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report:-apple-is-about-to-be-fined-e500-million-by-the-eu-over-music-streaming

Report: Apple is about to be fined €500 million by the EU over music streaming

antitrust, Apple, Apple Music, EU, Policy, Spotify, streaming, syndication / Mike M. / February 20, 2024

Competition concerns —

EC accuses Apple of abusing its market position after complaint by Spotify.

Javier Espinoza, Financial Times – Feb 19, 2024 3: 03 pm UTC

Report: Apple is about to be fined €500 million by the EU over music streaming

Brussels is to impose its first-ever fine on tech giant Apple for allegedly breaking EU law over access to its music streaming services, according to five people with direct knowledge of the long-running investigation.

The fine, which is in the region of €500 million and is expected to be announced early next month, is the culmination of a European Commission antitrust probe into whether Apple has used its own platform to favor its services over those of competitors.

The probe is investigating whether Apple blocked apps from informing iPhone users of cheaper alternatives to access music subscriptions outside the App Store. It was launched after music-streaming app Spotify made a formal complaint to regulators in 2019.

The Commission will say Apple’s actions are illegal and go against the bloc’s rules that enforce competition in the single market, the people familiar with the case told the Financial Times. It will ban Apple’s practice of blocking music services from letting users outside its App Store switch to cheaper alternatives.

Brussels will accuse Apple of abusing its powerful position and imposing anti-competitive trading practices on rivals, the people said, adding that the EU would say the tech giant’s terms were “unfair trading conditions.”

It is one of the most significant financial penalties levied by the EU on Big Tech companies. A series of fines against Google levied over several years and amounting to about 8 billion euros are being contested in court.

Apple has never previously been fined for antitrust infringements by Brussels, but the company was hit in 2020 with a 1.1 billion-euro fine in France for alleged anti-competitive behavior. The penalty was revised down to 372 million euros after an appeal.

The EU’s action against Apple will reignite the war between Brussels and Big Tech at a time when companies are being forced to show how they are complying with landmark new rules aimed at opening competition and allowing small tech rivals to thrive.

Companies that are defined as gatekeepers, including Apple, Amazon, and Google, need to fully comply with these rules under the Digital Markets Act by early next month.

The act requires these tech giants to comply with more stringent rules and will force them to allow rivals to share information about their services.

There are concerns that the rules are not enabling competition as fast as some had hoped, although Brussels has insisted that changes require time.

Brussels formally charged Apple in the anti-competitive probe in 2021. The commission narrowed the scope of the investigation last year and abandoned a charge of pushing developers to use its own in-app payment system.

Apple last month announced changes to its iOS mobile software, App Store, and Safari browser in efforts to appease Brussels after long resisting such steps. But Spotify said at the time that Apple’s compliance was a “complete and total farce.”

Apple responded by saying that “the changes we’re sharing for apps in the European Union give developers choice—with new options to distribute iOS apps and process payments.”

In a separate antitrust case, Brussels is consulting with Apple’s rivals over the tech giant’s concessions to appease worries that it is blocking financial groups from its Apple Pay mobile system.

The timing of the Commission’s announcement has not yet been fixed, but it will not change the direction of the antitrust investigation, the people with knowledge of the situation said.

Apple, which can appeal to the EU courts, declined to comment on the forthcoming ruling but pointed to a statement a year ago when it said it was “pleased” the Commission had narrowed the charges and said it would address concerns while promoting competition.

It added: “The App Store has helped Spotify become the top music streaming service across Europe and we hope the European Commission will end its pursuit of a complaint that has no merit.”

The Commission—the executive body of the EU—declined to comment.

Report: Apple is about to be fined €500 million by the EU over music streaming Read More »

Amazon hides cheaper items with faster delivery, lawsuit alleges

Amazon, antitrust, Antitrust law, European Commission, online marketplace, Policy / Kelly Newman / February 13, 2024

A game of hide-and-seek —

Hundreds of millions of Amazon’s US customers have overpaid, class action says.

Ashley Belanger – Feb 12, 2024 6: 59 pm UTC

Amazon rigged its platform to “routinely” push an overwhelming majority of customers to pay more for items that could’ve been purchased at lower costs with equal or faster delivery times, a class-action lawsuit has alleged.

The lawsuit claims that a biased algorithm drives Amazon’s “Buy Box,” which appears on an item’s page and prompts shoppers to “Buy Now” or “Add to Cart.” According to customers suing, nearly 98 percent of Amazon sales are of items featured in the Buy Box, because customers allegedly “reasonably” believe that featured items offer the best deal on the platform.

“But they are often wrong,” the complaint said, claiming that instead, Amazon features items from its own retailers and sellers that participate in Fulfillment By Amazon (FBA), both of which pay Amazon higher fees and gain secret perks like appearing in the Buy Box.

