Apple hit with over 1.8B euro EU antitrust fine in Spotify case

Maybe it's something akin to punative damages (https://en.wikipedia.org/wiki/Punitive_damages), where the "fine" component is assessed according to the actual harm measured and the "deterrent" amount is meant to make it sting as a punishment.

The law always needs a little something extra to deal with people like the guy who parks in handicap spaces because he can afford the fines.

In most cases, the Commission sets a fine which is based on the harm caused by some anti-competitive conduct, with relatively small adjustments for extenuating or attenuating circumstances. In this instance it's the opposite; the economic harm was small but the adjustment was huge.

You're right that the logic - deterrence - is the same in both cases. But what's different (at least in my view), is the object of the deterrence.

Ordinary fines are designed to make anti-competitive behaviour unattractive in terms of the costs and benefits. Maybe some underhanded conduct generates €40m extra profit, but the risk of a €40m fine plus legal costs and adjustments makes it not worth it.

The trouble is that these fines might are essentially just rounding errors for large firms. In this case, a €40m fine would be tiny in relation to Apple's revenue stream (~€350bn euros a year), thus not an effective deterrent. That's for two reasons. First, the 40m figure is too low since a "significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for under the revenue-based methodology as set out in the [Commission's guidelines]"[1]. Second, the fine is trying to to "deter [Apple and] other companies of a similar size and with similar resources from committing the same or a similar infringement"[1] even when they could absorb the ordinary (small) fine as essentially a rounding error on their cost of doing business. In that case, large conglomerates could basically just ignore competition law.

So here, the Commission is deterring all firms which have a "particularly large turnover" [2] (e.g. Big Tech firms) from using their power in one market to gain an advantage in another market, as in this case where Apple used its control over its App Store to gain an advantage in the music streaming market. The fining guidelines allow for fines to be much larger (~50x in this case) for tech giants, even if the actual infringement didn't cause that much quantifiable harm.

You're right, there's no restitution here. As you say, the fine is payable to the EU and would be paid into the EU budget.

[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_24_... [2] Para 30 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...

GDPR rules follow the same structure and are a pretty good deterrent.

Manufacturing's share of US real GDP has remained relatively stable over time: https://www.stlouisfed.org/on-the-economy/2017/april/us-manu...

i.e. the quantities of goods produced is growing about as fast as the economy. The reason manufacturing is dropping as a percentage of nominal GDP is that inflation for manufactured goods has been lower than for other goods.

Apple was nearly dead. Microsoft literally gave them a big investment to keep them alive [1] , in part to avoid monopoly-related issues [2].

Microsoft was doing everything in its power to kill the only other serious browser at the time, Netscape, and it basically had "won" the desktop and server market. It's pretty astounding that Apple was ever able to do as well as it did in the server, laptop, and desktop market.

1. https://www.neowin.net/news/a-quick-look-back-at-when-micros... 2. https://www.engadget.com/2014-05-20-what-ever-became-of-micr...

Couldn't be more wrong. It's not even remotely comparable.

Yes Microsoft had a 90% OS market share but it was an open OS running on open HW platform wich had many players, so users had the freedom to install whatever non-Microsoft SW and HW they wanted on it and SW developers could develop software for it without needing Microsoft's permission for sales or distribution on their OS, or giving them a 30% cut of their profits (other than buying a MS Visual C++ license maybe).

While Apple might have an "only" 60% market share now (though it's currently 87% amongst US teens today[1] so it's only a matter of time till it reaches 90s' Microsoft levels of monopoly amongst US gen-pop) but it's a closed OS running on closed HW with attestation, so costumers and SW developers have absolutely no choice but to run only Apple approved content on them. Vastly more restrictive than what Microsoft of the 90's could even dream of.

>It was a lot easier to see how Microsoft was being mean-spirited for consumers versus Apple.

How? Just like Apple, Microsoft was only being mean spirited to SW and HW vendors and competitors, not to consumers.

[1] https://www.barrons.com/articles/apple-stock-teens-iphone-e5...

And in 2022 tech was a big reason why the S&P 500 tanked, dropping 30% when the rest of the market dropped 20%.

Live by the sword die by the sword.

Somehow, that is repeated so often as if it was the truth. Making both HW and SW makes it even worse, not better.

IMO there are good reasons for some regulation of platforms.

And the security of the American chip industry depends on ASML machines, and American airline passengers depend on EU made airplanes. What's your point? Every post-WW2 economy is dependent on the other economies nowadays. There's no fully independent economy that can survive on its own anymore.

