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The end of 30%? | Opinion

The European Commission has opened an antitrust investigation into Apple -- will this be the end of the App Store's 30% revenue share?

Following complaints from Spotify and an e-book and audiobook distributor, the European Commission has opened formal antitrust investigations to examine whether Apple's rules for the distribution of apps via the App Store infringe EU competition law. The investigations will focus on the obligation to use Apple's proprietary in-app purchase system, and the restrictions on informing iPhone and iPad users of alternative purchasing possibilities outside of apps.

This is not a formal decision that Apple has breached EU competition law -- not yet -- and in theory, the European Commission can conclude that there has not been a breach. Practically speaking, though, formal proceedings opened by the Commission rarely go away without consequences. In most cases, companies either commit to changing their behavior or are forced to do so by the Commission.

In most cases, companies either commit to changing their behavior or are forced to do so by the Commission

If the Commission decides to impose fines, they are often hefty: Google received a record fine of €4.34 billion in the Android case. That decision is currently being challenged before the European Courts -- as could any formal finding of an infringement against Apple.

So the opening of the proceedings is not good news for Apple, but it can be good news for developers and maybe even consumers. So far, the Commission has not attacked the 30% revenue share Apple asks from developers as such, and doing so would be very difficult under EU competition law.

However, the opening of the proceedings means that the Commission is at least very critical of Apple not allowing other (cheaper) in-app purchase systems. This, in turn, means that if Apple changes that policy, app developers may use other payment systems that demand a lower revenue share -- or even that Apple itself lowers the revenue share it requires app developers to pay. In the long run, such a development might even put the revenue shares asked by Google and Steam under pressure eventually.

Dr Andreas Lober

If the Commission's investigations find that it has a dominant position, there might be more issues to come for Apple. This is because the concept of an "abuse" of a dominant position is very wide. It forbids unfair prices or terms, but also discriminatory treatment of trading partners, or bundling and tying contracts which do not belong together naturally.

The wide discretion Apple reserves for itself when accepting -- or not accepting -- third-party apps might be the next topic to look at. A competition authority would be particularly interested in app categories in which Apple competes or intends to compete with third-party developers -- and as far as games go, there's Apple Arcade.

There is a very prominent recent example for such a wave of Commission investigations: Google, which ended up with three investigations -- Google Search, Google AdSense, and Android -- all resulting in high fines. There is also a case pending against Valve, and other games publishers, for geo-blocking of game activation keys, which the European Commission also holds as being a breach of EU competition law according to its preliminary assessment.

In sum, these procedures show that the European Commission now closely monitors the tech giants.

In Germany, the Federal Cartel Office has attacked Facebook for its data collection practices. Even though many held that a Cartel Office should not do the Data Protection Authority's job, the German Federal Court of Justice some days ago confirmed in preliminary proceedings that depriving private Facebook users of any choice how their data is collected amounts to an abuse of Facebook's dominant position.

This all shows that rough times lie ahead for some of the dominant digital companies.

Dr Andreas Lober is partner at the law firm Beiten Burkhardt. He has been advising video game companies for many years, including Epic Games, Microsoft, and ZeniMax. The views expressed in this article are his personal opinions and conclusions. The contribution was created with the collaboration of Christoph Heinrich, who is partner at the law firm Beiten Burkhardt, and advises clients with regard to antitrust law.

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