Dusseldorf Apple and its App Store in Germany are now under stricter supervision by the Federal Cartel Office: The authority classifies the electronics manufacturer as a company with “outstanding cross-market importance for competition”, as it announced on Thursday. The Cartel Office can now prevent practices that endanger competition. Cartel Office President Andreas Mundt explained that Apple’s “economic power position” opened up “behavioural leeway that was not sufficiently controlled by the competition”.
The electronics manufacturer wants to take action against the decision and stated that the authority misrepresents “the tough competition” in Germany. The group from Cupertino is the fourth large US tech group after Google parent company Alphabet, Facebook parent company Meta and Amazon is under the surveillance of the Cartel Office. Microsoft is still running a corresponding test.
But why are the antitrust lawyers opening so many new proceedings – and what exactly are they investigating, as is now the case in Apple’s App Store? What consequences does Apple have to reckon with? The Handelsblatt answers the most important questions.
Why is the Cartel Office opening so many new cases against tech companies?
An amendment to competition law has been in force since the beginning of 2021, making it easier for the Federal Cartel Office to monitor large digital groups with a “gatekeeper function”. The assumption: If a company offers a platform – like an app store – it may have a position of power that is difficult to attack.
Especially since the dynamics in the digital economy are still promoting concentration. There are network effects with social media such as Facebook and Instagram – the greater the reach of an app, the more attractive it becomes. In addition, platform operators can evaluate user behavior in order to further develop their own products in a targeted manner.
The law, created under the former Economics Minister Peter Altmaier (CDU), provides for a two-stage procedure. First, the Cartel Office analyzes the importance of a group for competition. If this is particularly large, as in the case of Apple, the authority can prohibit certain behavior as a preventative measure.
Apple is not the market leader – why the investigation?
Apple is known for hardware like the iPhone smartphones and iPad tablets, the Apple Watch, and Mac computers and laptops. Based on these products, the group has built an ecosystem with a large number of other products and services, argues the Bundeskartellamt. As a result, there is a “focus on digital business models”.
The fact that Apple is just one of many hardware providers and recently had a 24 percent market share in smartphones, for example, is not accepted by the antitrust authorities as an argument. There are considerable hurdles for customers to switch to another provider – there are pronounced lock-in effects due to the bundling of hardware and services. Therefore, there is a lack of competitive pressure.
In other words, once you use Apple, you usually stick with it.
According to the Cartel Office, Apple has a key position in this self-created ecosystem, across all stages of the value chain. And so – according to the authority’s reasoning – the group can significantly influence competition in various markets.
Where is Apple’s power particularly great?
The Cartel Office cites several examples of Apple’s great power. The group has far-reaching power over access “to a large number of procurement and sales markets”. This applies to app developers who market their applications via the App Store, as well as to the advertising industry, whose data collection is restricted on devices with the Apple logo.
There is some resistance to this business practice. Spotify has filed a competition complaint with the European Union (EU). Apple is on the one hand a competitor in music streaming, but on the other hand operates the App Store and thus sets the rules – including the 30 percent fee on payments, argues the Swedish company.
What can the Federal Cartel Office do?
The amendment to the law gives the Federal Cartel Office new opportunities to take action against Big Tech. A possibly important and far-reaching measure: The authority can prohibit platform operators from offering their own products with privileges. In addition, stricter merger control is planned.
The original message was posted on April 5th. published at 12:05 p.m.
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