US (and other including EU) companies get fined because they break EU laws, it's not done out of spite. If they dont wanna get fined they should stop breaking the laws. Simple.

Microsoft would make competition harder by bundling "good enough" versions of competing software into Windows, with business deals restricting pre-installs of competing operating systems (if you pre-install Windows on 100% of machines, you'll get a massively better deal than when installing on it on 95%), and (arguably) by making interoperability harder by not having stable documented interfaces and having the interfaces change with new releases every few years.

That was bad. But Apple... Apple hasn't been just making competing harder, but outright impossible. It's one thing to compete against a free pre-installed product. It's another thing to try to compete when the platform owner straight out forbids you from shipping a product that competes with them, or applies draconian business terms to the competition that their own business units get to ignore. They weren't just making interoperability harder by not documenting interfaces, but (in the case of iMessage) by actively breaking any attempt to interoperate.

Whether Safari is this way deliberately or by chance, is something to be found on a court. But Apple's behavior here isn't different from the Microsoft one with IE.

1) Break them up 2) Fine them

From history we know that #1 is really friggin hard to get right (see: AT&T). We also know that #2 is usually ineffective and can harm consumers that are still locked into the monopoly.

There's other options!

    * End the company (corporate death penalty).  Auction off all their assets and force all their intellectual property into the public domain.
    * Force FRAND-style licensing of all their products and services.  Make it so that if they want to make money they *require* 3rd parties to sell customized versions of their stuff.
    * A combination of forced public domain on their intellectual property and FRAND-style licensing.  Possibly with forced selling of assets.  Basically, just force the company out of whatever market they were abusing.

It behooves society to look past these short-term consequences though and look towards the future. The longer a monopoly goes on the more it stifles the future. It may feel like you're cutting off an arm when you end a really big, powerful company but it's more like cutting off a tree branch. More and better branches will grow in its place and younger, nearby trees will now have access to more sunlight.

Unpopular opinion (here on VC-funded HN): The way capitalism is supposed to work is that large, old companies are meant to be overtaken by newer, more nimble ones. It shouldn't be so easy for large companies to acquire smaller ones. That's a big reason why tech monopolies persist! SO many of Microsoft's "staple" products wouldn't be part of their portfolio today if it weren't for acquisitions.

[1]https://www.digitaltrends.com/computing/federal-antitrust-ov...

Just wait until they've integrated their entire supply chain.

Huh? Apple chips are not Turing-complete? Or are they "not general purpose computing devices" because Apple would like us to believe so?

Blackberry phones were sort of similar, but as enterprise-first devices they always had a reputation of being mostly a work email device, not personal. They still had filesystem access and microSD expandability though.

I would argue this is 100% false. They are general-purpose computing devices! The only reason why people think they're not is because they're locked down.

Apple got away with it so Google did the same. Yet there's really no reason why these devices should be locked down the way they are. It should be much easier to take control of our phones than it currently is and I'd argue that with the recent EU decisions regarding app stores we're about to get just a tiny little taste of what these general-purpose computers in our pockets could be.

They tried, but completely failed competing with the jaws that were a) Apple taking all the profits at the top and b) Android taking the rest of the market

These smartphone providers had to compete on both fronts and it was too much for them (even for Microsoft).

The iPhone in 2007 was like alien technology compared to anything released before then (and I was a skeptic).

> Today's decision concludes that Apple's anti-steering provisions amount to unfair trading conditions, in breach of Article 102(a) of the Treaty on the Functioning of the European Union (‘TFEU')

[1] https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...

not particularly weird, it's a rhetorical implication that the EU favors a European company unfairly.

My nutshell contains something else:

- Apple lamp-shading that EU companies seem to get a pass

- Apple refuting Spotify’s claims that Apple’s acts somehow have harmed and stifled Spotify, by highlighting how successful Spotify is

- Highlighting how Spotify has benefited from Apple’s work without paying a dime, refuting the implied notion that Spotify is on the hook for 30% and refuting the implied notion that no benefit is provided in exchange for the commission by Spotify consistently calling it a “tax”

- Lamp-shading the fact that the scope of the EC’s investigation has changed more often than your average brothel’s bed occupant during the ten years of the investigation due to the EC not being able to make the case on all the other stuff they tried, from consumer harms to harm to competitors, eventually landing on a anti steering provision but only in the music streaming service market and only after that anti steering was already abolished, hinting that Spotify has been the driving force behind this indefatigable mindset to find something that sticks

- They think it’s BS and are going to appeal, according to them because no harm was proven, but I think in part because the actual fine is only $4m, because that’s how shitty the EC’s case was even after shifting the goal post so often, so the EC decided to add a bogus “deterrence” fine. That and of course because this is merely a decision by an executive branch, in that regard it’s not unlike, say, Trump’s executive orders, in that they’re not worth much more than the paper they’re written on until a judge has adjudicated it.