“The result is that consumers routinely overpay for items that are available at lower prices from other sellers on Amazon—not because consumers don’t care about price, or because they’re making informed purchasing decisions, but because Amazon has chosen to display the offers for which it will earn the highest fees,” the complaint said.

Authorities in the US and the European Union have investigated Amazon’s allegedly anticompetitive Buy Box algorithm, confirming that it’s “favored FBA sellers since at least 2016,” the complaint said. In 2021, Amazon was fined more than $1 billion by the Italian Competition Authority over these unfair practices, and in 2022, the European Commission ordered Amazon to “apply equal treatment to all sellers when deciding what to feature in the Buy Box.”

These investigations served as the first public notice that Amazon’s Buy Box couldn’t be trusted, customers suing said. Amazon claimed that the algorithm was fixed in 2020, but so far, Amazon does not appear to have addressed all concerns over its Buy Box algorithm. As of 2023, European regulators have continued pushing Amazon “to take further action to remedy its Buy Box bias in their respective jurisdictions,” the customers’ complaint said.

The class action was filed by two California-based long-time Amazon customers, Jeffrey Taylor and Robert Selway. Both feel that Amazon “willfully” and “deceptively” tricked them and hundreds of millions of US customers into purchasing the featured item in the Buy Box when better deals existed.

Taylor and Selway’s lawyer, Steve Berman, told Reuters that Amazon has placed “a great burden” on its customers, who must invest more time on the platform to identify the best deals. Unlike other lawsuits over Amazon’s Buy Box, this is the first lawsuit to seek compensation over harms to consumers, not over antitrust concerns or harms to sellers, Reuters noted.

The lawsuit has been filed on behalf of “all persons who made a purchase using the Buy Box from 2016 to the present.” Because Amazon supposedly “frequently” features more expensive items in the Buy Box and most sales result from Buy Box placements, they’ve alleged that “the chances that any Class member was unharmed by one or more purchases is virtually non-existent.”

“Our team expects the class to include hundreds of millions of Amazon consumers because virtually all purchases are made from the Buy Box,” a spokesperson for plaintiffs’ lawyers told Ars.

Customers suing are hoping that a jury will decide that Amazon continues to “deliberately steer” customers to purchase higher-priced items in the Buy Box to spike its own profits. They’ve asked a US district court in Washington, where Amazon is based, to permanently stop Amazon from using allegedly biased algorithms to drive sales through its Buy Box.

The extent of damages that Amazon could owe are currently unknown but appear significant. It’s estimated that 80 percent of Amazon’s 300 million userbase is comprised of US subscribers, each allegedly overpaying on most of their purchases over the past seven years. Last year, Amazon’s US sales exceeded $574 billion.

“Amazon claims to be a ‘customer-centric’ company that works to offer the lowest prices to its customers, but in violation of the Washington Consumer Protection Act, Amazon employs a deceptive scheme to keep its profits—and consumer prices—high,” customer’s lawsuit alleged.

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2024 may be a year of reckoning for Apple’s $85 billion services business

antitrust, App Store, App stories, Apple, big tech, monopoly, syndication / Kelly Newman / January 2, 2024

scrutinized —

US court cases and tougher EU regulation will pose challenges to Apple’s bottom line.

Michael Acton, Financial Times – Jan 2, 2024 2: 11 pm UTC

Apple faces a legal reckoning in 2024, with a series of regulatory decisions by US and EU authorities over the coming months set to determine the future of its $85 billion-a-year services business.

The biggest hit to the iPhone maker could come from a US antitrust trial against Google, where it emerged that the fellow tech giant had paid more than $26 billion in 2021 to make its search engine the default on Apple devices and other smartphones and browsers.

Should Google lose the case, it could be forced to stop making regular payments to Apple, which Eric Seufert, an independent analyst, estimates as being worth a quarter of annual revenues earned by Apple’s services arm.

Meanwhile, Apple and other tech giants face increasing scrutiny from the Biden administration over concerns about the dominance of its App Store, which it is already being forced to change in the EU due to legislation designed to rein in the power of Big Tech.

Together, the legal and regulatory actions spanning two of Apple’s biggest markets represent the biggest threat to the company’s business in years.

Its services arm, which includes income from the App Store, video streaming arm, and Apple Music, has steadily increased as a proportion of the company’s total revenues, which is still dominated by sales of devices such as the iPhone.

The Google trial, seen as the most significant antitrust monopoly trial in more than 25 years in Washington, will hear closing arguments in May. Should Google lose, it will almost certainly file an appeal, but such a decision would raise questions about how the two tech giants work with one another into the future.

