This week the EU Commission announced that it has started antitrust investigations against the platform group Apple. Both antitrust proceedings are focused on the terms and conditions of Apple’s platform. One concerns the conditions for the App Store (Commission press release); the other concerns the conditions for Apple Pay (Commission press release). In both cases the Commission is investigating possible infringements of the prohibition of abuse of market power under Article 102 TFEU and the ban on cartels under Article 101 TFEU.
Proceedings against the IAP compulsory use
There are two main issues in the first procedure. Firstly, Apple’s customers are obliged the use of a certain internal Apple interface at a charge (In-App Purchase = IAP). The Commission’s preliminary view is that the companies concerned have little room for manoeuvre in this IAP compulsion. Either they discontinue their in-app subscription business models or they pass on the high IAP provision to their customers in the form of surcharges. By solely controlling the IAP interface, Apple is also in a position to control the customer relationships of the respective app operators and to benefit more than these operators from the available data. The Commission states this in its press release:
The IAP obligation also appears to give Apple full control over the relationship with customers of its competitors subscribing in the app, thus dis-intermediating its competitors from important customer data while Apple may obtain valuable data about the activities and offers of its competitors.https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1073 (Commission, Press relase 16 June 2020)
The issue seems to be how a platform deals with user data, not so much in terms of the total “how much”, but rather in terms of the relative share of possible uses. This means that it is not the mass of data that would be the competition problem, but simply the contractual relations between the platform and its users. If they were given far-reaching possibilities for data evaluation and for the sole design and maintenance of their customer relationships, this could be less problematic. A review of the amount of the commission is also conceivable. Secondly, app operators must not advertise by offering alternative purchase options outside the app, i.e. they must not be able to circumvent the IAP compulsion. The investigation was triggered by complaints from a major music streaming provider and an e-book and audio book retailer.
Proceedings concerning Apple Pay
The other case is directed against Apple’s practices in connection with the introduction of the Apple Pay payment interface. What’s that about? With Apple Pay, an NFC interface was integrated into the operating system that can be used for mobile payments. This interface is also solely controlled by Apple. There is no alternative solution, so companies are dependent on this interface if they want to offer their customers payment options on Apple operating systems. This in turn gives the platform operator the possibility to exclude other companies. The Commission will assess whether these practices are abusive.
In Germany, the introduction of Apple Pay and related commercial practices eventually led to the inclusion of a sector-specific access provision in Section 58a of the German Act on the Supervision of Payment Services (ZAG). This was in particular a reaction to the demands of numerous payment service providers who saw their competitive opportunities for growth affected by Apple. At that time I had briefly explained the connections in a two-part interview, which you can read here and here. This provision should be read with a strong focus on the comparison with antitrust law. What I mean by this, I outlined briefly in a recent article here. This is because the provision obliges so-called system companies to immediately grant access to their technical infrastructures. Although at first glance this term is somewhat vague – compared to antitrust law it is still nothing.
What do I mean by that last sentence? If the Commission were to continue to focus its investigations on a possible violation of Art. 102 TFEU, numerous particular questions of antitrust law would have to be answered, which are very complex in comparison to the application of the sector-specific access right under Section 58a of the Act. The first step would be to identify a dominant position held by Apple, which it has abused. Also, any abuse at this point would have to be investigated concretely and extensively. This shows a clear advantage of a sector-specific access regulation: it is more selective, quicker to implement and consistently more effective. The latter, once again, because it has a specific purpose, which is to put an end to conduct that is precisely pre-regulated. In principle, general antitrust law also allows the ordering of so-called compulsory deals or compulsory licences. However, these would have to be enforced using the very open rules of antitrust law.
What is the next step in the antitrust proceedings?
Initially, the Commission this week only announced that it had formally initiated proceedings against Apple. The statements on possible infringements are only preliminary assessments and are not yet final. The Group can use its procedural rights to refute accusations or at least contribute to a favourable outcome. For example, commitments are conceivable to rebut, if not to dispute, then at least to invalidate the official assessments. In the case of platforms, this can typically be achieved by designing their business models in a pro-competitive manner or by deliberately granting access rights to third parties. However, it is still unclear whether this will happen and whether perhaps other measures might be adopted. At this point, too, a directly enforceable access claim is in any case more effective.