Brussels Regulatory Brief: March 2024

• Published date: 03 April 2024
• Subject Matter: Antitrust/Competition Law, Environment, International Law, Media, Telecoms, IT, Entertainment, Strategy, Technology, Industry Updates & Analysis, Antitrust, EU Competition , Environmental Law, Export Controls & Trade & Investment Sanctions, Music and the Arts, Economic Analysis, Security
• Law Firm: K&L Gates
• Author: Ms Mélanie Bruneau, Francesco Carloni, Giovanni Campi, Nikolaos Peristerakis, Antoine De Rohan Chabot, Michael Hofmann Dr., Petr Barto', Vittoriana Todisco, Rebecca Halbach, Kathleen Keating and Covadonga Corell Perez de Rada

Antitrust and Competition

The European Commission Fines Apple EUR 1.8 billion for Abusing Its Dominant Position in the Music Streaming Sector

On 4 March 2024, the European Commission (Commission) fined Apple EUR 1.8 billion for abusing its dominant position under Article 102 of the Treaty on the Functioning of the European Union (TFEU). The Commission began an informal investigation in 2019 after Spotify, a Swedish-based music streaming app, filed a complaint accusing Apple of anti-competitive behavior in connection with its App store policies. The Commission opened the formal investigation against Apple in June 2020.

The Commission found an abuse through the imposition of anti-steering provisions on music streaming app developers that prevented them from promoting their apps outside the Apple App Store. The Commission noted that these anti-steering provisions prevented music streaming app developers from:

• informing their users about alternative and cheaper music subscription services available on the internet outside Apple's App Store;
• informing their users about the price differences between in-app subscriptions and those available on the internet outside the App Store;
• including links in their apps to their own websites on which alternative (and cheaper) subscriptions could be bought; and
• directly contacting their own in-app subscribers outside the Apple App ecosystem to inform them about alternative pricing options once the users set up an account with Apple's App Store.

The Commission found that the imposition of these anti-steering provisions by Apple amounted to the imposition of unfair trading conditions by a dominant company under Article 102(a) of the TFEU, which could not be objectively justified, as (i) they were neither necessary nor proportionate for the protection of the company's commercial interests in relation to the app store; and (ii) negatively affected the interests of iOS users, who were prevented from making informed and effective decisions on where and how to purchase music streaming subscriptions for use on their Apple iOS device.

A prerequisite of the Commission's findings was the establishment of a dominant position by Apple. The Commission had previously taken the position that Apple's iOS and Google's Android were separate markets and thus the Commission easily established that Apple's App store was dominant, given that it was the only App Store operating in the iOS ecosystem.

While the Commission reconfirmed the established precedent that dominant companies have a special responsibility not to abuse such a position by restricting competition, the case is novel in two respects.

First, it marks a significant enforcement shift towards exploitative abuses. Exclusionary abuses (abuses that exclude competitors), were considered as more harmful to competition, as they led to the anticompetitive foreclosure of smaller competitors from the marketplace. Exploitative abuses such as unfair terms and conditions or high prices were traditionally considered more innocuous, as there was a general view that such abuses would be corrected by normal market forces, i.e., entry or expansion by other competitors.

Second, this is the first case where the Commission imposed a fine of EUR 1.8 billion just for deterrence, even though the base amount of the fine calculated by reference to the value of the affected music streaming sales in the relevant EU market only amounted to EUR 40 million. As indicated by Financial Times, Vice President M. Vestager considered the base amount "quite small, not even a speeding ticket, parking ticket", and therefore, the Commission took the unprecedented step to increase the fine by EUR 1.8 billion to increase the deterrence effect, based on Apple's market capitalization and global revenues. This confirms the highly unpredictable and political nature of the Commission's fining policy, particularly when it comes to violations committed by very large companies such as Apple.

Apple has already announced that it will appeal the Commission decision. Its view is that Apple's App store has enabled rather than hindered the development of music streaming providers, and we certainly expect that they will also contest the EUR 1.8 billion fine imposed for deterrence.

Digital Affairs

The European Parliament Gives Its Final Approval to the Artificial Intelligence Act

On 13 March 2024, the Parliament voted in plenary to adopt the Artificial Intelligence Act (EU AI Act) with 523 MEPs voting in favor, 46 against, and 49 abstentions.

The Parliament's formal adoption in plenary follows favorable committee votes in the Parliament and Council in February, whereby EU Member...