EU says Apple’s App Store breaks competition rules after Spotify complaint

Drafts, Apollo, Things, Overcast, and more are apps I pay subscriptions on so that they continue to add new features and keep compatibility with new iOS releases.

Have you not dealt with the annoyance of an app that hasn’t been updated for a newer OS? Or one that isn’t even providing “table stakes” to other apps in it’s category?

Multiple mobile/security companies publish annual malware reports, for example here is Nokia's Threat Intelligence Report for 2020 (https://www.nokia.com/networks/portfolio/cyber-security/thre...):

Figure 3 provides a breakdown of infections by device type in 2020. Among smartphones, Android devices are the most commonly targeted by malware. Android devices were responsible for 26.64% of all infections, Windows/PCs for 38.92%, IoT devices for 32.72% and only 1.72% for iPhones.

I wouldn't say this is "just fine". Perhaps you (and most HN commenters) have the technical knowledge to avoid installing malware but the vast majority of people using these devices do not.

Should e.g. a restaurant have to provide an open market for silverware providers?

Then are these network effects worth paying 30% for or not? If yes, you've just conceded the price is fair. If no, then Purism's Librem exists (and will not be bought by Apple).

> We need strong regulation to counter this, and to give small businesses a chance.

The same way it gave small railroad companies a chance? Or small oil, or small pharmaceutical, or small telecom? National legislation historically has been a method of pulling up the ladder behind robber barons, not of giving the little guy a chance.

Can we please stop pretending corporations have feeling and liberties the way natural persons do? It reads like collective insanity "stones have feeling too".

About the same as it looks today. AOL was a walled garden, and unregulated internet was so compelling that AOL was forced to offer it, or die, like so many other services did; of course, AOL still pretty much died, but it lasted the longest of the pre-internet national information services. Incidentally, that was back when it was easy to switch between competitive ISPs or set up your own and there was not much in the way of regulation. Now, we live under the threat of the cable and telephone companies pushing their products. Not a whole lot of clear regulation now, and not even the basis for local loop unbundling like congress provided in 1996, but the FCC watered down until it meant hardly anything.

Even for my day-to-day uses there’s only one or two third-party apps that really “add value” for me (Slack, Taskmator and Signal)

Apps are the difference between “A phone with extra tricks” and “A computer in your pocket.”

But non free apps with a smaller base you would be surprised I guess. Storage for hosting and GB for bandwidth is incredibly cheap.

To give a frame of reference AWS pricing is currently at $0.023 per GB for storage and $0.09 per GB for bandwith out.

That means 30% of a $0.50 sub is enough for covering the entire storage + distribution costs of one gigabyte for that user (and that's assuming you need to store an entire copy for each user, which you don't). Yes, there are other costs (website, review, ...), but then again how many subs are $0.50 ?

And Apple and Google charge 15 times that because there's no way around them.

If you consider selling apps to ios devices to be its own market, then yes you are forced to use Apple. If you don't consider that to be its own market but only a part of the actual "phones and tablets apps" market then no you are not forced to use Apple.

I believe because of the size of their userbase that apps for ios devices are a market on their own, therefore "you are forced to use Apple" applies. Here the EU seems to agree.

> 3.1.1 In-App Purchase: If you want to unlock features or functionality within your app, (by way of example: subscriptions, in-game currencies, game levels, access to premium content, or unlocking a full version), you must use in-app purchase. Apps may not use their own mechanisms to unlock content or functionality, such as license keys, augmented reality markers, QR codes, etc. Apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.

Also, I don't know how common it is in the US but in the EU and here in France we have "prélèvement" (~bank direct debit ?)

Eg I (virtually, on my computer) sign an agreement for company X to take amount Y from my bank account every Z amount of time for a given service. It takes less than a minute to setup and sign directly on the provider website (no need to contact or connect to my bank). I can cancel it at any time through the provider or at my bank. Since a couple of years they are valid in the entire EU accross countries "prélèvement SEPA" (Single Euro Payments Area). They're entirely free, for the customer AND the one billing them (there are bank fees depending on your bank, but no interchange fee, eg I use them to charge many of my customer and it costs me a flat fee of 25e/month for the web access).

That's how I pay my amazon prime, my amazon purchases, my electricity bill, my mobile phone bill, ... So a certain swedish music company could bill me in france that way for virtually no fee.

