Confirming recent reports, European Union officials today announced formal antitrust charges against Apple Inc. that accuse the company of distorting competition in the multibillion-dollar mobile app industry. 

The charges focus on the App Store terms of service. The App Store is the only way for developers to distribute their apps to iOS users and, to access the marketplace, they must comply with the terms of service set by Apple. The EU has determined that some of the requirements Apple imposes on developers are anticompetitive.

Two issues in particular were pointed out by the European Commission, the EU’s executive branch, which is the bloc’s principal enforcer of antitrust rules. The first is that Apple only permits iOS music streaming apps to let their customers make in-app purchases, such as subscription purchases, if they use Apple’s IAP payment processing system. IAM takes an up to 30% cut from transactions. The EU has found that most streaming apps pass on the cost of Apple’s transaction fees to customers, which raises prices. 

The charge against Apple is significant not only for music streaming providers but also other developers in the iOS ecosystem that make money from in-app purchases.

The other major focus of the charge sheet brought against Apple are the restrictions that it imposes on developers who don’t use IAP. Developers who take this route are still allowed to sell in-app goods such as music streaming subscriptions, but they can’t do so on the App Store. Instead, they must use other channels such as their websites.

The European Commission has found that Apple is limiting developers’ ability to inform customers about options for purchasing in-app goods outside the App Store and is thereby engaging in anticompetitive behavior.

“Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store,” said European Commission executive vice president Margrethe Vestager. “With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition.”

Apple will have an opportunity to present the European Commission with arguments against the preliminary finding before officials make a final decision. If it’s determined that the iPhone maker did indeed break EU competition law, it could potentially be ordered to change the violating business practices. Apple may additionally receive a fine amounting to as much as 10% of its global annual revenues.

The preliminary antitrust charges are the culmination of an investigation into Apple that the European Commission opened into Apple last year following a complaint from music streaming provider Spotify Technology SA. “At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows,” an Apple spokesperson told the Wall Street Journal today in response to the European Commission’s charges. “The Commission’s argument on Spotify’s behalf is the opposite of fair competition.”

The future direction of case is likely to be closely followed by Spotify now that formal charges have been filed. Spotify currently doesn’t allow users of its iOS app to purchase subscriptions via in-app purchases to avoid using Apple’s IAP processing system. It might have an incentive to change that if Apple is ordered to lift the requirement to use IAP for in-app sales. Other streaming providers that do use the system, in turn, may gain an opportunity to adopt competing payment processing services with lower transaction fees.

Apple is currently facing a separate antitrust probe in the EU over Apple Pay. Officials are investigating whether the company blocked competing financial services from accessing some iOS in-store payment features. 

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