Margrethe Vestager. Picture: OLIVIER MATTHYS/REUTERS
Margrethe Vestager. Picture: OLIVIER MATTHYS/REUTERS

New York — Apple faces a twin-pronged attack from EU antitrust chief Margrethe Vestager amid concerns the US tech company’s App Store and Apple Pay services squeeze developers and potential rivals.

Four years after hitting Apple with a record-breaking tax bill, Vestager has switched her attention to the iPhone maker’s market power.

The EU will review whether Apple’s app store violates competition law by requiring developers to accept a 30% commission for every sale on Apple’s platform. Watchdogs will also examine how Apple limits “tap-and-go” functionality to its own Apple Pay product.

“It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices,” Vestager said on Tuesday. “We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers.”

The investigation is the latest in a growing list of EU probes into Silicon Valley, which have led to criticism from US President Donald Trump. The EU in 2019 wrapped up nearly a decade of probes into Google that racked up about $9bn in fines. An investigation into Amazon.com is set to escalate in the coming weeks.

Aitor Ortiz, an analyst at Bloomberg Intelligence, said the huge penalties in the Google case have not been seen as successful and the EU may focus on changing behaviour in new probes.

“This is not about the fines,” Ortiz said. “We saw it with Google, the fines don’t really have a deterrent effect on the companies.”

Apple said the EU is responding to complaints from rivals that “simply want a free ride, and don’t want to play by the same rules as everyone else”.

“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies,” Apple said in a statement. “At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment.”

Shares of Cupertino, California-based Apple rose 2.7% to $352.38 in New York trading on Tuesday morning.

Apple is already fighting Vestager’s 2016 order to repay Ireland €13bn in unpaid taxes. CEO Tim Cook called Vestager’s decision “political crap” in a longer battle over how digital giants should be taxed in Europe.

The latest EU probe targets a strategic area for the company, which has gradually shifted focus from hardware to subscription-based services such as Apple TV and Apple Music in search of other revenue streams. For the financial year ended September 28, 2019, revenues for Apple’s services grew 16% to $46.3bn but they were still a fraction of its overall sales of $260.2bn.

Apple says it welcomes competition on its app store and says other apps it competes with, including on television and podcasts, are also available on its platform. The iPhone company says developers have earned more than $120bn around the world from selling digital goods and services in apps distributed by Apple’s store.

Regulators are separately wrestling with how to act against online giants that critics say run a rigged game when they set the rules for platforms that also host their rivals. New laws on how online platforms should treat the companies they host will enter into force on July 1.

Spotify Technology last year complained that Apple unfairly squeezes its music-streaming service with changing rules and a large cut of sales on the app store. Such behaviour gives an unfair advantage to Apple’s own service Apple Music, it alleged.

Spotify said the EU announcement made it “a good day for consumers” and called on the EU “to act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy,” according to an e-mailed statement from Spotify’s lawyer, Horacio Gutierrez, referring to Apple’s operating system for mobile devices.

The EU said it was acting on a complaint filed in March from an e-book and audio book provider it did not name. The Financial Times reported on Tuesday that Rakuten’s Kobo unit complained to the EU.

The app store probe will examine Apple’s curbs on developers telling users of other payment methods which may be cheaper, the EU said. Apple and Google face a growing backlash against the toll they charge outside developers for using their app stores.

The Apple Pay investigation will scrutinise Apple’s terms and conditions for how Apple Pay is integrated into merchant apps and websites that run on Apple phones and tablets, saying these might distort competition and reduce choice and innovation. Apple Pay is the only mobile payment solution that can use NFC technology for contactless payments in stores, it says.

Bloomberg