The European Union's competition authority on Monday fined Apple about $2 billion for abusing its dominant position in the distribution of music streaming apps to iPhone and iPad users. Apple stock fell on the news.
The EU's European Commission fined Apple 1.84 billion euros following an investigation spurred by music streaming service Spotify Technology. The commission said Apple violated EU antitrust rules with its App Store policies.
"In particular, the Commission found that Apple applied restrictions on app developers preventing them from informing iOS users about alternative and cheaper music subscription services available outside of the app," the agency said in a news release. Apple's "anti-steering provisions" are designed to prevent third-party services from avoiding paying Apple's 30% commission fees.
In a statement, Apple said it will appeal the commission's ruling. "The facts simply don't support this decision," the company said. "The decision was reached despite the Commission's failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast."
Apple Stock Falls After Ruling
On the stock market today, Apple stock dropped 2.5% to close at 175.10.
In prepared remarks, EU antitrust chief Margrethe Vestager said the commission's ruling orders Apple to remove its anti-steering provisions.
"From now on, Apple will have to allow music streaming developers to communicate freely with their own users, be it within the app, or by email, or any other way of communicating," she said.
Apple noted that the biggest beneficiary of the ruling is Stockholm-based Spotify, the market leader in streaming music.
"Today, Spotify has a 56% share of Europe's music streaming market — more than double their closest competitor's — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world," Apple said. "A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world."
In a blog post, Spotify said Apple's App Store restrictions have benefited its own streaming music service, Apple Music.
U.S. Antitrust Case Could Be Next
Meanwhile, in the U.S., the Justice Department reportedly is preparing to file an antitrust lawsuit against the consumer electronics giant. The suit is expected in the coming weeks, likely by the end of March, Bloomberg reported.
On Friday, Evercore ISI analyst Amit Daryanani reiterated his buy rating on Apple stock but removed it from his "tactical outperform" list. He kept his price target on Apple stock of 220.
Apple stock has a middling IBD Composite Rating of 68 out of 99, according to IBD Stock Checkup. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
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