It is a dispute that has been brewing for a long time and which went public in recent months. Now, according to the FT, the European Union is preparing to formally investigate Spotify-led anti-trust complaints about Apple and its App Store.
In brief, Spotify is arguing that Apple is “tilting the playing field to disadvantage competitors” and filed an official complaint in March, accusing Apple of unfairly using the market dominance of its App Store to work in favour of Apple Music and to work against Spotify and other rival subscription streaming services. At the heart of it is the fact that Apple takes a 30% cut of in-app subscriptions on subscription services. (It should be noted that Apple takes 30% on the first year of subscriptions and this drops to 15% for subsequent years.)
If – and this is, of course, a gigantic if – the EU comes down unilaterally on the side of Spotify, Apple could face levy fines of up to 10% of its global turnover. To put this in context, Apple’s service revenues (which includes iTunes, the App Store, the Mac App Store, Apple Music, Apple Pay and AppleCare) generated $11.5bn in the second fiscal quarter of 2019, up from $9.9bn in the same period a year earlier.
Other streaming services have voiced similar concerns to those outlined by Spotify but they have not gone so far as to file formal complaints to the EU. The FT quotes Thomas Vinje from law firm Clifford Chance who worked on Spotify’s case, who says these companies might have had “similar concerns” but were “too afraid to take on Apple” – leaving this to be a Spotify-led legal challenge.
Apple has countered the accusations (terming them “misleading rhetoric”) and has said that Spotify has happily used the App Store marketplace to “dramatically grow their business”, taking all the benefits “without making any contributions to that marketplace”.
Spotify recently passed 100m paying subscribers globally while Apple Music was at 56m at the last count. Apple may well argue that Spotify is growing its business very well despite its App Store policy while Spotify could counter that the sharp rise of Apple Music is down in part to benefitting from a competitive disadvantage on the App Store.
There will be a lot of speculation – and even more lobbying – around what happens next and what the shape of the EU ruling will be. Obviously it is too early (and too reckless) to try and second guess anything the EU does, but whatever the final ruling, the repercussions will be felt for many years.
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