apple’s app store to face scrutiny in germany as fco opens ‘market power’ proceeding

Germany's Competition Authority Investigates Apple

The German Federal Cartel Office (FCO) has initiated proceedings against Apple, completing its assessment of major technology companies – often referred to as “GAFA” – under updated competition regulations.

Investigation Under New Competition Law

This investigation, mirroring those recently launched against Amazon, Facebook, and Google, will assess whether Apple qualifies under the threshold established by Germany’s revised competition law.

The 10th amendment to the law, effective since January, empowers the Bundeskartellamt to proactively address the practices of dominant digital enterprises.

Influence of Past Cases

This update was significantly influenced by the FCO’s experience with a prolonged case concerning Facebook’s extensive user profiling practices, as explained by FCO President Andreas Mundt during a recent panel discussion.

Consequently, German competition law now incorporates a framework that links competition regulations with data protection principles.

Targeting Big Tech Practices

The amendments broadly target Big Tech, aiming to maintain open markets, encourage innovation, and prevent anti-competitive conduct.

The FCO will have the authority to implement measures such as prohibiting self-preferencing, restricting bundling practices, and preventing the blocking of interoperability and data access.

Focus on the App Store

The FCO’s investigation into Apple will primarily focus on the operation of the App Store, as it “enables Apple in many ways to influence the business activities of third parties,” according to Mundt’s statement.

The investigation will examine whether Apple has established a digital ecosystem around its iPhone that spans multiple markets.

Apple's Extensive Ecosystem

Apple’s business encompasses the production of tablets, computers, and wearables, alongside a range of device-related services.

These services include the App Store, iCloud, AppleCare, Apple Music, Apple Arcade, and Apple TV+, forming a comprehensive services portfolio.

The FCO will assess Apple’s position across these areas, considering its integration across market levels, its substantial resources, and its access to user data.

Complaints Received by the FCO

The FCO has received several complaints alleging anti-competitive practices by Apple.

These include concerns from the advertising and media sectors regarding restrictions on user tracking introduced with iOS 14.5.

Another complaint centers on the exclusive pre-installation of Apple’s own applications, potentially constituting self-preferencing.

Concerns Regarding In-App Purchases

App developers have also voiced criticism regarding the mandatory use of Apple’s in-app purchase system (IAP) and the associated 30% commission.

Marketing restrictions for app developers within the App Store are also under scrutiny, mirroring concerns raised by the European Commission regarding Apple’s practices with Spotify.

The Bundeskartellamt will collaborate with the European Commission and other competition authorities as needed.

Apple's Response

Apple provided the following statement in response to the FCO’s proceedings, through a company spokesperson.

Legal Framework and Expedited Appeals

A “paramount significance” designation will be valid for five years.

Appeals related to orders issued under Section 19a will be expedited, with cases proceeding directly to Germany’s Federal Court of Justice.

This expedited process aims to avoid prolonged legal battles, as seen in the FCO’s case against Facebook’s data practices.

Broader Implications for Big Tech

The coming months and years are expected to be pivotal in shaping the operational landscape for GAFA within Europe’s largest economy.

These developments are likely to have broader implications for regulations affecting Big Tech across Europe and globally.

International Regulatory Efforts

The U.K.’s Competition and Markets Authority initiated its own investigation into Apple’s App Store in March and is working on legal reforms to promote competition.

The European Union proposed the Digital Markets Act in December, targeting the power of “gatekeeper” platforms.

The appointment of Lina Khan as chair of the U.S. Federal Trade Commission signals a potential shift in approach to tech antitrust enforcement in the United States.