Spotify haven't paid revenue to Apple in years... because they haven't offered payment from inside the iOS app.

- They make 30% less on iOS subscriptions compared to Apple Music

- They charge users 30% more compared to Apple Music

- They offer less functionality (don't accept subscriptions on iOS) compared to Apple Music.

Apple uses one area of it's business to disadvantage competitors to it's other areas.

The 30% fee + no way to redirect users to better offers is kind of extreme, especially when Apple has a first party offering which doesn't need to go through the same hoops.

yea they do it not as a public service but to make their own platform more attractive with apps to ppl who buy iphones.

This is not a service like aws purely benefit of app creators like spotify. Apple does it for their own benefit.

Apple is not entitled to a cut of every transaction that happens on my device, despite however much their claim otherwise.

But this assumes that by creating something Apple has right to all the profits from it. For consumers, it's likely better if they didn't. And consumers are voters while corporations aren't.

A feedback loop is created as bigger platform attracts more third party products, which in turn make the platform even bigger. At some point it becomes impossible for new competition to enter the market.

IMO laws should treat platforms as special in order to promote creation of environments with a healthy amount of competition. Laws requiring openness of platforms seem to be one way to do it.

Well, that is more because every bot and their toaster is able to pay a 8$/month fee to have top visibility, especially when it partitally gets reimbursed due to the payouts.

Slack and Zoom should have good cases over the Teams bundling tbh.

The "Open"AI investment and sudden shift from a non-profit is crazy too.

My Spotify subscription, for example, was purchased on their website, which I got to via a browser on my desktop computer. Apple has had no involvement whatsoever in my relationship with Spotify other than as a provider of some of the platforms on which I run Spotify's apps to use my Spotify service.

If Apple were to tell Spotify that Spotify must provide a way to cancel my totally outside of Apple Spotify subscription from Apple's subscription managements interface as a condition of being allowed on the App store I can't see the EU allowing that.

As far as regulations go:

- Let Apple require that apps accept Apple Pay as one form of payment - Let Apple take whatever cut they want for Apple Pay - Let apps inform users about Apple's cut - Let apps inform users about alternative, cheaper, ways to pay.

How could anyone be against transparency?

Let all the folks that allegedly love the "convenience" of Apple Pay so much continue to pay an extra 30%.

Or how independent casinos were legal before, and people could still become stinking rich from it (the owners, that is). Until the government made strict rules allowing only them to have "real" casinos, for the people that still really want it, but then at least the government can use the money for something useful.

The real benefit of these rulings is ease of competition (subscribing to Spotify as easily as to Apple Music, buying Kindle books as easily as iBooks, all great things). And more game companies dumping Apple IAP for their in-app gambling mechanics, overpriced cosmetic skins, and pay-to-win tokens, so they can make them non-refundable, screwing over parents. Some customers win and some lose, but prices won't change.

Luckily, by custom there is another solution - respect each other boundaries and stop acting like whiny little children.

And yet, in retail, it's common for product brands to pay for shelf space. There's a recognition that the place users are, is worth paying to be in.

Meanwhile, Steam shows what just the storefront part of such a platform should cost a developer, and interestingly, that open market price is higher than Apple's ask.

It’s pretty clear that Spotify’s value add to Apple is tiny while the reverse is much larger.

Spotify wouldn’t have a business in the counter-factual world where they were never allowed in App Store, while Apple Music would clearly exist. Their business model innovation was fairly limited; streaming music services began in the late 90s.

Note the “more” part, it’s still a symbiotic relationship.

Apple couldn’t have made the iPhone successful without third party devs, but it’s doubtful Spotify could’ve been as successful as they are without access to the iPhone.

As an app developer for iOS myself I can say that Apple’s frameworks have been invaluable to me, especially the improvements and additions in the last few years have significantly made my work easier.

Not only that, because overtime I’ve become friends with some of the engineers that work on them, I also know how much time and money goes into them, at least on an individual engineer level.

