By Foo Yun Chee

BRUSSELS (Reuters) -Brussels on Monday fined Apple 1.84 billion euros ($2 billion) for thwarting competition from music streaming rivals via restrictions on its App Store, the iPhone maker's first ever penalty for breaching EU rules.

A basic penalty of 40 million euros was inflated by a huge lump sum included as a deterrent - a first for the European Union's antitrust authorities.

The European Commission charged Apple last year with preventing Swedish streaming service Spotify and others from informing users of payment options outside its App Store, following a 2019 complaint by Spotify.

It said on Monday Apple's restrictions constituted unfair trading conditions, a relatively novel argument in an antitrust case and also used by the Dutch antitrust agency in a decision against Apple in 2021 in a case brought by dating app providers. It ordered it to stop such conduct.

Apple said it would appeal the decision. A ruling at the Luxembourg-based General Court, Europe's second-highest, is likely to take several years. Until then, Apple will have to pay the fine and comply with the EU order.

Apple shares were down 3.2% at $173.88 on Monday afternoon.

The fine was nearly four times the 500 million euros sources with knowledge of the matter had told Reuters they expected the European Commission to impose on Apple.

It comprised a basic element of 40 million euros - described by European Competition Commissioner Margarethe Vestager as a "parking ticket" for the U.S. tech giant - plus 1.8 billion euros slapped on top as a deterrent. The 1.84 billion euros total is equal to 0.5% of Apple's global turnover, she said.

Apple criticised the decision, saying in a statement it" was reached despite the Commission's failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast".

"The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation," it said.

'LEFT IN THE DARK'

"Millions of European music streaming users were left in the dark about all available options," Vestager told a press conference.

"And Apple's anti-steering rules also made consumers pay more for such services because of the high commission fee imposed on developers and passed on to consumers."

Spotify cheered the EU decision but said there were other issues in other areas.

"And while we are pleased that this case delivers some justice, it does not solve Apple's bad behaviour towards developers beyond music streaming in other markets around the world," the company said in a statement.

Although the fine is big, Apple can handle it without any immediate cash impact, said analyst Ryan Reith at tech and services company IDC.

But he added: "I believe this is another step in the on-going process of breaking down some of the walled gardens that Apple has created around its ecosystem."

In the past decade, the EU regulator has fined Alphabet's Google a total 8.25 billion euro over three cases.

Vestager's order to Apple to remove its App Store restrictions echoes the same requirement under new EU tech rules known as the Digital Markets Act (DMA) which Apple has to be in compliance with on March 7.

In contrast to the music streaming case, Apple is seeking to settle another EU antitrust investigation by offering to open up its tap-and-go mobile payment systems to rivals.

EU regulators, who subsequently sought feedback from rivals and users, will likely accept its offer without fining the company.

($1 = 0.9217 euro)

(Reporting by Foo Yun Chee in BrusselsEditing by Emelia Sithole-Matarise and Matthew Lewis)