Not a good example - Spotify takes PayPal, which can be topped up from a bank account transfer, trivially done with the bank app or site.

https://support.spotify.com/us/article/payment-methods/ (just learned there's also "pay by mobile" which adds it to your phone bill ...)

Also, the EU regulations cap the fees and set up identical rules for everyone (unlike Apple where its own services are left through without a second thought even though they don't necessarily operate to the code).

Apple is directly competing with Spotify with their Apple Music streaming service. Since Apple has complete control over the iPhone ecosystem, they can set the rules to harm other streaming service, or let their own service completely break the rules.

These anti-competitive rules aren't just about Company A relying on Company B to do business. It's about Company B also directly competing with Company A.

That is your opinion. There is no merit in this subjective standpoint from a legal perspective unless you're willing to share the metric by which you arrived at this judgement.

> the fast/cheap/good thing (while for starters not being some actual "law"), is meant to apply to engineering and not market dynamics

That's exactly the context in which I mention it. The iPhone, operating system and app store are _huge_ engineering projects.

> I guess we don't need free markets for price signals at all!

I don't know what point you're making with this. We're in a thread literally discussing removing a freedom from Apple.

>> I also wish there was an alternative to the AppStore to catch cases that didn't meet that strict bar

Setting aside the obvious difference, how is this different than outlawing murder, except for one day of the year or in one city? Attention will suddenly be directed towards the less stringent alternative. You're just opening up the gates for a race to the bottom, something we've already had enough of IMO (and FWIW, I agree with you here: "I wish the AppStore was MUCH pickier about the apps it let in").

Remember all the "malware cleaners" that install viruses on Windows machines? Yeah, we're gonna get that on iOS. "But we already have that/similar" Yeah, it's gonna get worse, not better.

Your entire second quote is invalidated as well by your suggestion for alternatives. Nobody that the app store is meant to protect is going to use the curated store because they will be tricked/coerced into using the alternatives where people with less scruples can exercise more control.

I've come to the viewpoint that this would be a good thing. I think we've moved too far in the direction of never paying for anything with cash.

My (albeit limited) understanding is that Visa and Mastercard ensure that the debit/credit transactions are securely and quickly occur, but if there are post-transaction issues like fraud or chargeback, then the credit card-issuing bank handles/resolves those issues.

Conversely there's probably a subset of transactions that don't need this sort of "insurance", such as buying groceries. Currently the merchant still has to pay the 2%+ fee in the U.S. but would be nice to have the option for a customer to waive the "insurance" part and benefit from a 2% savings. It's akin to many merchants offering a lower "cash-only" rate.

This system coincidentally punishes non-subscription products like non-IAP games, where your "launch" produces a big revenue spike and then you have a much smaller long tail of revenue. To avoid getting punished by this, you'd have to optimize for a lower-revenue launch and more stable long-term revenue... i.e. a subscription.

You're "free" to choose one side of the same coin, because Apple and Google have a duopoly in the mobile app distribution market. They both abuse that market dominance to prevent competition in the mobile app distribution market from offering consumers better, more efficient and cheaper options.

Google prevents mobile app distribution competitors from competing with the Play Store on feature parity because user installable 3rd party mobile app stores cannot implement automatic upgrades, background installation of apps, or batch installs of apps like the Play Store can.

Or not building products which collide with platforms.

As a general rule, if you have to use offensive lawsuits you are not smart enough to do it cleanly.

This is true in business and everywhere else

EDIT (cannot reply):

So if Apple would basically not have an AppStore for third parties and only distribute their own apps then it would be fair.

If Apple was to not allow other Music apps on their AppStore then it would be fair.

But when Apple allows others to distribute a competing product to Apple on Apple’s own platform for a fee then it is considered unfair?

I honestly don’t understand this logic.

That payment was $500 million, but they were printing money from iPod+iTunes at that point (revenues of $9.5 billion in 2006, $10.5 billion in 2007). I'd call it an ongoing headache more than a minefield.

Yes it would.

1. Apple creates iPod, and iTunes serves as its music store.

2. Apple creates iPhone, which has an iPod app.

3. Apple introduces App Store so other apps can be used on the iPhone.

4. iPod (Apple Music) competitors emerge.

5. EU says "that's it, Apple can't have iPod anymore on the phone unless iPod (Apple Music) becomes a separate company".

No one (successfully) sued Apple for anti-competitive practices on iPod. Ergo if the iPhone never had an App Store, they'd be allowed to have 100% of the revenue of iTunes, and ban competitors out completely.

