Probing Apple

The EU narrowed its Apple probe but regulation is coming for big tech.
Probing Apple

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Today's newsletter is a 7 min read:

  • 🍎 Probing Apple: The EU narrowed its Apple probe but regulation is coming for big tech
  • Plus: China-US tensions, strikes in France, Meta layoffs and North Korea's warning.

📰 News Briefing

  1. 🌏 Qin Gang, China's new foreign minister, accused the US of trying to "contain and suppress" China, blaming them for inflaming tensions over Taiwan and Ukraine. The Speaker of America's House of Representatives agreed to meet Taiwan's President.
  2. 🚂 Trade unions in France launched nationwide strikes against Emmanuel Macron's plans to raise the retirement age from 62 to 64.
  3. 💼 Meta plans to lay off thousands more employees this week, following the 11,000 job cuts made in November, in response to declining advertising revenues. This round of layoffs seems to be driven by financial targets.
  4. 🚀 Kim Yo Jong, Kim Jong Un's sister, warned that shooting down North Korea's missiles would be seen as a "declaration of war". North Korea recently resumed testing intercontinental ballistic missiles, while the US and South Korea plan to hold a military drill from March 13th.

🤿 Deep Dive

Probing Apple

In brief:

  • The European Commission has narrowed its antitrust investigation against Apple. It's good news for the iPhone maker but regulation keeps coming for big tech.

What's Happening?

Back in December, we covered how Apple decided to allow alternative app stores on its iPhones and iPads. This decision came in response to the EU's strict new laws on social media platforms.

Last week, the European Commission narrowed the scope of its probe by dropping the charge that accused Apple of forcing music streaming app developers to use its own in-app payment system. It is now focusing on how apps are prevented from telling iPhone and iPad users of cheaper ways to access music subscriptions outside of the App Store.

More probes!

This is not the end of it. Regulators in Brussels have three open probes into Apple's alleged anti-competitive practices. One of the probes is concerned with Apple Pay being the only payment service available for iOS devices and the other arises from a March 5, 2020 complaint from a distributor of ebooks and audiobooks about Apple's rules and the Apple Books app.

Why Does This Matter?

  • PostsIncreasing scrutiny of big tech companies: The European Commission's investigation is taking place as new laws, such as the Digital Services Act, are being introduced to regulate the power of big tech companies. Governments and regulators worldwide are increasingly concerned about the power that these companies have and are taking steps to ensure that they don't engage in anti-competitive behaviour or abuse their dominant positions in the market.
  • Focus on consumer protection: The European Commission's investigation is centred on allegations that Apple's App Store policies harm consumers by preventing them from accessing cheaper music subscription options i.e. by paying a premium for purchasing through the app rather than on the streaming app's website.

How does this Impact Law Firms and their Clients?

Note: In this section, we consider how law firms' clients may be affected by the story we discussed. We then explain how law firms can help, and which particular legal departments could see an increase in work and why. Use this section to stand out in applications and interviews!

💼 What does this mean for law firm's clients?

App Developers: If the European Commission finds Apple guilty of anti-competitive behaviour in the narrowed probe, it could result in more competition and a level playing field for app developers. For example, if the commission rules that Apple must allow app developers to promote alternative payment methods outside of the App Store, this could result in app developers being able to offer lower subscription fees and ultimately compete more effectively with Apple.

Music Streaming Services: The European Commission's probe could positively impact music streaming services (like Spotify), particularly those who have been struggling with Apple's 30% cut in subscription fees. For example, if the European Commission rules that Apple must allow music streaming services to promote alternative payment methods outside of the App Store, this could result in lower subscription fees and more demand for subscriptions.

Apple: The European Commission's decision to narrow the scope of its probe is good news for Apple. This limits its exposure as the Commission is no longer challenging Apple's requirement that music streaming apps distributed through the Apple App Store use the company's own in-app payment system. However, this may be linked to Apple's decision to let alternative app stores on to its iPhones and iPads to meet European Union requirements coming into force in 2024 (as covered in our newsletter here). Third-party app stores are expected to be able to offer their own payment mechanisms, which would render the issue moot from an enforcement perspective.

E-Book Subscription Providers: This development could negatively impact e-book subscription providers if the European Commission rules that Apple has engaged in anti-competitive behaviour when it comes to e-book subscriptions on its App Store. For example, if the commission rules that Apple must allow e-book subscription providers to promote alternative payment methods outside of the App Store, this could result in a loss of revenue for Apple and a gain for e-book subscription providers.

⚖ Which legal departments would this impact?

Antitrust/Competition Law:

Assessing the Impact on Competition: This department would review Apple's alleged anti-competitive practices in response to the probe, including preventing apps such as Spotify from informing users about alternative subscription options, and determine whether these practices have an adverse effect on competition. This involves assessing the impact of Apple's practices on the market, and determining whether they result in higher prices or reduced quality of services for consumers.

  • Examples of legal work: Advising the European Commission on the potential impact of Apple's App Store policies on competition in the market for music streaming services. The lawyers would assess whether Apple's practices have led to higher prices or reduced quality for consumers, and would provide recommendations on how the European Commission could address these issues.

Representing the European Commission: Antitrust lawyers would represent the European Commission in any legal proceedings that arise from the investigation. This would involve preparing and presenting evidence in court, arguing the case before a judge, and negotiating any settlements or remedies with the parties involved. They would also be involved in drafting legal documents such as complaints, orders, and injunctions.

  • Examples of legal work: Representing the European Commission in a legal proceeding against Apple. They would present evidence to support the European Commission's claims that Apple's practices violate EU antitrust laws and negotiate any settlements or remedies with Apple.

Commercial Contracts:

Advising Apple on the enforceability of contractual restrictions: The European Commission is investigating the contractual restrictions that Apple imposed on app developers, which allegedly prevent them from informing users about alternative music subscription options. The contract legal department would be responsible for advising Apple on the enforceability of these contractual restrictions.

  • Examples of legal work: They would review the terms of the contract, including any relevant provisions relating to competition law and intellectual property law, and provide guidance on whether the contractual restrictions are legally valid and enforceable.

Advising Spotify on the interpretation of contractual terms: Contract lawyers would be responsible for advising Spotify on the interpretation of the contractual terms governing its relationship with Apple.

  • Examples of legal work: They would review the terms of the contract, including any provisions relating to payment systems and intellectual property, and provide guidance on whether Apple's actions are in breach of the contract. They may also advise Spotify on the options available to them for challenging the validity of the contractual terms or seeking compensation for any losses incurred as a result of Apple's actions.

Finance:

Payment Systems: Finance lawyers may be asked to review the rules and regulations governing the use of in-app payment systems, as well as advising Apple on the potential legal and regulatory implications of forcing developers to use its own in-app payment system and taking a 30% cut of subscription fees. The lawyers would also be involved in representing Apple before regulatory bodies, such as the European Commission, in arguing that their in-app payment system is legal and compliant with regulations.

Financial Transactions: Finance lawyers advising companies like Spotify on the potential legal and regulatory issues of using an alternative payment system to circumvent Apple's in-app payment system.

  • Examples of legal work: This would include reviewing the rules and regulations governing the use of alternative payment systems, as well as advising Spotify on the potential legal and regulatory implications of using such a system. The lawyers would also be involved in representing Spotify before regulatory bodies, such as the European Commission, in arguing that using an alternative payment system is legal and compliant with regulations.

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