[todd-davies]

Note that this fine is made up of 0.04bn of fine and 1.8bn of deterrent against future anti-competitive behaviour [1]. The the 2006 fine-setting guidelines allow the Commission to do that [2].

We should read the 1.8bn lump sum (roughly 0.5% of Apple's revenue) as partially being about music streaming and app stores, but mainly a warning to all large firms which are currently jockeying for a dominant position in emerging tech like generative AI and visual computing.

The warning: play fair and compete on the merits, or see you in court.

[1] "the Commission decided to add to the basic amount of the fine an additional lump sum of €1.8 billion to ensure that the overall fine imposed on Apple is sufficiently deterrent" https://ec.europa.eu/commission/presscorner/detail/en/ip_24_... [2] See paras 30 and 31. https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...

[RugnirViking]

what is actually the difference in this case?

I thought the function of fines WAS the deterrent effect? or is some aspect of this restitution? I thought this was payable to the EU itself, not spotify.

[tivert]

> I thought the function of fines WAS the deterrent effect? or is some aspect of this restitution? I thought this was payable to the EU itself, not spotify.

Maybe it's something akin to punative damages (https://en.wikipedia.org/wiki/Punitive_damages), where the "fine" component is assessed according to the actual harm measured and the "deterrent" amount is meant to make it sting as a punishment.

The law always needs a little something extra to deal with people like the guy who parks in handicap spaces because he can afford the fines.

[neycoda]

Would be nice if fines like that were earmarked as probationary in the sense that if the bad behavior continues, they actually have to pay the fines plus a penalty, otherwise they get a diminished amount.

[Novosell]

They could pay nothing by not doing it in the first place, right?

[todd-davies]

(edit) TL;DR: see tivert's comment.

In most cases, the Commission sets a fine which is based on the harm caused by some anti-competitive conduct, with relatively small adjustments for extenuating or attenuating circumstances. In this instance it's the opposite; the economic harm was small but the adjustment was huge.

You're right that the logic - deterrence - is the same in both cases. But what's different (at least in my view), is the object of the deterrence.

Ordinary fines are designed to make anti-competitive behaviour unattractive in terms of the costs and benefits. Maybe some underhanded conduct generates €40m extra profit, but the risk of a €40m fine plus legal costs and adjustments makes it not worth it.

The trouble is that these fines might are essentially just rounding errors for large firms. In this case, a €40m fine would be tiny in relation to Apple's revenue stream (~€350bn euros a year), thus not an effective deterrent. That's for two reasons. First, the 40m figure is too low since a "significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for under the revenue-based methodology as set out in the [Commission's guidelines]"[1]. Second, the fine is trying to to "deter [Apple and] other companies of a similar size and with similar resources from committing the same or a similar infringement"[1] even when they could absorb the ordinary (small) fine as essentially a rounding error on their cost of doing business. In that case, large conglomerates could basically just ignore competition law.

So here, the Commission is deterring all firms which have a "particularly large turnover" [2] (e.g. Big Tech firms) from using their power in one market to gain an advantage in another market, as in this case where Apple used its control over its App Store to gain an advantage in the music streaming market. The fining guidelines allow for fines to be much larger (~50x in this case) for tech giants, even if the actual infringement didn't cause that much quantifiable harm.

You're right, there's no restitution here. As you say, the fine is payable to the EU and would be paid into the EU budget.

[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_24_... [2] Para 30 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...

[TimPC]

It's insane that they think the deterrant to a single line of business should be based on the revenue of the business as a whole instead of that line of business. 0.5% of app store revenue would be far more reasonable than 0.5% of Apple revenue.

[Ghexor]

I think, in order to have the desired effect, the deterrant must be in proportion to the resources of the transgressor as a whole entity. If its not, Apple can afford to behave anticompetitively with their appstore, hold on to an illegal position of power and use that to extract revenue for the other lines of business that they're in.