By opening the iPhone platform to third parties, EU sees them as another type of entity completely. In effect the EU penalizes the creation of market places, because once you're market place, you lose control over your own products to the government.

It picks my interest: Companies internally run as communist economies, all resources are merged and shared, employees are not individually associated with a revenue because the group is worth more than its sum, on the outer, liberal economy. At what size / on which criteria should a group inside a company be considered an independent product-and-loss entity, in order to avoid supercorporations to make use of monopolistic behaviors? Should a 100-billion-dollars marketing operation inside Apple be allowed to function at a loss if it pumps interest in all of Apple’s other products? Can Apple Music be disguised as a marketing operation instead of as an independent entity?

https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer

Source : a part of the article you linked to : https://en.m.wikipedia.org/wiki/Apple_Corps#Apple_Corps_v._A...

By your definition companies like Sony, Microsoft, Nintendo, Epic Games, Intel, AMD, Nvidia, IBM, Stripe, Facebook, Samsung, Adobe etc would all need to be broken up as like Apple they are in multiple markets with similar market shares.

YC itself would need to be broken up given your criteria.

I think the ship has sailed on App stores. They're just better than the alternative and consumers are used to them. I'd consider them an integral part of the OS.

The problem is the fees. 30% is excessive especially so for in-app purchases where the customer is already acquired. The easiest and cleanest solution is to just cap these to something more reasonable. Something like 5% or maybe CC transaction costs + a couple percent.

Nobody is mad that Apple/Amazon/Netflix/etc are creating competition for banks, movie studios, car dealers, etc.

The complaints about these companies are the specific areas where they hold a dominant position and unfair advantage over other companies. The App Store in the case of Apple/Google, advertising in the case of Google, etc. The areas where these companies have a stranglehold on distribution is the problem.

Amazon and Apple having movie studios and banking aspirations makes competition BETTER, not worse. Literally nobody is mad at Apple for having a credit card or funding movie productions.

Apple has zero control over credit card distribution or automobile purchasing. Why the hell would you want to protect the big banks and lazy old car companies from having to compete with Apple?

You want to go back and re-read the comment I directly replied to where bullet point 1 was the EU (hypothetically at this point) making determinations about who was in what market and laid the foundations for bullet point 2 based on its own flawed presupposition and then tell me that the timeline is irrelevant?

I didn’t point this out to make an argument against the claims that Apple has any sort of claim to monopoly status (or that the EU has any basis for making that claim), but that any legal argument at all made on that foundation would crumble because bad facts make bad law.

> whereas having prefered treatment because of your monopoly at any stage is.

Except Apple does not have market dominance, let alone a monopoly, in Music or Phones.

> Some are mentioning the App Store being the root of the monopoly, and that is probably true.

Not having market dominance, let alone a monopoly, in phones, software, or software retail and distribution, that is actually not true.

They have a monopoly on iPhone features, including the App Store, insofar as the iPhone is researched, developed and sold by Apple as a cohesive product, and it does not have out of the box functionality that Apple does not add themselves. You might as well claim Google has a monopoly on YouTube channels or that Amazon has a monopoly on Whole Foods shelves; more accurately, that Nintendo has a monopoly on the eShop and Sony has a monopoly on the PlayStation Store. It was a bad argument 13 years ago, and it is a bad argument today that doesn’t even pass the sniff test.

> especially as the EU is stating their case in the streaming music area only

Why only streaming music? Spotify was originally an upstart competitor to iTunes and the iTunes Music Store, and the iTunes Music Store was originally a competitor to record stores.

Music itself is part of the larger News and Entertainment industry where ultimately the resource is someone else’s leisure time and you want to be the one to fill it. Spotify knows this; that’s why they experimented with video and they’re huge into podcasts now.

> wouldn't the simplest way for Apple to get away with it be to externalize 'enough' Apple Music and to have them pay the same fees as Spotify?

Why should they have to? Because they have a competitive advantage? Businesses always look to edge out their competitors by accumulating advantages. Spotify was successfully out-competing iTunes, so Apple acquired Beats and folded Beats Music into iTunes and called it Apple Music.

Spotify has almost 5 times the global market share of streaming music as Apple does, and has almost as many EU subscribers as Apple has total subscribers, that is globally, give or take 10 million.

