EU Competition Chief Vestager all but confirmed that Apple will be forced to allow a Second App Store on its Platform
Yesterday Kara Swisher of the New York Times interviewed the EU Competiton Commissioner Margrethe Vestager who has over the years investigated and/or charged Google, Amazon, Apple and Facebook with massive fines. Our report focuses on the part of the interview that relates to Vestager's work against Apple and more specifically on the work focusing on ending the App Store as we know it.
Although Apple won their case in Europe over a $15 billion Irish tax bill, Vestager made it clear that the new laws in Europe are close to being finalized, intimating that the appeal should go their way against Apple. Vestager was also happy to say that President Biden's policies will now support their positions taken against U.S. tech companies.
Swisher: So I want to also know what’s going on with the Spotify case. You’ve accused Apple’s App Store of antitrust violations, basically alleging the App Store gives preferential treatment to Apple’s music streaming service. If Apple loses, it could face a fine of up to 10% of its annual turnover. Fines make good headlines, but are fines the right remedy when it’s really needed is to change bad behaviors? Talk a little bit about this case.
Vestager: Yeah, the Apple music streaming case is about the way Apple treats competitors to their own products. Here, you have Apple Music. Then you have Spotify, Deezer, SoundCloud — those will be familiar European names, at least. And here, if you want to subscribe, you will have to pay a 30% commission fee. And also, if for instance, you’re then Spotify, you cannot tell your subscribers that you can get it without the commission fee if you sign up via the Spotify website. And that lack of communication that is simply forbidden of course makes it really difficult, because if you sign up for Apple music, you’re not paying the commission fee.
So even though you could avoid the commission fee signing up via the website, you’re not being told that this is possible. And that squeezes, of course, the margins for the other music streaming providers, and it makes the competition unfair. For most things, if you subscribe to it, and you stop subscribing, they would come back and, say, why were you not happy, is there something we can do for you. Not even that can you do. And that, of course, makes it very difficult.
Swisher: What are your chances of succeeding here?
Vestager: Well, I think it’s really important, because what we see is also that in Europe, Apple would hold like 30% of the marketplace. But the thing is that once you have an iPhone, they hold a de facto monopoly of you getting apps on your phone. And of course, it’s really important, because it’s a case about what should be the acceptable de facto monopoly behavior in these markets. And the second thing is that, hopefully, it can also pave the way for a proposal we have tabled that if you are in such a position as Apple are, they should allow for another app store on their phone. If I’m not happy in the supermarket with the prices or the choices, I just go to the next one. This, we have accepted not to be the case in app stores for a really, really long time.
Swisher: What do you make of their argument that they’re providing safety, security, they’re vetting apps and things like that.
Vestager: Of course, that’s a really important argument, because we want things to be safe. We want them to be tested. But we don’t want safety and testing to be something that you can use to make life difficult for your competitors. And in the Apple Music streaming case, well, you see very different conditions depending on what kind of apps you’re dealing with. So I think it’s an important argument, but neither safety and security nor privacy should be used as a dike against competitors.
Swisher: So what do you think of the current Apple Epic case here in the US? That’s another case that goes after Apple on antitrust concerning the App Store. Are you talking with their lawyers? Or do you just hope that there’s all kinds of lines of attack on the same issue.
Vestager: No, we follow, for instance, the hearings on the Epic’s case very close, because there are a lot of similarities. And I think part of the Epic’s complaint could be solved by allowing a second App Store, because then they are looking for some specificities in how they engage with their customers.
Swisher: So when you’re looking at cases like this, when you’re saying a second App Store, Apple could say, look, why should we let another company take advantage of our platform that we built and let them run wild on it? That would be their argument. We believe in privacy. How do we know they’re going to be private? How do we know they’re going to be safe? We paid all this money to create this thing and are taking economic advantage from that
Vestager: But it’s — it’s fair enough. But on the App Store, as you see it by now, well, here you see the different treatment of different apps. Some apps you don’t pay for, there’s no commission fee. Other apps you pay for, there’s a very high commission fee that Apple do not pay themselves for where they compete against
Vestager continues and stumbles: And I think every one of us, we would expect if we were to place another app store on our phone, that the people responsible for that app store, well, they would, of course, deliver us a safe place to do our business. But there is a thing when you are in a dominant position, as you are when you provide an operating system, and you put your own products in that rein of that operating system. And that, of course, is what is at stake here, because if we do not have a marketplace that gives room for that kind of innovation, well, then we’re kind of stuck in the situation that we’re in right now.
Vestager: Is there any other solution besides the second app store? Could you regulate them, or regulate the commission fees? Or is there any other way to deal with this and not have a second app store — or you think that’s the only way?
Vestager: Now, I think a second app store, that is in the future. That will take time, because it’s in a legislative proposal that we have tabled in front of the European Parliament. But I would hope that we could conclude this case in good time. And then we’d see how to remedy this. Depends, of course, very much on the Apple answer to our concerns. Some of the music streaming services, the smaller ones, they’re not doing too good. And no one can judge what would actually be the market performance of those who are still doing quite well. We have seen in other cases how damaging it can be if things takes a lot of time — then the market moves on. So obviously, we never compromise on the quality of our case work and on due process, but we need speed, because a digital marketplace and a digital world is a world where things are moving fast.
For more on this, read the full New York Times report titled "Meet Big Tech's Tormentor in Chief."
It's pretty clear that Vestager's vision is to force a second App Store within Apple's App Store which would be equal to hijacking the App Store for European companies. It's one thing to lower commissions on the App Store, it's another to overtake it with legislation.
It's easy to see why Vestager expressed her pleasure in seeing the Biden administration supporting the same legislation going before Congress shortly. It gives Vestager the green light to force a second App Store in Europe knowing full well that there won't be any blowback from the U.S.