Apple loses appeal in German court

Top civil court upholds 2023 stricter antitrust ruling

Apple had sought to overturn FCO's 2023 decision by arguing that its business model did not pose a significant threat to competition in digital markets.

Apple Inc. has lost its legal battle against Germany's Federal Cartel Office (FCO) after the nation's top civil court upheld a decision that subjects the tech giant to stricter antitrust scrutiny.

The Federal Court of Justice in Karlsruhe ruled on Tuesday that the FCO was correct in its May 2023 decision to apply the so-called 19a rules to Apple, citing the company's outsized influence in the digital economy.

These rules, introduced in 2021, allow Germany's competition authority to intervene early and impose stricter oversight on companies that wield significant power across multiple markets, potentially threatening competition.

The court stated that Apple's vast market footprint justified increased regulatory scrutiny. Judges pointed to the iPhone maker's highly interconnected ecosystem of products and services, which they argued creates a closed environment that limits competition.

"The products and services that Apple offers are highly vertically integrated, closely interconnected, and largely reserved for users of Apple devices," the court said in its ruling.

"This is the basis for what the company itself calls the Apple ecosystem."

The court also pointed to Apple's extraordinary financial resources and market power, factors that place the company in a position to potentially distort competition. The judges concluded that these characteristics met the legal threshold for enhanced oversight under German competition law.

Apple had sought to overturn the May 2023 decision by arguing that its business model did not pose a significant threat to competition in digital markets. The company contended that its integration of hardware, software, and services delivered benefits to consumers and encouraged innovation.

But, the court rejected Apple's arguments, siding with the regulator's assessment.

This is the second major defeat for an American tech giant seeking exemption from the 19a regulations. Last year, Amazon failed in its bid to escape similar scrutiny.

The FCO has also ramped up its oversight of other major tech companies, including Alphabet Inc.'s Google, Meta Platforms Inc.'s Facebook, and Microsoft Corp.

The ruling comes amid increasing resistance from US tech giants against European regulatory efforts to curb their market dominance. Apple's defeat adds momentum to the broader push within the EU to rein in Big Tech through stricter antitrust rules.

US President Donald Trump, a vocal critic of European regulatory measures, has previously described EU fines on Big Tech as "a form of taxation."

The court's decision is likely to have far-reaching consequences for Apple's operations in Germany and the broader EU. Increased regulatory scrutiny may lead to mandatory changes in how Apple manages its App Store, payment systems, and software interoperability.

"We are pleased that the Federal Court of Justice has upheld our decision," Andreas Mundt, president of the FCO, said.

"It is now confirmed by the highest court of appeal that Apple is subject to stricter abuse control. This means that our ongoing review of Apple's tracking rules for third-party app providers is based on a solid foundation, and we are working vigorously on this as well as on other cases against the major digital companies."

Apple, in an emailed statement to Reuters, expressed its disagreement with the court's decision, asserting that it operates in a highly competitive market in Germany.

"We disagree with the FCJ's decision today to uphold the FCO's designation, which discounts the value of a business model that puts user privacy and security at its core."

"Apple is proud to be an engine for innovation, job creation, and competition in every market where we operate," it added.