Brussels considers that Apple breaches EU competition law because it charges high commission fees on rivals on the App store.
The European Commission has accused Apple for what it considers to be anti-competitive behaviour against music streaming services, such as Spotify, SoundCloud and Deezer.
The Commission believes Apple is distorting competition in the music streaming market because it is abusing the dominant position it enjoys thanks to its widely-used App Store.
The App Store connects app developers from all around the world with users of Apple devices, like iPhones and iPads. The App Store hosts almost 2 million apps, some of which offer services similar to apps designed by Apple itself.
Apple users can only download apps via the App Store, an exclusivity that effectively turns the store into a "gatekeeper", the Commission said. Brussels considers that Apple's devices and software "form a 'closed ecosystem' in which Apple controls every aspect of the user experience."
"When you have an iPhone you can't go anywhere else," said Margrethe Vestager, European Commissioner for Competition, who has led other battles against the tech giant in the past. "Apple holds a monopoly on the App Store."
In particular, the Commission is concerned about two specific rules that Apple imposes on apps developers.
On the one hand, Apple charges developers a 30% commission fee on all digital subscriptions. Apple Music, the company's own music streaming service, costs €9.99 per month and is exempted of this fee. Meanwhile, Spotify Premium has a monthly price of €11.99.
On the other hand, the so-called "anti-steering provisions" prevent app developers form informing users of alternative and cheaper subscription offers that may be located outside of the apps.
The combination of these two rules, the Commission explained, raises costs for consumers and distorts competition in the market. For example: an app developer may be forced to increase the overall subscription price in order to offset the 30% commission fee, putting Apple Music at an advantage.
The Commission's conclusions are preliminary and have already been sent to Apple. The company will have several weeks to examine the arguments, reply in writing or request an oral hearing. These steps are part of an antitrust investigation, which might eventually lead to a court case.
Speaking to reporters on Friday afternoon, Vestager avoided listing the measures that the executive would consider necessary to resolve the dispute, but hinted that simply eliminating the 30% commission fee would not be enough.
'This is a music streaming case'
The new investigation into the App Store follows a complaint filed two years ago by Spotify, which is based in Sweden and is considered one of Europe's leading digital companies.
"This is not a Spotify case, this is a music streaming case," said Vestager, adding that the Commission is in touch with jurisdictions from the Netherlands, Australia and the United States, which are similarly worried about the situation in the music market.
Spotify welcomed the Commission's findings.
"Today is a big day. Fairness is the key to competition. With the [European Commission's] Statement of Objections, we are one step closer to creating a level playing field, which is so important for the entire ecosystem of European developers," Daniel Ek, Spotify's founder and CEO, wrote on Twitter.
"Apple’s actions are damaging not only to Spotify, but to the entire ecosystem of app developers," added Horacio Gutierrez, Spotify's chief legal officer.
For its part, Apple expressed its opposition to the legal reasoning.
"Spotify has become the largest music subscription service in the world, and we’re proud of the role we played in that," Apple said in a statement reacting to the news.
"Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The Commission’s argument on Spotify’s behalf is the opposite of fair competition."
This not the first time the European Commission investigates the market practices of Apple Inc, a company whose market value of more than $2 trillion is similar to Italy's GDP.
Last year, the Commission lost a high-profile case against the company related to state aid. The executive argued that the multinational was unlawfully benefiting from a special tax rate agreement that it had reached with the Irish authorities. The Commission was asking €13 billion in back taxes, but the EU’s General Court ruled the reasoning presented was not strong enough to guarantee such massive repayment.