So it seems fair to me that Apple gets paid for their IP. But I’m not interested in paying huge fees upfront like what was common when developing for game consoles, nor am I interested in paying potentially huge fees like the CTF.

To me, the best option is a revenue based commission. When I do well, Apple does well, but when I don’t I won’t owe Apple anything. This also motivates them to keep investing in frameworks, because with good frameworks I can make better and more successful apps, which then benefit them.

It also allows me to take risks and try out new things or even give away my work for free.

Personally I was already happy with 30% and that’s what I signed up for at the time. The 15% I pay now is of course even better, but it’s not like I passed on those savings to my customers. If I ever get so successful that I hit $1m in revenue then I’ll be more than happy to pay the 30%, because I will have been successful in part because of the tools provided by them. Or put differently, that success will be in part a consequence of what happened before I hit $1m, when I was still paying the 15%.

I’ve got friends that have launched their apps on Android as well, but those earnings are a rounding error compared to their iOS earnings and their apps are heavily being pirated on Android.

I can’t quantify what it is that Apple does different that it entices customers to spend money on apps (other than the lack of piracy perhaps), but it’d be silly to pretend like it doesn’t benefit developers to a degree that it warrants Apple getting something in return for that, in addition to the tool-based justification.

Yes, Apple is piggybacking on various ISPs infrastructure. That is a deal the ISPs explicitly allowed everyone to do and marketed as a selling point for others to use in their services.

Apple is simply trying to enforce its own boundaries which it established before Spotify came into the picture.

Apple risked their resources and created the whole ecosystem before Spotify even existed. It's not like Apple put a gun to the heads of Spotify executives and forced them to use the App Store. It's the executives who reviewed Apple's terms and then decided that investing in Apple's ecosystem would be useful for Spotify.

And there's a bunch of bureaucracy. You have to apply to the program beforehand, follow a bunch of guidelines, implement a bunch of hooks in app code and pray they will approve.

See section "Commission, transaction reports, and payments" from: https://developer.apple.com/support/storekit-external-entitl...

> Apple’s commission will be 27% on proceeds you earn from sales (“transactions“) to the user for digital goods or services on your website after a link out (i.e., they tap “Continue” on the system disclosure sheet), provided that the sale was initiated within seven days and the digital goods or services can be used in an app. This includes (a) any applicable taxes and (b) any adjustments for refunds, reversals and chargebacks. For auto-renewing subscriptions, (i) a sale initiated, including with a free trial or offer, within seven days after a link out is a transaction; and (ii) each subsequent auto-renewal after the subscription is initiated is also a transaction.

Then Xbox for not allowing alternative marketplaces like Steam.

OneDrive and Office365 cross-promotion is also a bit dodgy, especially tied in to the near-mandatory Microsoft account. Apple might get sued over iCloud for the same reason soon.

It helps startups and stops Apple from abusing the App Store monopoly to funnel users to Apple Music over competitors, etc.

The Big 3 labels don't enforce exclusivity at all (although UMG has threatened it a few times) - so you can get the same library on Apple Music, Deezer, Youtube Music, Spotify, Tidal, Amazon Music, etc. so even though it sucks they have a monopoly on almost all popular music, at least there isn't a monopoly in distribution like the App Store.

Nothing? Not even the developers fees?

C'mon Apple

And they shouldn't have to, users should be able to install whatever software they want on their devices without paying a gatekeeper for it. Spotify exists on the web as well, they don't have to pay Google or Mozilla for delivering the service to their users. They don't have to pay Microsoft when users downloads and installs desktop software for windows. So why should Apple get any money because users install Spotify on their iphones? I'm sure Spotify pays Google for their cloud services that actually helps make them successful.

I'm pretty sure Apple did nothing for that, Spotify's own marketing did. It's not like people discover that Spotify is a thing thanks to the app store.

Apple has argued they do not sell a piece of hardware, but a platform. It includes hardware, software, and a marketplace (like a video game console like others have said). Apple will also say that they have cultivated the platform to have the most affluent users (like a console again). This shows up in the stats. Even with iOS having a minority marketshare in the EU, all developers want to be on it because that is where the money is. What is access to a market and platform like that worth? Apple thinks 15%-30%.

Yes, it has been symbiotic between Apple and devs, but Apple has done something that differentiated it from Android wrt the type of user. Otherwise, all the devs could have left and Apple would have been forced to change long ago.

JFC, they really need to fix their PR team here.