What Spotify is doing here is trying to lower their costs because they have massive overhead in licensing fees, same as everyone else that licenses music. Part of their growth story is exactly being on the iPhone at the right time to capitalize on its growth, and being featured in the App Store. In order to compete, they offer an ad-supported tier from which Apple sees exactly none of that money. I don’t think you can even subscribe to Spotify from within the iPhone app anymore so Apple is still footing the bill for distribution and any money that Apple sees from prior subscriptions is now at the lower 15% rate that all subscription apps see for customers after their first year subscribed.

> Therefore, the only way to restrict anticompetitive practices here would be as others like Epic are doing: by proving the monopoly in enough different domains covered by the App Store? Would the antitrust laws in the US similar, that is proving monopoly has to be done by domain, or would a more global view be possible there?

I don’t know how to parse this. Clarify and I’ll get back to you.

Also it's market-specific. As the other commenter noted, the market share is region-specific and in the EU higher than 13%. In the U.S. it's even higher at ~47% (https://www.statista.com/statistics/236550/percentage-of-us-...).

You could argue that users technically have a choice to switch to Android but due to network effect (e.g. your family/friends all use iOS) and lock-in features like iMessage and Facetime, it's often a false choice.

> Captive markets are markets where the potential consumers face a severely limited number of competitive suppliers; their only choices are to purchase what is available or to make no purchase at all

> Courts do not require a literal monopoly before applying rules for single firm conduct; that term is used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors. That is how that term is used here: a "monopolist" is a firm with significant and durable market power.

--

> Apple phones make up only 13% of the phone market.

iOS has 60% of the market in the US[2].

[1] https://www.ftc.gov/tips-advice/competition-guidance/guide-a...

[2] https://deviceatlas.com/blog/android-v-ios-market-share

Their argument that they are responsible for Spotify’s iPhone-originating revenue to the tune of a 30% cut is a complete farce. If the iPhone didn’t have third party apps, no-one would buy them.

The only way to install an app on an iPhone is via Apple's store. You can't download it from the dev's website and install it. You also can't use a different app store because Apple doesn't let you. And you also can't buy something on an app (eg: a subscription) without using Apple's payment system or even link to a donation page (why?).

You can have a well integrated product and still give users and developers some freedom.

For example, Android phones usually come with Google's Play Store, which is what the vast majority of users use. It's no different from Apple and the App Store. Then, optionally, you can download the apk (the .dmg or .exe equivalent) from the dev's website and install it. You can also install a different app store, if that's what you want (almost no one does it, but the option is there). Apps are still only allowed to do what the OS let's them do (eg: you still need to give them permission to access your location, camera, etc), so you're only missing the privacy given by the review process. And when it comes to payments, you can use Google's payment system or something else. Not very different from what happens on your computer.

Some people say this is terrible because then Facebook can create their store to bypass Google's rules. In practice, Facebook knows most users won't sideload apps or install a different app store, so they follow Google's rules like everyone else.

If you want to buy Cyberpunk 2077 you have the option of at least 3 stores, I did not see any Steam user getting damaged by the fact the game is on other stores too.

I suspect the law is not structured so as to take your personal interest into consideration.

>I think the idea that competition in this area will benefit users is highly dubious.

this seems a very American concept of anti-trust, benefiting consumers is only one part of what concerns European anti-trust, in this case the question is does Apple Music have an unfair advantage on the platform against other music services - the answer would appear to be yes, for actually two points -

1. because they don't have the pay the fee the other music services have to pay

2. because they are not artificially restricted from communicating alternative methods of subscribing to their customers (because they don't need to because they are Apple)

Apple doesn't allow App developers to Inform users about Alternate payment options.

That sounds nice to me. Want me to update? Provide an appealing update! Although I am still not a fan of having any sort of app store in the first place.

Alcapone was popular, but he was still a criminal and a murderer

That's not an advantage - that's a disadvantage. Having an open ecosystem is a strict superset of the functionality of a closed ecosystem. If I can sideload, then I can sideload and use Apple's app store. If I can't sideload, then I can only use Apple's app store. It's a strict downgrade.

> I, and millions of users like me, like the closed garden.

Meanwhile, I, and millions of users like me (more, if you count every Android user as not liking walled gardens), do not like the closed garden.

Popularity does not make you right.

Absolute popularity doesn't even matter - only relative popularity does.

> I’m effectively outsourcing the duties implied by caveat emptor to Apple. I don’t have the time/inclination to check the safety & honesty of each app developer.

