Commission opened two investigations into the company’s alleged antitrust violations in its App Store and its Apple Pay service. At the same time, the House of Representatives is ramping up its antitrust probe of Apple, Google, Facebook, and Amazon. In the last few days, Amazon CEO Jeff Bezos finally agreed to testify, leaving Apple CEO Tim Cook the last remaining holdout as the pressure on Big Tech increases.

The House of Representatives has requested that the CEOs of all four companies testify before its antitrust panel. Google’s Sindar Pichai and Facebook’s Mark Zuckerberg expressed their willingness to testify before the House Judiciary Committee over the weekend. Then, Amazon’s Jeff Bezos followed suit a couple days later amid reports that the European Commission was preparing charges against his company, but Bezos stipulated that he would only appear if all four CEOs appeared together. Facebook and Google have reportedly agreed to those same terms, but Apple is still holding out.

The new investigations in Europe are sure to draw attention to how Apple will handle its various antitrust woes. As has been the case with Apple’s US-based antitrust trouble, the issue in the EU revolves around how the company controls third-party offerings on its devices — namely, its practice of forcing apps to pay commissions on in-app sales and giving its Apple Pay exclusive access to Near Field Communications (NFC) technology, which allows the user to simply tap their device on a reader to make payments on iOS devices. Apple is known for tight control over its ecosystem, a practice that’s often framed as a security feature but, according to some, also becomes a way for Apple to promote its own apps and eliminate the competition. Music-streaming service Spotify, which kicked off the investigation with a complaint to the commission back in 2019, has been a particularly vocal critic of Apple’s policies around apps.

If the commission finds that Apple has breached its antitrust rules, it could fine the company as much as 10 percent of its annual revenue. Apple may also face compensation claims from companies and consumers that are found to be victims of its antitrust practices.

“Apple sets the rules for the distribution of apps to users of iPhones and iPads,” the commission’s executive vice president, Margrethe Vestager, said in a statement. “We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers ... I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”

Apple strongly rebuked the 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,” Apple told Recode. “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.”

Apple also issued a statement following Spotify’s initial complaint to the commission, saying, among other things, that Spotify’s free offering — which the majority of its customers use — does not monetarily benefit Apple in any way. Nevertheless, Apple still generously allows Spotify to be offered in its App Store.

The European Commission will look at how Apple makes money off of companies that sell products through apps offered in the App Store. Apple requires most third-party apps to pay a 30 percent commission on in-app sales. Subscription services like Spotify pay a 30 percent commission for a user’s first subscription year and 15 percent afterward. Spotify says it raised subscription prices from $10 to $13 in order to make up the difference in 2014. The company charges $10 a month for subscriptions purchased through its website. Apple launched its own Spotify-like streaming music service in 2015 and charged $10 a month for it.

These complaints echo those of both developers and iPhone users who have sued Apple in the US over claims that it has an unfair monopoly, leading to inflated charges. Testimony from representatives of smaller companies said as much at recent congressional hearings. The European Commission, meanwhile, pointed specifically to the Rakuten-owned e-book distributor Kobo, which lodged a similar complaint against Apple’s Books app in March 2020. Several years ago, Apple also paid a $450 million settlement after the Justice Department determined it colluded with book publishers to fix prices in an effort to compete with Amazon.

As for Apple Pay, the commission said on Tuesday that its “preliminary investigation” found that Apple’s refusal to allow third-party mobile payment services to use NFC technology might unfairly give Apple Pay an advantage and that terms and conditions placed on related merchant apps could be unfair to competitors. Android, by contrast, does allow other payment apps to use its NFC application programming interface. Payment app developers have groused for years about Apple’s restrictions, and Germany even passed a law last year that would require Apple to open NFC up to mobile payment apps.

Some developers also believe that Apple takes its advantages even further, sometimes by studying third-party apps and their usage patterns before putting some of their best features into Apple’s native apps. Many of these Apple-made apps are automatically installed on devices, and often they can’t be deleted. Popular apps that track menstruation cycles, for instance, were upended when Apple added that feature to its Health app. Flashlight apps were made obsolete when Apple introduced its own flashlight in 2013. The list goes on. Apple’s habit of borrowing ideas from third-party apps is common enough that developers refer to it as being “Sherlocked.” Of course, this is nothing new to the industry, and Apple is far from the only company that does it.

Retailers have made similar complaints about Amazon and its Amazon Basics line, which Amazon has denied. That company is also facing a congressional antitrust probe — as are Google and Facebook — as government agencies including the Federal Trade Commission and the Department of Justice have started to scrutinize Big Tech and its power over American life.

Again, these companies’ antitrust woes are not new. Apple and Google have reportedly considered ways to regulate themselves before the government can do it for them. On Tuesday, however, Apple maintained that it had done nothing wrong — at least not in its handling of third-party apps and mobile payments.

“We follow the law in everything we do and we embrace competition at every stage because we believe it pushes us to deliver even better results,” the company said. “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.”