Apple’s €1.8 billion fine, imposed by the European Commission this week, has been a long time coming.
The investigation lasted a lengthy five years, but it’s more that it’s taken an incredibly long time for Apple to be slapped with a fine for anything, even though questions have been raised for years about its tightly-managed walled tech garden, and potential suppression of competition and consumer choice.
Though Apple has been the target of investigations over its tax arrangements with Ireland, and continues to dispute an EU finding that it must pay Ireland billions in unpaid taxes, it has managed to glide below the radar of the EU’s increasingly robust regulation of giant technology companies. The EU laws shaping how these mammoths do businesses have walloped companies such as Meta and Google, but Apple always managed to be the teacher’s pet, smiling angelically at the front of class.
Until this week.
“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” said Margrethe Vestager, the EU vice-president with oversight of competition issues. At €1.8 billion, the fine was four times larger than had been expected, and the third largest ever imposed by the EU (Google takes the unwanted prizes for first and second place, at €4.34 billion in 2018, and €2.42 billion in 2017).
The penalty comes on the foot of a complaint by Spotify. Oh yes, there’s irony here, given Spotify’s dominant position in the music streaming market. Apple, of course, has pointed this out. But the cost and effort of bringing complaints means larger companies are in a more comfortable position to raise such issues.
Like sulking teens, big tech companies often make moany “what about” points like this after being reprimanded. In one variation of such whininess, Meta has noted that rivals and smaller companies are doing just what it has been doing – using special contracts as a way of sending EU data to the US – after the European Court of Justice ruled that two EU/US data transfer agreements in a row did not meet the requirements of the General Data Protection Regulation (GDPR). So why, gripes Meta, does the Irish Data Protection Commission (DPC) single out and fine Meta?
Well, because – as these big, litigious companies know perfectly well – the complaint was brought against them, and they’re the largest and most obvious targets. And just because a decision may have wider implications for other companies, or an entire market, that doesn’t mean your company has been unfairly “singled out”. It means your company will serve as the case law example that will apply, if relevant, to everyone else. Irony also isn’t a defence, or capitalism would have collapsed long ago.
While huge, the fine represents only 0.5 per cent of Apple’s annual global turnover, as Vestager acknowledged. The base fine of €40 million really only constituted a “parking ticket”, she admitted, hence the extra €1.8 billion added deterrent. How much of a deterrent do such fines really pose for companies valued at over a trillion euro? Meta shareholders were indifferent to a $5 billion fine levied by its US regulator in 2019, and to the €1.2 billion imposed last year by the DPC.
While this fine may be instantly payable from Apple’s vast cash reserves (unlike Donald Trump, Apple does seem to have actual cash on hand for troublesome legal fines), don’t underestimate its importance both as a broader symbol of a serious stepping-up of EU regulatory aggression, and as an instigator of serious internal corporate jitters, no matter how the markets might respond (Apple shares dipped slightly).
Both of the EU’s flagship digital regulations, the Digital Markets Act (DMA) and Digital Services Act (DSA), are now in full operation, with more tech-impacting regulation on the cards. The EU is now the world’s tech regulator, because decisions here have influence worldwide (even if Apple is own-goaling by planning to comply with new regulations only within the EU rather than offer consumers in other markets the options it’s now forced to give Europeans. Let’s see how global consumers will feel about that). The massive Apple fine is a very big cannonball fired across the bows of tech, a sign that penalties in the piddly hundreds-of-millions may be a thing of the past, and that former ways of operating, via walled gardens for example, are open to serious examination.
[ You think last year was big for data protection? Brace yourself for 2024Opens in new window ]
No company, and no boardroom, wants to see headline fines. Even if they don’t demolish the annual bottom line, they still hurt, especially if on repeat. More worryingly, they scar a brand’s reputation and lustre, and can increase public, regulatory and shareholder focus on broader operational or product and service issues.
Companies may kvetch, but Europe is too valuable, too vast a market for big tech to just pull out. The era of tech self regulation, which has always really meant no regulation, may not fully end. But thanks to the EU, it will be more fiercely scrutinised and contested, with global repercussions.
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