EU accuses Apple of ‘distorting competition in music streaming’

The commission found that Apple abused its dominant position for the distribution of music streaming apps through the App Store. It added that the company distorted the competition 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.”

The EC’s investigation is focusing on two main restrictions imposed by Apple: The compulsory use of Apple’s own in-app purchase (IAP) system imposed on music streaming app developers who want to distribute their apps via the App Store, and a constraint preventing developers from informing iPhone and iPad users of alternative, cheaper purchasing options. Apple charges third-party app developers a 30% commission, also known as the Apple tax, on all subscription fees through IAP for the first year.

The EC noted that the preliminary findings would not affect the final outcome of the investigation. Apple has now been afforded a chance to read the commission’s findings, respond in writing and request an oral hearing to argue its case.

“Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store,” EC executive vice-president Margrethe Vestager, who heads up its competition policy, said. “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. 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.”

Apple and Spotify have both issued statements following the announcement.

“Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that,” an Apple spokesperson said. “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. At the core of this case is Spotify’s demand that 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.”

Spotify head of global affairs and chief legal officer Horacio Gutierrez said: “The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behaviour, ensuring meaningful choice for all consumers and a level playing field for app developers,” 

Spotify’s first filed an antitrust complaint against Apple with the EC in March 2019. The complaint was regarding the impact that Apple’s App Store rules have on competition in the music streaming business. At the time, Spotify CEO Daniel Ek said Apple was “essentially acting as both a player and referee to deliberately disadvantage other app developers”.