Apple Faces New Probes by Europe's Competition Watchdog
The investigations are preliminary in nature but significant for introducing a new focus of competition regulation: away from market dominance and toward a company's role as a "gatekeeper" to market access, lawyers said.
June 16, 2020 at 02:02 PM
4 minute read
The original version of this story was published on The Recorder
The European Commission said Tuesday it had opened two competition investigations into Apple, the latest in a series of recent inquiries by European authorities into the practices of tech giants.
The commission's competition directorate said it was investigating whether conditions imposed by the company's online App Store on outside app developers were reducing competition in the market for mobile applications.
A second investigation is into whether Apple is infringing competition in mobile payment systems by imposing conditions on the use of Apple Pay, its proprietary product.
The investigations are preliminary in nature but significant for introducing a new focus of competition regulation: away from market dominance and toward a company's role as a "gatekeeper" to market access, competition lawyers told Law.com International.
Opening the investigations is the first step in what could be a years-long process of determining whether Apple breached EU competition rules and, if so, what remedies should be ordered, lawyers said.
An Apple spokesperson, Josh Rosenstock, said in a statement that Apple disagreed with the commission's decision to open the investigations, and he described as "baseless" any complaints that the company had broken competition laws.
"Throughout our history, Apple has created groundbreaking new products and services in some of the most fiercely competitive markets in the world," Rosenstock said in a statement. "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 App Store investigation stems from complaints filed by Spotify, the music-sharing service, and other content vendors in the past 15 months, the commission said in a statement.
The complaints allege that Apple's conditions for listing on the App Store, including requiring app developers to share data and give Apple a percentage of any sales made through the store, represent a restriction of free trade and abuse of Apple's market position in devices such as iPads and iPhones.
"It appears that Apple obtained a 'gatekeeper' role when it comes to the distribution of apps and content to users of Apple's popular devices," Margrethe Vestager, the EU's competition commissioner, said in a statement announcing the investigations. "We need to ensure that Apple's rules do not distort competition in markets where Apple is competing with other app developers."
Vestager linked the Apple Pay investigation to the COVID-19 health crisis, asserting that the increased use of online shopping and contactless payments was accelerating the importance of mobile payment systems for consumers.
"It appears that Apple sets the conditions on how Apple Pay should be used in merchants' apps and websites," Vestager said. "It also reserves the 'tap and go' functionality of iPhones to Apple Pay. It is important that Apple's measures do not deny consumers the benefits of new payment technologies, including better choice, quality, innovation and competitive prices."
The focus on Apple's role as a gatekeeper, rather than its size or market share, is a first for the commission and marks an important shift in competition regulation—one that should give tech giants pause, competition lawyers said.
"The tech industry is very fast-moving, and competition authorities have had a hard time tackling these issues with conventional metrics," said Natasha Tardif, a competition partner at Reed Smith in Paris.
"The 'gatekeeper' theory has been gaining, but until now it has been just a theory," Tardif said. "We expect it will now be used to develop a new set of competition metrics."
Marc Lévy, also a competition partner at Reed Smith, added that in taking on Apple, "the commission is going after a company that does not have an obvious dominant market position, but that is seen to have significant control over access to data and content via its devices."
In March, France's antitrust authority fined Apple a record-high €1.1 billion, ruling that the company had entered into cartel-like agreements with two wholesalers and abused its market position and economic power to impose higher prices to resellers. Apple said it would appeal the judgment.
The French authority also handed Google a harsh defeat in April in a dispute with news publishers over the use of their content online without compensation. Google said it would comply with the ruling to negotiate with the publishers.
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Read More:
For Google, a Harsh Copyright Ruling From French Competition Watchdog
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