Apple faced harsh criticism on Tuesday from regulators and the companies behind some of the most popular apps in its App Store, including Tinder and Fortnite, a sign of the growing discontent with Apple’s grip on the mobile economy.
The companies – Tinder parent Match Group and Fortnite owner Epic Games – each faulted Apple for its long-standing policy of collecting a portion of subscriptions and other purchases made through its App Store, a move the companies say has cut their profits and left consumers paying higher prices.
Earlier in the day, the European Commission announced two investigations into how the iPhone maker treats competitors on its App Store and in its mobile payment system.The probe into the App Store was brought on by Spotify, the music-streaming service that has complained loudly about alleged mistreatment by Apple, and by an unnamed distributor of e-books and audiobooks.
“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books,” Margrethe Vestager, the commission’s executive vice president for competition, said in a written statement.
Every time an iPhone user subscribes to a service such as Spotify through Apple’s App Store, a portion of that fee, usually between 15 and 30 percent, goes to Apple. That fee has irked companies including Match, Fortnite and Spotify, which has said it hurt its business and resulted in higher prices for its customers. Spotify has tried to encourage its customers to subscribe directly, so as to circumvent Apple’s fees. But Apple has tried to block Spotify from doing so. That behavior is at the heart of the investigation, according to an announcement by the commission Tuesday.
Apple says the fees are fair and help pay for the service, which it says offers a safe and secure way for customers to download apps. “It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right – we want to maintain a level playing field where anyone with determination and a great idea can succeed,” said Apple spokesman Josh Rosenstock, in an emailed statement.
Epic earns revenue from Fortnite players who are willing to pay real dollars for digital currency that can be redeemed for in-game items – and Apple gets a cut of it.
Epic Games chief executive Tim Sweeney said security has nothing to do with Apple’s “extractive” fees. “The iOS App Store’s monopoly protects only Apple profit, not device security.”
“Apple is a partner, but also a dominant platform whose actions force the vast majority of consumers to pay more for third-party apps that Apple arbitrarily defines as “digital services,” Match Group said in a statement, adding Apple “squeezes industries like e-books, music and video streaming, cloud storage, gaming and online dating.”
“We’re acutely aware of their power over us,” the company added.
“Apple acts as stadium owner, referee and player and tilts the playing field to favor its own services,” Horacio Gutierrez, Spotify’s head of global affairs and chief legal officer. “There is no doubt that Spotify would be a more successful company today were it not for Apple’s conduct,” he said.
A new email service called Hey echoed some of Spotify’s concerns, telling the tech site Protocol Tuesday that Apple was forcing the start-up to use the iOS payments system by preventing it from updating its app until it complied. “There is never in a million years a way that I am paying Apple a third of our revenue,” the company’s co-founder, David Heinemeier Hansson told the website.
Companies rarely sound off in opposition to Apple, given the iPhone giant’s immense power, popularity and influence. Apple also maintains tight, strict oversight of its App Store, potentially leaving companies like Match Group and Epic Games little choice but to work out their disagreements – or risk losing access to millions of users’ iPhones and iPads.
New antitrust scrutiny in the United States and Europe, however, has emboldened some smaller tech companies in recent months to speak out publicly for the first time. That includes Tile, which makes technology that helps people track their keys and other lost items. Earlier this year, the company publicly blasted Apple at a congressional hearing for introducing tweaks to its operating system, known as iOS, that it says puts competing services at a disadvantage.
Tile later lobbed a complaint with the European Union. The commission has not said whether it will formally investigate those allegations. Apple has defended its software revisions, arguing that changes to iOS are designed to protect user privacy.
“Our multiple attempts to engage in meaningful dialogue with Apple have been ignored and we are beginning to believe the only way to get Apple to play fair is through government action,” Tile’s general counsel, Kirsten Daru, wrote in an emailed statement.
The move by the European Commission comes as antitrust scrutiny in the United States has moved on to focus on other technology companies such as Google. Antitrust regulators in Europe have been more aggressive in taking on the power of large technology companies. Though the cases have dragged on for many years, they’ve resulted in some large fines.
The commission also announced a separate investigation Tuesday into Apple Pay, the company’s mobile payment system that allows its customers to make in-store purchases using a wireless chip in the iPhone.
In a news release, the commission said Apple dictates the terms to merchants who accept Apple Pay and limits the use of the “NFC” chip on iPhones only to Apple’s own service. “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 commission wrote in the release.
The commission said it will also focus on allegations that Apple restricts the use of Apple Pay for its competitors.
Apple is one of several U.S. technology companies facing possible fines and other action in Europe for allegedly anticompetitive behavior. Last week, The Wall Street Journal reported that Amazon could be hit with antitrust charges for its treatment of third-party sellers on its site.
Whether the investigation will lead to a change in Apple’s business or a material ding to its pocket book is unknown. But Tuesday, Wall Street shrugged at the news. Apple’s stock was up roughly 2.5 percent, and the company was valued at $1.5 trillion, or about 44 times the size of Spotify, whose stock was down Tuesday.
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