4 ms·

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 w

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.
  - Ghexor 3y ago
    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 3y ago
      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.
  - XajniN 3y ago
    The law allows up to 10% of global revenue.
  - todd-davies 3y ago
    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 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3166005
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.

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.
- Ghexor 3y ago
  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 3y ago
    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.
- XajniN 3y ago
  The law allows up to 10% of global revenue.
- todd-davies 3y ago
  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 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3166005

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.