Morally, if we fine violations to the speed limit in proportion to the context of the transgression only it will not adapt to the income of the transgressor. That makes it practically legal for rich people to drive as fast as they wish.

[TimPC]

I'd support fines for the whole business revenue if you can prove that's what the business is doing. Here it's pretty clear the app store is behaving anti-competitively to increase app store revenue. Apple doesn't sell more iPhones by making it harder to use Spotify on them.

[sircastor]

I follow your reasoning, but by the same reasoning we could say that Apple shouldn't internally fund projects with the revenue from other projects. Each project should be supported by its own income stream.

To function as a deterrent, it needs to represent a cost that a company is unwilling to tolerate.

[beeboobaa]

The point of a fine is to get a company to behave.

I'd prefer if they could just jail the executives instead, but since sadly companies are an effective shield against justice this will have to do.

[todd-davies]

Criminal sanctions in competition/antitrust law cases are an option in some jurisdictions, notably in the US and the UK (but not in the EU).

For an ageing but interesting case, see https://en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy

[todd-davies]

There are a few ways to think about this. One is deterrence based on cost-benefit analysis, which is essentially a game theoretic way to think about firm behaviour. The logic here would be to fine the firm enough to deter anti-competitive behaviour, as has been mentioned.

Another way to think about it, is to say that we care about safeguarding the process of competition itself. That could include ensuring that competition is fair, ensuring that firms can enter markets, ensuring consumers get to choose which firms to consume from, etc. There's lots of precedent for that in EU competition law [1]. Taking that view, Apple was using its dominant position to restrict the economic freedom of Spotify (and others) and thereby harming the process of competition. Specifically, it limited rival firms from "fully informing iOS users about alternative and cheaper music subscription services" (as per the press release), thus harming competition.

All that to say, if we take the objective of EU competition law as being to prevent large firms from exercising power over smaller firms and to protect the process of competition in a general sense, then these big fines are easier to justify.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3166005

[deanishe]

> It's insane that they think the deterrant to a single line of business should be based on the revenue of the business

How is that "insane"?

It's pretty clear that Apple Music hadn't gone rogue.

[XajniN]

The law allows up to 10% of global revenue.

[catothedev]

Honestly, these multibillion dollar fines from the EU against US tech companies always have an air of 'Since we don't really have a domestic tech industry, these judgements don't really set a precedence for domestic companies, therefore let's just systematically use fines to collect cash'. An extra tax for big US tech companies doing business in Europe. Is there some truth to this?

[GreenWatermelon]

Or maybe the US is just too comfortable with being the home of multiple large criminal organizations? Said crime syndicates then actually get fined for committing crimes on countries with actual rule of law, unlike the oligarchic farce that is the US justice system.

[jijijijij]

> Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the company concerned, damages may be awarded by national courts without being reduced on account of the Commission fine.

Uff. Spotify can ask for damage compensation on top of those 1.8 B€, huh?! Apart from music streaming services, I don't see why the situation isn't fundamentally the same with video streaming and Apple TV, and maybe even things like VPN, or cloud services, where Apple has its own competing products now.

So... this ultimately may get really, really nasty and expensive for Apple. I am so here for it :)

[Aerbil313]

Looking from the perspective of Apple, the whole situation is really annoying. Let me play the devil's advocate here. They built the iPhone, iOS and all its frameworks and the App Store. Now they are forced to act as essentially a public service provider. Philosophically, the amount of users they have shouldn't necessiate them to be treated as one. But you know, everyone wants a piece of the cake Apple thought they baked under their own terms. It's quite telling that this regulation comes from EU which are not getting nearly the tax and revenue US gets from Apple.

[hu3]

> They built the iPhone, iOS and all its frameworks and the App Store.

Well they don't give iPhones and App Store away for free.

Cheapest iPhones in Germany cost ~$530 for a 64GB model which Apple will nag you to subscribe to their iCloud to offload data.

Meanwhile developers need a $1k macbook (with measly 8GB RAM and 256GB storage btw) and $100/year.

