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Apple’s $1.9 billion EU Sanction May Trigger Avalanche of Compensation Claims

Last Updated March 7, 2024 10:56 AM
Giuseppe Ciccomascolo
Last Updated March 7, 2024 10:56 AM
Key Takeaways
  • The EU accuses Apple of stifling competition in the music streaming market through App Store restrictions.
  • This decision may lead to a surge in compensation claims from users who paid more due to Apple’s alleged practices.
  • Apple may face new issues on the gaming front too.

The European Union has fined  Apple $1.9 billion for allegedly abusing its market dominance in music streaming. The company stands accused of stifling competition and limiting consumer choice regarding music streaming services.

This situation may lead to a wave of compensation claims from users who believe they were overcharged. But the legal problems  for the Cupertino-based company in the EU go beyond this streaming case.

EU Sanctions Apple

Apple has received a $1.9 billion fine from the European Union for allegedly abusing its dominant position in the market. The EU accused Apple of limiting competition in the music streaming sector, including Spotify. Thus, it imposed restrictions on their presence on Apple’s platforms. Additionally, Apple received accusations of banning streaming apps from informing users about cheaper alternatives outside the App Store, a practice ordered to stop by the EU Commission.

Margrethe Vestager, European Competition Commissioner, also criticized  Apple’s practice in streaming sector. “For a decade, Apple has exploited its dominant market position in distributing music streaming apps through the App Store,” she said. And emphasized that this behavior violates EU antitrust regulations. The EU Commission alleged that Apple’s actions deprived consumers of informed choices, leading them to pay more for services. Moreover, developers have passed on the costs associated with accessing the App Store to end users.

Apple has announced  its intention to challenge the EU’s ruling, asserting that there is “no credible evidence” of harm to consumers. The company contends that “the reality is that European consumers have more choices than ever.” The investigation started after a complaint from Spotify, which alleges that it had to increase subscription prices to offset the expenses stemming from Apple’s control over the App Store.

According to Apple, Spotify stands to gain from the decision. “The primary supporter – and the biggest beneficiary – of this ruling is Spotify, a company headquartered in Stockholm, Sweden,”, it complained. Apple emphasized that “Spotify boasts the largest music streaming app globally and has engaged with the European Commission over 65 times throughout this investigation.”

Fine Impact Will Be Immediate

According  to Valerio Vertua of 42 Law Firm, the European judge’s decision resulted in a cease and desist order. This implies an immediate impact on the market and users. This urgency is compounded by the fact that consumers have five years from the cessation of contested behavior to file compensation claims

“Therefore, Apple, like any operator in a similar situation, the longer it delays in complying with EU directives, the more it risks facing a wide range of civil claims for compensation. The right to compensation in this case is comprehensive, including the payment of legal interest to the consumer,” Vertua said.

According to Vertua’s estimation , this could potentially amount to €3 per month for each installed streaming service. It’s a value that then needs to be multiplied by five years. All of this would need to be repeated for each Apple user.

However, the burden remains on the consumer to “demonstrate the damage suffered, even if not quantifying it exactly, a task which ultimately falls to the judge”, specifies Vertua.

What Can Apple Do?

So, if the responsibility to prove the damage still lies with the consumer, Apple‘s appeal may center on this aspect. The company may accuse the EU Commission of imposing the fine “despite the lack of credible evidence of harm to consumers,” Vertua added.

Cupertino-based tech giant may focus, among potential lines of defense, on the challenge of proving that the consumer would have genuinely opted for the alternative and less expensive streaming service, rather than prioritizing convenience.

Regardless, even if unfair commercial practices are proven, it’s unlikely that a “major player like Apple would bear the consequences alone, as it’s more probable that it would absorb the impact and pass it on to third parties while still adhering to the law,” Vertua said.

For instance, if required to allow app developers to provide a link to a cheaper streaming service – thereby foregoing commissions but offering consumers choice – Apple may transfer the costs to another service.

Is That All For Apple In The EU?

Problems for Apple in the EU are not over. In fact, Epic Games has urged  the European Union to promptly enforce its new major law governing big tech after Apple halted the Fortnite-maker’s efforts to develop a competing app store for its devices.

Epic’s CEO, Tim Sweeney, described  Apple’s move to block competition as a blatant attempt to stifle their main rival, enabled by the Digital Markets Act (DMA). The latter is a landmark European law coming into effect on Thursday, March 7, 2024. It mandates the world’s largest tech companies to open up their platforms to competition.

Epic has consistently pushed for more competition and lower commission fees on Apple and Google devices. Despite these demands being part of the DMA, Apple rejected Epic’s attempt to launch its own app store on iPhones. This was partly due to public criticism of Apple. Sweeney compared Apple’s actions to deterring criticism by displaying the skulls of their enemies.

Apple closed Epic’s developer account on March 2, preventing the launch of its standalone stores on Apple devices, citing past criticisms and rule breaches. Epic sees this as Apple’s refusal to promote competition, violating the DMA. Sweeney urges swift action to hold Apple accountable.

Epic has notified the European Commission, responsible for enforcing the DMA, and believes this action aligns with the law’s objectives. Corie Wright, Vice President of Public Policy for Epic Games, expressed  confidence that this issue is precisely what the DMA aims to address.

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