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On today’s Business Casual segment, brought to you by MarketScale, co-hosts Tyler Kern and Daniel Litwin take on allegations against Apple that have resulted in two antitrust investigations being leveled at the company by the European Commission.
In recent months, the EU has launched anti-trust investigations into Google, Amazon and Facebook. And on Tuesday, June 16, the EU announced that it’s now launching two antitrust investigations into Apple’s App Store rules and the Apply Pay platform as well, seeking to assess whether Apple’s rules for app developers on the distribution of apps via the App Store breach EU competition rules.
While companies can place their apps on the App Store at no cost, Apple charges companies 30% from in-app purchases and 30% on subscriptions for the first year, then 15% thereafter. Reaching a new single day record of $386 million on January 1st and generating $1 billion for the company each month—with $50 to $100 million of those revenues going directly to Apple—Spotify, which competes directly with Apple music, and Kobo, an e-reader company that competes with Apple Books, have filed complaints against the tech giant over the last year, stating that these practices are unfair, stifling and distorting competition by promoting Apple’s own books and music, while collecting and using customer data siphoned from Spotify and Kobo databases.
According to Executive Vice-President Margrethe Vestager, in charge of EU’s competition policy, “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.”
In a statement from Apple, the company asserts that, “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.”
While Apple maintains that it’s done nothing wrong, Litwin and Kern delve deeper into the situation, pondering whether the EU’s maximum penalty of 10% of global revenues for breaking competition rules—just a drop in the bucket for this multinational tech giant, even though services represent 18% of Apple’s annual sales—will actually curb the company’s long-term business practices, and whether or not other solutions are necessary to help protect smaller app providers.
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