Tech giant Apple is abusing its market dominance with anticompetitive behavior in the music streaming app sector where their Apple Music thrives, according to The European Commission. The decision came after Spotify filed an antitrust complaint with the European Union against Apple in 2019. The Commission, which is the EU’s executive arm, opened an investigation iin June of last year.
Spotify’s biggest complaint was that Apple’s 30 percent commission on App Store subscriptions amounted to no more than a tax because the tech giant bans developers from informing users about alternate routes of purchasing subscriptions, such as through the Spotify website, while also competing directly against Spotify for subscribers to its own Apple Music.
Margrethe Vestager, head of competition policy in the EU and the European Commission’s Executive Vice President, stated that their preliminary findings designate Apple as holding a monopoly over the distribution of music streaming apps on customers with Apple devices, “Our preliminary conclusion: @Apple is in breach of EU competition law. @AppleMusic compete with other music streaming services. But @Apple charges high commission fees on rivals in the App store & forbids them to inform of alternative subscription options. Consumers losing out,” Vestager said in a tweet.
She pointed out that Apple’s 30 percent commission was in fact eventually passed on to customers. In order to protect company revenue from Apple’s tax, Spotify decided to cease offering paid subscription options through the App Store in 2016. Vestager also highlighted the tendency of Apple users to be “very loyal,” rarely switching to other devices, thereby making iOS and OSX a walled garden ecosystem where every aspect of user experience is under the control of the company.
Apple now has 12 weeks to provide a formal response to objections raised by the Commission. If the Commission deems Apple has violated EU antitrust rules, the tech company can be fined very steeply: up to 10 percent of annual revenue. With Apple’s approximate $274 billion in 2020 revenue, penalties from the case could exceed $27 billion USD.
Daniel Ek, CEO of Spotify, called the decision a “big day” and said that Europe is one step closer to creating a level playing field. He called the European Commission’s Statement of Objections a “critical step” to holding Apple accountable for their anti-competitive behavior.
Apple has rejected the Commission’s determination. According to The Guardian, a spokesperson said “Spotify does not pay Apple any commission on over 99 percent of their subscribers, and only pays a 15 percent commission on those remaining subscribers that they acquired through the App Store.”
They say Spotify wants “all the benefits of the App Store but don’t think they should have to pay anything for that.”
Fight for the Future, a U.S. digital rights advocacy organization, recently slammed Apple, calling for an end to the company’s extreme control over software its users can install because iOS does not allow you to install apps unless they are through the App Store, “Once an app is removed from the App Store, there is no alternative way to install it. This creates a situation where apps can be created to uphold power, but never to challenge it,” they say on their Abolish the App Store webpage.
“To effectively censor the web—and software distributed via the open web—countries must undertake massive infrastructure projects. But with Apple in charge, all a country has to do to censor an iPhone app is send Apple an email about it,” the organization said.
Fight for the Future also accused the Silicon Valley behemoth of having a long history of removing apps from the App Store at the behest of authoritarian governments and called Apple’s distribution model a “gift to censors and dictatorships everywhere.”
At a recent hearing of the U.S. Senate Judiciary subcommittee on antitrust, several app developers admitted that they are afraid of the power Big Tech holds over their business. Several executives accused the cartel of threatening their businesses.
At the hearing, Spotify’s Chief Legal Officer, Horacio Gutierrez, remarked that there were at least four incidents he could recall where Apple threatened his company after Spotify poke out against their anticompetitive practices.