— — Apps

Europe charges Apple with antitrust breach, citing Spotify App Store complaint – TechCrunch

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The European Commission has issued a formal ‘statement of objections’ against Apple, saying today that its preliminary view is Apple’s app store rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. Apple has a period of 12 weeks to respond to the preliminary charges. Last summer, the Commission began investigating competition concerns related to iOS App Store (and Apple Pay). But today’s charges relate only to music streaming apps and the App Store’s role as a gatekeeper for such apps to access iOS users. This is also a market where Apple competes with its eponymous offering (Apple Music).

“The Commission takes issue with the mandatory use of Apple’s in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple’s App Store,” it wrote. “The Commission is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.” The statement of objections focuses on two rules that Apple imposes in its agreements with music streaming app developers: Namely, what the Commission said is a “mandatory” requirement to use Apple’s proprietary in-app purchase system (IAP) to distribute paid digital content (with the Commission stating that Apple charges a 30% commission fee on all such subscriptions bought via IAP); and ‘anti-steering provisions‘ which limit the ability of developers to inform users of alternative purchasing options.

“The Commission’s investigation showed that most streaming providers passed this fee [Apple’s 30% cut] on to end-users by raising prices,” it went on, adding: “While Apple allows users to use music subscriptions purchased elsewhere, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper. The Commission is concerned that users of Apple devices pay significantly higher prices for their music subscription services or are prevented from buying certain subscriptions directly in their apps.”

In a statement, EVP and competition chief Margrethe Vestager added: “App stores play a central role in today’s digital economy. We can now shop and access news, music, or movies via apps instead of visiting websites. 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.”

Apple sent us this statement in response to the Commission’s statement of objections:

The music streaming company also sent us this statement, attributed to its head of global affairs and chief legal officer, Horacio Gutierrez — in which he suggests the antitrust charges will have “far-reaching implications”:

“This is not a Spotify case.”

During a press conference following the announcement of the Commission’s charges, Vestager went into a little more detail on the case — saying the Commission believes the impact of Apple’s distortion of the music streaming market has led to raising subscription prices for consumers to €12.99, rather than the €9.99 Apple charges for its service. Apple, of course, is not subject to the 30% fee it levies on third-party music streaming services which opt to sell subscriptions via its store. (Spotify stopped doing so in 2018 to avoid the IAP fee.)

During a Q&A with journalists, Vestager was pressed on the fact that Spotify is itself a piece of thriving music streaming business — and Apple also points out that Spotify describes itself as the “largest global music subscription service” and has a market capitalization of $50BN+, so is hardly a minnow of a digital business — but she argued it’s “tough to say what would have been the market development without these conditions imposed by Apple in its App Store”. “Spotify is a big player in the music streaming market, but we don’t know what would have been the conditions without this,” Vestager went on, pointing to other rivals who — the clear implication is — might have been able to cut themselves a more significant chunk of Spotify’s (and Apple’s) music streaming pie, under different App Store conditions.

“There are other rivals to Apple Music — there are Deezer and Soundcloud. Smaller competitors, and here we have real concerns about their developments,” she said, adding: “This is not a Spotify case — this is a music streaming case. It’s about the different service providers and the conditions to be able to present to us their offers so we might be their customers. This is what it’s about… It’s important for a market to stay innovative and competitive and that we can see the different rivals and that they are free to make their own decisions.”

Vestager suggested it’s not the level of the fee Apple charges on in-app subscriptions, per se, that the Commission is objecting to. Still, the conditions it imposes on players in this market while also offering its rival,l service,e, which is not subject to the same conditions. She also noted that Apple’s fee doesn’t apply universally to all apps in its store — but does apply to all music streaming apps except Apple’s own, remarking: “So you have a possible 30% price difference between the two.”

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