Apple doesn't do those duties consistently - malware repeatedly appears on the app store, and Apple doesn't even attempt to make sure that the vast majority of apps adhere to their privacy labels.

Citation needed.

Apple runs the app store for users (people like me who in aggregate have made it the most valuable company in the world), and it is simply bizarre seeing these claims like it's some enormous expense that they're doing because they're benevolent (which is quite clearly the foundation of your comment, given the claim that Apple could charge "banana" amounts just for being on the app store, contrary to reality where they're already under enormous scrutiny for claiming these fees as a payment processor).

There is an argument that Apple could charge some fee for their expenses of operating the app repository. Those fees, to avoid the regulatory hammer, would be absolutely tiny compared to what they are currently getting from their take.

Exclusives are not that many and instead of fighting like idiots to have only one store we could ask laws to block artificial exclusives.

On PC is not a big deal to install Origin and play a game if you are desperate, on iOS you can't install stuff without a big effort to jailbreak your device (though you can do it on OSX and I did not see any malware/viruses or similar complaints)

I think we can all find examples when platforms were not "greedy" and eventually got pushed out as irrelevant. That's why Apple and others will try to leverage their position to promote their new services.

Let's see if the EU says "No, it is" and shakes apple for some money.

Why not?

You didn't build or work on an app store. You played with one. Much easier to modify something that already exists than to create something where there once was nothing.

> just look at AWS prices to see how much it costs to store and transfer a file on S3

Look, if it's so cheap and easy to do, why is everyone so hell bent on getting onto Apple's? They should just do it themselves!

The answer is that it's not that simple.

> Please re-read my comment, especially the part about sandboxing and 3rd-party app stores

I reread it. You did not say anything about sandboxing _3rd-party app stores_. Thanks for wasting my time with that! You said "apps are pretty well sandboxed" and we've seen how well that's done to protect users' privacy. App Tracking and Transparency was created for a reason.

You really need to cool it with the condescension ("Haha what are you talking about?", "I actually laughed out loud when I read your comment"); it adds nothing to your arguments, except the veneer of juvenility.

Apple isn't a deity.

Which should be illegal (as we democratically decided to have these laws), having no choice in services is not a feature it's an additional price to pay for the product and customers legally didn't agree to that simply by buying a commodity phone (no contract, no consideration whatsoever for this additional price).

> People should just leave if they don’t like the rules. This is correct, Apple should just get out if they don't like the anti-trust rules of our market.

Apple benefits from our society, and they've gamed their way into a Al Capone / Suez Canal / golden goose scenario. They've locked up everything under their control because they managed to weasel themselves into controlling 50% of the mobile phone market. This was, in retrospect, an illegal move.

Either Apple benefits from government-sanctioned commerce, or they don't. They can easily be broken up or fined into oblivion. The industry will move on regardless of what happens to Apple.

I can count on my hand the number of merchants I haven't done business with because they weren't on Google Wallet, Apple Pay, or PayPal.

Zero.

The problem is one company controlling our entire industry.

The easiest way to think about it is - John wants to sell Mark a product that works on Mark's iphone. Currently, John cannot do that without a) getting explicit permission from Apple b) giving Apple a substantial cut, regardless of whether John wants to use their services or not.

This is what EU(and hopefully US very soon) has a problem with - Apple holds a gigantic market in their grasp and by controlling it so tightly and by forcing everyone to use their billing, they stifle legitimate business and competition.

Also, the entire web has to maintain Safari compatibility because iOS devices can only browse via Safari's engine. Ironically, this is the only thing protecting us from a complete Chrome monopoly... so I'm kinda in favor of it, but it's a problem we need to address as well.

Not only is that anticompetitive, it's also dangerous (state actors can and do apply pressure on them to censor dissenting apps as Apple is the the single gatekeeper) and wasteful (you can't easily repurchase older unsupported devices due to the artificial limits inserted by Apple in what they can boot).

https://www.youtube.com/watch?v=pI-iJcC9JUc

Splitting off the media part (iTunes, Beats, Tidal, and the rest) will have the same effect, I fear.

By your logic Microsoft are also fine to force everyone to use internet explorer forever because they put so many hours into making windows.

That’s an argument that was lost 20 years ago.

Windows costs me way less than that, why should iOS cost 500$?

In no way are Apple devices and electricity access comparable. Phone ecosystems come and go - energy access is forever.