In March 2019, Spotify filed a complaint against Apple with the European Commission, accusing the latter company of anticompetitive behaviour in the way it managed its App Store and in-app purchases. 15 months on, the EC has now launched a formal antitrust investigation of Apple.
In fact, it has launched two, although they’re not just focused on Spotify’s complaint. The first will assess “whether Apple’s rules for app developers on the distribution of apps via the App Store violate EU competition rules”, and was sparked by Spotify’s complaint as well as another unnamed ‘e-book / audiobook distributor’.
“Mobile applications have fundamentally changed the way we access content. Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices,” said the EC’s executive vice-president Margrethe Vestager, who heads competition policy, in a statement.
“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books. I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”
Spotify’s complaints included the access it got to Apple’s hardware and services, as well as the cut of in-app purchase sales taken by Apple – 30% for subscriptions within apps like Spotify, dropping to 15% after a subscriber has been paying for a year – and specifically its rules on companies not being able to promote direct subscriptions within their apps, to avoid that rev-share.
This is exactly what the antitrust probe will be focusing on. In the words of the EC’s announcement today:
“(i) The mandatory use of Apple’s own proprietary in-app purchase system “IAP” for the distribution of paid digital content. Apple charges app developers a 30% commission on all subscription fees through IAP.
(ii) Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to consume content such as music, e-books and audiobooks purchased elsewhere (e.g. on the website of the app developer) also in the app, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper.”
The second formal antitrust investigation has nothing to do with Spotify’s complaint, but instead relates to the Apple Pay payments technology, and the way it works in apps and in retail stores.
Spotify has already issued a statement on the news from its head of global affairs and chief legal officer Horacio Gutierrez.
“Today is a good day for consumers, Spotify and other app developers across Europe and around the world. Apple’s anticompetitive behaviour has intentionally disadvantaged competitors, created an unlevel playing field, and deprived consumers of meaningful choice for far too long,” he said, in a statement sent to Music Ally.
“We welcome the European Commission’s decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.”
Apple has issued a statement too, which it sent to Music Ally:
“Throughout our history, Apple has created groundbreaking new products and services in some of the most fiercely competitive markets in the world. We follow the law in everything we do and we embrace competition at every stage because we believe it pushes us to deliver even better results,” said the company.
“We developed the App Store with two goals in mind: that it be a safe and trusted place for customers to discover and download apps, and a great business opportunity for entrepreneurs and developers. We’re deeply proud of the countless developers who’ve innovated and found success through our platform. And as we’ve grown together, we’ve continued to deliver innovative new services — like Apple Pay — that provide the very best customer experience while meeting industry-leading standards for privacy and security.”
And now to the matter in hand.
“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed,” it continued.
“At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality”
Last year, Spotify launched a ‘Time to Play Fair‘ website going into detail on its complaints against Apple, while the latter company issued its own statement rebutting Spotify’s claims in some detail. Expect both arguments to get a thorough airing in the upcoming antitrust investigation.
There has been some movement in the two companies’ dispute since the original complaint was filed. In October 2019, Spotify launched an Apple TV app and integrated with Apple’s Siri voice assistant on iPhone – two of the things it said it had been hampered in doing before.
In April 2020, Spotify’s app began working with Siri on the Apple Watch too. The following month, CEO Daniel Ek told Bloomberg that “long term, we do expect Apple to open up… It’s moving in the right direction, but we still have many, many steps to go.”
We’re intrigued by the identify of the ‘e-book / audiobook distributor’ whose complaint, filed on 5 March 2020, was the spark for the first antitrust investigation alongside Spotify’s. Many people will jump to the obvious conclusion, but we’ll await official confirmation. Don’t hold your breath for a speedy ruling though.
“There is no legal deadline for bringing an antitrust investigation to an end,” explained the Commission. “The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the companies concerned cooperate with the Commission and the exercise of the rights of defence.”
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