The Apple App Store has given rise to a thriving marketplace that connects app developers and iOS users. However, Apple has recently come under increased antitrust scrutiny on both sides of the Atlantic over concerns that it uses its role as operator of the App Store to give its own apps an anticompetitive advantage. At the center of these concerns lies the 30% commission Apple charges for in-app purchases (which drops to 15% after one year in the case of subscriptions). Authorities currently investigating Apple are the European Commission (in response to a formal complaint filed by Spotify in March 2019), the Dutch Autoriteit and Consument Markt (as a follow-up to its excellent report of its market study into mobile app stores) and the US Department of Justice. Apple, on the other hand, dismisses the accusations, arguing that its App Store brings massive value to app developers while at the same time allowing them to reach users through alternative distribution channels (according to Apple, these channels are the web and alternative app stores).
Against this background, Damien and I decided to write a paper examining whether there is indeed an antitrust case against the App Store. We think there is.
After engaging critically with various public statements of Apple discussing the services that the 30% commission corresponds to, we conclude that the 30% commission is charged for payment processing and related services and not, as Apple asserts, for distribution.
We then examine several practices of Apple that appear to be at odds with competition law and in particular Article 102 TFEU. We first discuss the issue of market definition and dominance with regard to the App Store. We find that Apple is a monopolist in the market for app distribution on iOS, as it is not subject to any meaningful competitive constraint from alternative distribution channels, such as Android app stores or the web. The result is that Apple is the gateway through which app developers have to go in order to reach the valuable audience of iOS users. This bottleneck position affords Apple the power to engage in several prima facie anti-competitive practices, such as: charging app developers excessive fees, using the App Store to exclude rival apps or discriminating in favor of certain apps. Apple’s conduct is likely to result in considerable consumer harm, be it in the form of higher app prices, worse user experience or reduced consumer choice. We conclude by proposing a combination of remedies that would address the competition concerns identified.
Interested? Read the full paper here!