Apple Faces Probes Against App Store In Mexico and Brazil

Mercado Libre (“Meli”), the Latin American e-commerce and financial services giant, filed antitrust complaints against Apple in these two countries alleging anticompetitive behavior around Apple’s policies and practices in its App Store.

The Primary Restrictions Imposed by Apple

Mercado Libre’s complaints focus on two key restrictions imposed by Apple that, according to the company, undermine competition and restrict consumer choice. Firstly, a ban on the distribution of third parties’ digital goods and services through iOS apps, it is worth mentioning that such ban does not apply to Apple’s Apps. This limitation, according to the claimant, restricts developers’ ability to offer alternatives to Apple’s offerings and limits consumer choice.

Secondly, there’s the imposition of Apple’s payment processing system, with commissions ranging from 15% to 30% of the amount paid by the end user for digital goods. Furthermore, these policies include anti-steering rules, consisting of a prohibition of informing users about alternative payment options, which according to Meli, perpetuates Apple’s monopoly on transactions within the App Store.

For Meli, these restrictions, constitute proof of Apple’s abuse of dominance. Such restrictions have become an element that hinders the possibility of offering its customers digital goods and services, such as streaming subscriptions, video games, gift cards, software license subscriptions, among others. In addition, these prohibitions artificially limit the ability of Mercado Libre not only to compete effectively with Apple, but also to grow and achieve the scale necessary to amortize the investments made.

These actions were reported to the Federal Economic Competition Commission (Cofece) and the Federal Telecommunications Institute (IFT) in Mexico, and to the Administrative Council for Economic Defense (CADE) in Brazil.

Size and Value of the Market at Stake

Although precise figures are not available, the App Store is a significant part of the app market in Mexico and Brazil.

Based on the First Survey 2021, Mexican Telecommunications Services Survey conducted by the IFT, 18.7% of respondents used Apple’s App Store to download applications. In Brazil, in June 2023, 18% of consumers were users of the IOS operating system.

Additionally, according to a study conducted by Statista, e-commerce sales revenues in Mexico during 2022 amount to 48,000 million dollars and in 2023, e-commerce revenues in Brazil amount to 42 billion dollars.

The large number of Apple device users in these countries underscores the importance of this dispute. Additionally, e-commerce revenues in the region highlight the potential value of removing the restrictions imposed by Apple.

Threats of Sanctions Against Apple

If competition authorities determine that Apple has violated antitrust laws in Mexico, the company could face substantial fines, up to 8% of its accumulated revenues. Furthermore, executives who have participated in anticompetitive practices could be disqualified and fined. It should be noted that in Mexico, the law provides for a mechanism through which Apple can submit commitments with both COFECE and IFT during the investigation and before the issuance of ruling.

In Brazil, CADE can impose fines on the responsible company ranging from 1% to 30% of the gross income before taxes of the last fiscal year. The fine imposed may not be less than the advantage obtained by the economic operator from the violation of the antitrust law. For managers who, indirectly or directly, are responsible far the infringement of their company, the fine that can be imposed ranges from 10% to 50% of the fine imposed on the company.

Duration of the Legal Process

In Mexico, COFECE and IFT initiated investigations on September 2022 and April 2023, respectively, and these investigation process can last up to 5 periods of 120 working days each, approximately 2.5 years. Neither the Commission nor the Institute is obliged to exhaust all these deadlines. The investigation in Mexico is in its second period, which will conclude in January 2024.

In Brazil, the administrative procedure consists of a discovery stage that can last up to 75 days and a trial stage that can extend up to 20 days.

Other Companies

Mercado Libre’s challenge against Apple’s practices could encourage other companies facing similar conditions due to by Apple’s restrictions to also file complaints with competition authorities. This could open the door to eliminate Apple’s anti-steering rules and using their own or third-party payment methods, which could be more cost-effective and beneficial for consumers.

International Precedents and Legal Developments in Mexico and Brazil

This case is not isolated as it joins a number of legal actions and ongoing investigations worldwide, including the famous Epic Games vs. Apple case in the United States  and investigations by the European Commission, the Dutch Authority of Consumers and Markets (ACM) and the UK Competition Markets Authority.