The European Commission has sent a ‘statement of objections’ to Apple, after its Spotify-triggered investigation of the company reached a preliminary view that Apple “distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store”.
The EC is targeting the “mandatory use of Apple’s own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple’s App Store” as well as its restrictions on companies like Spotify “informing iPhone and iPad users of alternative, cheaper purchasing possibilities” within their apps.
You can read the Commission’s full statement here, in which it claims that “Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices. In addition, Apple becomes the intermediary for all IAP transactions and takes over the billing relationship, as well as related communications for competitors.”
It’s important to note that this is a preliminary view, with the EC making it clear that sending a statement of objections “does not prejudge the outcome of an investigation”. What happens next is that Apple gets to read the Commission’s investigation file, reply in writing and request an oral hearing to offer its defence.
The Commission’s executive vice-president Margrethe Vestager, who heads up its competition policy, offered this statement:
“Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers,” she said. “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. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”
Spotify and Apple have both issued statements following the announcement this morning.
“Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that. Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store,” said Apple’s spokesperson.
“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. Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The Commission’s argument on Spotify’s behalf is the opposite of fair competition.”
As for Spotify: “Ensuring the iOS platform operates fairly is an urgent task with far-reaching implications. The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers,” said Spotify’s head of global affairs and chief legal officer Horacio Gutierrez.
Spotify filed its original complaint with the European Commission in March 2019, alongside the launch of a website setting out the ways it believed Apple had unfairly hampered its business. The two companies have regularly tangled over this and other issues in the two years since.