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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 all

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_1161 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%3A52006XC0901%2801%29 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...

JonAtkinson 3y ago
Hi Todd!
RugnirViking 3y ago
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 3y ago
  > 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 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 3y ago
    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 3y ago
      They could pay nothing by not doing it in the first place, right?
- todd-davies 3y ago
  (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_1161 https://ec.europa.eu/commission/presscorner/detail/en/ip_24_... [2] Para 30 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A52006XC0901%2801%29 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...
  - TimPC 3y ago
    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.
- catothedev 3y ago
  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 3y ago
    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.
msla 3y ago
> 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.
- jijijijij 3y ago
  Respectively, 21% of Apple Music's 8.3B$ revenue, tho. Video streaming and other services may follow. Now, there is precedent.
- piva00 3y ago
  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 3y ago
> 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 3y ago
  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 3y ago
    > 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 3y ago
      You get the choice to not buy it. They made it, they should be able to decide how it’s used.

JonAtkinson 3y ago

Hi Todd!

RugnirViking 3y ago

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 3y ago
> 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 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 3y ago
  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 3y ago
    They could pay nothing by not doing it in the first place, right?
todd-davies 3y ago
(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_1161 https://ec.europa.eu/commission/presscorner/detail/en/ip_24_... [2] Para 30 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A52006XC0901%2801%29 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A...
- TimPC 3y ago
  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.
catothedev 3y ago
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 3y ago
  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.

msla 3y ago

> 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.

jijijijij 3y ago
Respectively, 21% of Apple Music's 8.3B$ revenue, tho. Video streaming and other services may follow. Now, there is precedent.
piva00 3y ago
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 3y ago

> 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 3y ago
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 3y ago
  > 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 3y ago
    You get the choice to not buy it. They made it, they should be able to decide how it’s used.