“I think the judge was intrigued with that issue during the trial,” said Bill Kovacic, a former Federal Trade Commission chair and competition professor of law and policy at George Washington University Law School. “The question in the background was: ‘if Apple is going to have an auction for that prime placement, what should Google have done?’”

The White House is at the same time intensifying its efforts to tackle what it regards as excessive corporate power. Jonathan Kanter, head of the Department of Justice’s antitrust unit since November 2021, has made no secret of his ambition to bring cases against the biggest US companies.

His department has been probing Apple’s App Store policies for years and is now, according to Kanter, “firing on all cylinders.” The window for him to bring a case is closing, however, as the US presidential election and a potential change in administration loom. The DoJ did not respond to a request for comment on the Apple probe.

Regulators, businesses, and enforcers have for years been seeking to pry apart Apple’s iOS ecosystem, a move the tech giant has always insisted would undermine the mobile operating software’s security.

Apple, however, acknowledged recently in a filing to the Securities and Exchange Commission that it would have to make changes to its App Store in the EU, due to the bloc’s new Digital Markets Act, which has a March deadline for legal compliance from tech companies.

In the EU, Apple is preparing to allow “sideloading,” which enables iPhone users to bypass its store and download apps from elsewhere.

This will breach, for the first time, the walled-off ecosystem that the company has protected since Steve Jobs unveiled the iPhone in 2007. Apple has dragged its feet on this issue, since it maintains the practice will create security risks to its system.

Sideloading could have an impact on the App Store, where Apple charges developers as much as a 30 percent fee on digital purchases. Games account for more than half of that revenue. Google’s Play Store, which charges a similar fee, is also in the spotlight after it lost a landmark trial against Epic Games in California in December.

Apple draws between $6 billion and $7 billion in commission fees from the App Store globally each quarter, according to Sensor Tower estimates.

Competitors are pushing to earn some of that share and launch rival app stores and payment methods on Apple devices. Microsoft is talking to partners about launching its own mobile store.

Fortnite maker Epic Games, a longtime Apple foe, wants its store on iOS devices and points to its lower 12 percent fee as an incentive for consumers to switch to its platform.

While Epic broadly lost a lower court judgment into its claims against Apple in 2021, a California judge ordered Apple to put an end to App Store rules that prevent developers from steering customers outside of the store to make purchases. The appeals court upheld that injunction earlier this year. The US Supreme Court will review the case next year.

For investors, gauging the ultimate risk from the raft of regulatory and legal actions across the world is difficult. “I think there’s just a belief that there’s all this noise in the background, and ‘don’t worry about it,’” said Gene Munster, managing partner at Deepwater Asset Management.

Investors, he said, had been “lulled to sleep” by Apple’s initial wins against Epic in particular. “But I think investors should take it seriously.”

Apple declined to comment.

2024 may be a year of reckoning for Apple’s $85 billion services business Read More »

Adobe gives up on $20 billion acquisition of Figma

adobe, antitrust, competition, EU, Policy, syndication, UK / DJ Henderson / December 18, 2023

No deal —

Competition probes in the EU and UK made regulatory approval dicey.

Cristina Criddle, Suzi Ring, and Tim Bradshaw, FT – Dec 18, 2023 3: 35 pm UTC

Adobe has abandoned its proposed $20 billion acquisition of product design software company Figma, as there was “no clear path to receive necessary regulatory approvals” from UK and EU watchdogs.

The deal had faced probes from both the UK and EU competition regulators for fears it would have an impact on the product design, image editing, and illustration markets.

Adobe refused to offer remedies to satisfy the UK Competition and Markets Authority’s concerns last week, according to a document published by the regulator on Monday, arguing that a divestment would be “wholly disproportionate.”

Hours later, the two companies issued a mutual statement terminating the merger, citing the regulatory challenges. Adobe will pay Figma $1 billion in a termination fee under the terms of the merger agreement.

“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” said Shantanu Narayen, chair and chief executive of Adobe.

The companies had been battling multiple regulatory challenges, with the EU’s executive body, the European Commission, publishing a statement of objections to the deal last month arguing the takeover could “significantly reduce competition in the global markets.”

Margrethe Vestager, the EU’s competition commissioner, said: “By combining these two companies, the proposed acquisition would have terminated all current and prevented all future competition between them. Our in-depth investigation showed that this would lead to higher prices, reduced quality or less choice for customers.”

Competition regulators around the world have sent mixed signals over the aspirations of Big Tech groups hoping to acquire promising start-ups and potential rivals, at a time when public markets have been largely closed to new listings.

