Apple distorted competition in the music streaming market, says EC

IT news

The European Commission (EC) has filed antitrust charges against Apple after an investigation concluded that the company “abused its dominant position in the music streaming market” to stifle competition.

Following a complaint by Spotify in 2019, the EC launched an investigation into whether Apple’s rules for developers who distribute apps via the app store violate EU competition rules.

The investigation specifically looked into the mandatory use Apple’s own in-app purchase system (IAP), which charges app developers a 30% commission fee on all in-app purchases, as well as App Store policies that forbid developers from pointing consumers towards alternative ways of purchasing content outside of apps that might be cheaper.

The Commission today said its preliminary view was that Apple broke competition laws by using its position as a gatekeeper to the App Store to “distort competition in the market for music streaming services by raising the costs of competing music streaming app developers.”

The EC specifically took issue with the IAP that Apple imposes on app developers and said it was concerned that Apple’s restrictions on app developers prevented them from “informing iPhone and iPad users of alternative, cheaper purchasing possibilities.”

While the EC’s antitrust complaint is focused on music streaming, it may have broader implications for in-app purchases and whether Apple’s cut is passed on to consumers.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “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.

“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.”

The EC noted that its preliminary findings “does not prejudge the outcome of an investigation.”

Following the EC’s ruling, Spotify CEO Daniel Elk wrote on Twitter: “Today is a big day. Fairness is the key to competition. With the [European Commission] Statement of Objections, we are one step closer to creating a level playing field, which is so important for the entire ecosystem of European developers.”

In a statement Apple said: “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.

“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.”

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