Update: Apple responded to the announcement with a short statement: “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”.
Apple is now formally facing investigations on its conduct regarding the App Store and Apple Pay. European competition commissioner Margrethe Vestager today said that the probes are a priority and revolve around Apple’s role as gatekeeper.
The Apple Pay investigation will look into whether Apple unfairly locked out competing contactless payment services by restricting the use of the NFC chip inside iPhones. The App Store investigation centers on the mandatory use of Apple In-App Purchase system for third-party apps, and the 30% revenue cut that implies.
A probe is the first formal step towards an anticompetitive ruling. If the EU finds due cause, it could enforce fines and may require changes to the rule structure of the App Store. However, this will all take a long time and likely result in years of legal fights and appeals.
Last night, Apple released a new report that showed how the App Store business drove more than $500 billion in commerce, with 85% of that paid directly to third-party developers.
The $500 billion figure counts purchases of physical products like online shopping as part of the total. This is clearly Apple’s attempt to direct attention at the overall economic benefits of the App Store, rather than focusing on the digital transactions business specifically.
Earlier today, ebook store Kobo filed a complaint regarding the App Store’s terms. The European Commission’s case will use evidence from Kobo, Spotify, Tile and others as it continues its investigations.
The Apple Pay case is a result of the fact that the NFC chip in iPhone devices is locked down. Third-party contactless payment providers do not get the same access to the system as Apple Pay. For instance, Apple Pay can work in the background and the iPhone is ready to start an Apple Pay transaction at any time. However, third-party apps must be foregrounded to be able to read data from the NFC chip — and that functionality was only added as an API in the last couple of years.
Apple makes a relatively small amount of money from Apple Pay transactions directly, but it can use its market leading position to wield dominance in other services like the Apple Card credit card.
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