And you get no choice to install from other app stores. So generous!

[zaptheimpaler]

You get the choice to not buy it. They made it, they should be able to decide how it’s used.

[jijijijij]

Yeah, and if they don't like Android either, they still have the choice of not having a phone at all, therefore not having a job, medical care, a house, ... Maybe, you should consider the context of antitrust legislation and what that entails for your argument.

And maybe baby, you should also explore, if you may be affected by a cultural economic dogma founded in times of red scare propaganda. Because these naive free market takes tend to come up a bit reflexively in some people, but are actually very rare for economic scientists.

[zaptheimpaler]

I'm not a crazy free market maximalist or antitrust hater.. its very important in many markets.

I just don't think its really necessary or high priority for iPhones. Android is one OS like Linux is one OS, there are 5-6 big time manufacturers with their own OSes, 100s of phones at all price points. I was replying to someone complaining about the price point but there are so many great phones at lower price points. Not to mention discounted rates on plans or second hand phones.

This particular case was about Apple not allowing third party payment options. The payment market is cornered by Visa/MasterCard that charges 1% on every single transaction. They charge a huge percent rate on a constant amount of work. There are countries that operate their own payment systems that have 0 or close to 0 fees on transactions. But no one is going to go after Visa/MC in a 2-player market just like phones that hasn't reduced prices in decades? So now Spotify can stop paying fees to one monopolist and pay them to the next one down the line? These don't look like rational, considered decisions by antitrust agencies to focus on the markets that have the worst behaviour, more just piling on the current thing.

[hu3]

Oh I do exercise that right but it's not that simple. There's only so much the average citizen can do against the marketing and the network effects that a trillion+ dollar company can buy.

Luckily there's such thing as consumer protection laws in EU.

So my family can enjoy at least some protection from idiotic things such as not using industry standard charging cables (USB-C) while still marketing their product as green. And abusing their power against other companies and customers.

We're still left with jokes like a thousand dollar 8GB/256GB laptop sporting glued parts and an outdated 60hz screen (my friends 6year old phone has better screen refresh rate).

Not to mention they compare M3 performance against M1 instead of M2. There's only so much laws can do against deceiving marketing.

[fennecfoxy]

Ah yes, and people also have the choice not to buy cigarettes, too. Let's remove all the warnings on the boxes and cancel any law changes around trying to reduce smoking.

[octacat]

Devil advocate is that people cannot have more that one phone per person realistically. If every app would need a separate phone, that would be stupid. It is totally fine for a country to ask that if a company wants to sell their devices in the country, they have to follow some rules.

[jijijijij]

> They built the iPhone, iOS and all its frameworks

That's what their customers payed for when they bought very expensive iDevices. Honestly, what a weird take, considering Apple really invented this argument. iOS app devs and service providers are just as much a necessity for Apple's popularity and success. You know, the default iOS calculator app used to be a meme not that long ago...

> Appstore

Yeah really, unhappy devs should totally roll their own distribution like on every other platform since the beginning of software development. Oh, wait...

> But you know, everyone wants a piece of the cake Apple thought they baked under their own terms.

Or maybe, Apple wanting a piece of the second largest consumer market should play by its rules, considering all the commerce infrastructure they are using... Not to mention the education system they are free-riding for their engineers, courts protecting their brand and IP, police enforcing property rights, ...

Do you pay taxes in Jonestown?

[msla]

> We should read the 1.8bn lump sum (roughly 0.5% of Apple's revenue)

So it deters nothing, Apple pays it and continues to do what it's doing.

[piva00]

If they continue the fine amount will be increased on the next one. That's how the EU plays, you get a warning, then a deterrent, if that doesn't stop the behaviour fines will continue to be levied in increasing amounts.

GDPR rules follow the same structure and are a pretty good deterrent.

[jijijijij]

Respectively, 21% of Apple Music's 8.3B$ revenue, tho. Video streaming and other services may follow. Now, there is precedent.

[JonAtkinson]

Hi Todd!