The EU’s antitrust watchdog has made a formal objection to Amazon’s $1.7 billion proposed purchase of Roomba-maker iRobot. However, Microsoft was able to complete its $75 billion takeover of games maker Activision after it made revisions to the deal to appease UK regulators.

Speaking with the Financial Times last week, Figma chief executive Dylan Field said: “It is important that those paths of acquisition remain available because very few companies make it all the way to IPO. So many companies fail on the way.”

Shares in Adobe were up almost 2 percent in pre-market trading. Since the deal was announced, Adobe has turned its focus to embedding generative artificial intelligence into its products by, for example, enabling users to create novel stock imagery with AI.

The huge price that Adobe was willing to pay for San Francisco-based Figma had been seen by critics of the deal as an effort to quash the software giant’s most promising new rival in decades.

The deal, which was first negotiated during the COVID-19 pandemic’s boom in tech investment and announced in September 2022, would have valued Figma at roughly 50 times its annual recurring revenue, and double its last private funding round in 2021.

The companies were expected to appear in front of the CMA to contest the regulator’s provisional findings on Thursday this week.

Under its proposed remedies in November, the CMA said it was considering either prohibiting the deal or demanding the divestiture of overlapping operations, such as Adobe’s Illustrator or Photoshop, or Figma’s core product, Figma Design.

Field said that the latter suggestion left him amazed at “the idea of buying a company so you can divest the company.”

“When I read that document and saw that was one of the proposals, I thought it was quite amusing; it felt like a bit of a punchline to a joke. I was surprised to see that as a proposal from the agency.” In a statement on Monday, Field said he was “disappointed in the outcome.”

Earlier on Monday, the CMA had published the companies’ responses to its provisional findings, which Adobe and Figma said contained “serious errors of law and fact” and took “an irrational approach to the gathering and appraisal of evidence.”

“Requiring a multibillion-dollar global divestment of Photoshop or Illustrator in order to address an uncertain and speculative theory of harm is wholly disproportionate,” they wrote.

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Report: Meta Wins Bid to Acquire VR Fitness Studio Behind ‘Supernatural’, Awaiting FTC Appeal

antitrust, ftc, Meta, meta antitrust, meta ftc, News, VR Fitness / DJ Henderson / February 2, 2023

In 2021 Meta announced it was set to acquire Within, the studio behind popular VR fitness app Supernatural, however the reportedly $400 million deal became subject to investigations by the Federal Trade Commission (FTC) in respect to Meta’s supposed monopolization of the VR fitness space. Now, according to a Bloomberg report, it appears the FTC has lost an important suit to block Meta’s acquisition of Within.

Unreleased documents from the closed court proceedings appear to vindicate Meta’s acquisition of Within, Bloomberg reports, citing people familiar with the ruling. The sealed decision was made Wednesday morning by US District Judge Edward Davila in San Jose, California, which effectively denies the FTC’s request for a preliminary injunction to block the acquisition.

The final outcome of the trial isn’t entirely official just yet though. It’s said Judge Davila also issued a temporary restraining order with the aim of pausing Meta from closing the transaction for a further week, allowing time for the FTC to make an appeal. Provided the reports are accurate, the chances of the FTC potentially clawing back from the loss seem fairly slim at this point.

Last July, the FTC under sitting Chair Lina Khan revealed it had filed a motion aimed at blocking the deal with a federal court in a 3–2 decision, which aimed at reigning in Meta’s ability to “buy market position instead of earning it on the merits,” FTC Bureau of Competition Deputy Director John Newman said at the time.

Neither Meta nor the FTC has commented on the report regarding Meta’s win. In a statement to the New York Times about the matter in July, Meta called the FTC’s position “based on ideology and speculation, not evidence. The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible.” Adding that the lawsuit would send “a chilling message to anyone who wishes to innovate in VR.”

Over the past four years, Meta has gone unchallenged in several VR studio acquisitions, including Beat Games (Beat Saber), Sanzaru Games (Asgard’s Wrath), Ready at Dawn (Lone Echo & Echo Arena), Downpour Interactive (Onward), BigBox VR (Population: One), Camouflaj (Marvel’s Iron Man VR), Twisted Pixel (Wilson’s Heart, Path of the Warrior), and Armature Studio (Resident Evil 4 VR port for Quest 2).

In particular, the FTC used Meta’s acquisition of Beat Saber as evidence that the company already had engineers with the skill set to both expand Beat Saber into fitness and to build a VR dedicated fitness app from scratch, an FTC court filing stated, maintaining that buying Within “was not the only way Meta could have developed the production capabilities and expertise needed to create a premium VR fitness experience.”

Report: Meta Wins Bid to Acquire VR Fitness Studio Behind ‘Supernatural’, Awaiting FTC Appeal Read More »