Apple (AAPL) faces a massive $1.95 billion fine from European Union regulators. The EU claims Apple intentionally shut out music streaming competition, using its App Store to favor its own Apple Music service over rivals like Spotify (SPOT).
Yahoo Finance Legal Reporter Alexis Keenan breaks down the details.
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Editor’s note: This article was written by Angel Smith and updated by Luke Carberry Mogan.
Video Transcript
JULIE HYMAN: Well, Apple was hit with a $2 billion fine today by the EU for thwarting competition rules. The stock is down– was down today about 2 and 1/2%. The European Commission says the tech giant wielded its dominance through its App Store to the detriment of music streaming rivals like Spotify. Alexis Keenan has been following this story. And Alexis, this is a battle that Spotify has been fighting for years.
ALEXIS KEENAN: A long time. This case was– this investigation by the EC was initiated by Spotify. They complained that this activity was unfair by Apple. But it was a year ago that we knew that the EC had said that Apple had violated the EU’s antitrust laws. It’s only now that we’re learning of this $2 billion consequence of its actions. And here’s how EC czar Margrethe Vestager described the offense. Take a listen.
MARGRETHE VESTAGER: This is illegal. And it has impacted millions of European consumers. They were not able to make a free choice as to where, how, and at what prices to buy music streaming subscriptions.
ALEXIS KEENAN: Now, Apple, of course, disagreed with that in a blog post this morning, saying that the EC failed to uncover any credible evidence of consumer harm. They also noted that Spotify holds now 56% of the European music streaming market. They do also plan to appeal this decision.
But also let’s talk about the App Store and its significance and Apple’s total revenue stream. In 2023, the company had $383 billion in revenue. And if you look at the services category, that’s where these App Store sales are contained. That also contains this little fuzzy Apple Music, Apple TV.
But that revenue bucket comes in at $85 billion. You compare that to iPhone sales that declined in 2023 at $200 billion. That’s the big bucket. And then $39– almost $40 billion for the iWatch and AirPods. But certainly here, no drop in the bucket. It’s still a big significant and growing sector for Apple. So this is a big deal.
JOSH LIPTON: And, Alexis, we also might be– you could see Apple getting squeezed here on actually both sides of the Atlantic. This might not be the last antitrust case we see?
ALEXIS KEENAN: Yeah, so the word on the street, so to speak, is that the DOJ has been readying an antitrust case against Apple and that most recently last week had what’s called a last rites meeting with Jonathan Kanter, Head of the DOJ’s Antitrust Department with Apple.
And so it’s widely expected that there will be an antitrust suit against Apple here in the US. But the difference here could be really consequential because that probe is much broader than this EU probe.
The US is supposedly looking into the whole ecosystem for Apple. So you have to think about iPhones, the App Store, the iWatch, iMessage, AirTags, and all of the things that fit into that because the idea here is that the ecosystem itself is anticompetitive because all of those systems and softwares and technologies are tied together.
Also you have on top of that, the EU’s Digital Markets Act that takes full effect on Thursday. Apple has already said it will be making some adjustments to open the App Store so that alternate payments that were at issue in this case with the EU and the music streaming apps so that European users will be able to pay outside of the App Store. So that’s really the crux of this matter, is that Apple is withholding the ability to make payments elsewhere and taking that 30% fee from all the transactions that come through the App Store.
