By Alexandra Burlacu | May 27, 2013 02:09 PM EDT
The executive body of the European Union (EU) is investigating whether Apple practices anti-competitive iPhone sales tactics to keep other smartphone makers out of the European market.
The European Commission launched an investigation to determine whether the Cupertino tech giant is using anti-competitive iPhone sales practices and technical restrictions across the continent, willingly limiting other smartphone makers. The probe is still in its initial stages and follows complaints from various phone operators.
According to documents obtained by the Financial Times (FT), the European Commission expressed concerns that Apple's agreements with carriers might be illegal and the deals could ensure that Apple's rivals cannot land better sales agreements.
Apple was already facing pressure from government regulators and the new scrutiny comes just as US senators questioned company CEO Tim Cook regarding Apple's tax accounting practices.
Several EU mobile networks operators reportedly received a questionnaire last week, which indicated the Commission's investigation is centered on distribution terms that might illegally favor Apple by ensuring no other rival smartphone maker can secure a better sales deal.
The FT reports the probe stems from "private complaints from mobile operators." As the investigation is still in its preliminary stage, the European Commission did not launch a formal abuse probe yet. The executive body of the EU will first need to make sure that the Cupertino tech giant is indeed dominant in the European smartphone market. Apple, for its part, says its contracts are legitimate and fully comply with EU laws.
Telecommunications groups received nine-page questionnaires reportedly relating mainly to sales practices, including whether Apple forces groups to buy a minimum number of iPhones. Other topics in the questionnaire include restrictions on the use of marketing budgets, as well as clauses designed to ensure that Apple always gets no worse sales terms and subsidies than its rivals. The questionnaire further asks telecom groups whether the iPhone maker places technical or contractual restrictions on its latest iPhone 5, limiting the flagship handset from being used on high-speed 4G networks in Europe.
"The Commission has information indicating that Apple and Mobile Network Operators ('MNOs') have concluded distribution agreements which may potentially lead to the foreclosure of other smartphone manufacturers from the markets," states the questionnaire, according to FT.
"There are also indications that certain technical functions are disabled on certain Apple products in certain countries in the EU/EEA. If the existence of such behavior were to be confirmed, it might constitute an infringement of [antitrust law]."
Today's smartphone market is highly competitive and the race between smartphone makers is only bound to get increasingly tougher. Apple faces stiff competition especially from Samsung, whose Galaxy line of Android devices proved wildly popular worldwide.
The questionnaire, however, seems more focused on distribution practices rather than competition. In the "most favored supplier clauses" section of the questionnaire, the Commission asks whether Apple forces operators to offer iPhone subsidies and incentives on "the same or better terms" compared to other smartphones. Brussels reportedly inquires whether such clauses are still present in contracts or whether the iPhone maker secures special treatment in "oral or written statements," separate from the contracts.
Mobile operators have until June 17 to reply and the European Commission will then decide how to handle the situation. Previous EU probes into Apple's behavior looked into the company's warranty practices and its e-book deals with publishers. None of those inquiries led to formal antitrust lawsuits, and there's a good chance this one won't either.
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