Spotify is celebrating the European Commission’s bold move to hold Apple accountable for engaging in anti-competitive practices within the music streaming market. With a staggering €1.84 billion fine on the table, the message is clear – even a powerhouse like Apple cannot wield its power abusively when it comes to controlling interactions with customers.
In a statement on their corporate blog, Spotify shared their gratitude for the decision and described it as an important moment in the fight for a more open internet for consumers. “The European Commission (EC) has made its conclusion clear: Apple’s behavior of limiting communication to consumers is unlawful,” the statement read.
Despite this ruling in their favor, Spotify remains cautious about Apple’s potential actions moving forward. The tech giant has already announced their intention to appeal the decision and Spotify acknowledges that the details of the case will play a crucial role in determining their next steps.
“Apple has routinely defied laws and court decisions in other markets. So we’re looking forward to the next steps that will hopefully clearly and conclusively address Apple’s long-standing unfair practices,” Spotify explained.
One of the main concerns for Spotify is that Apple will find a way to circumvent any new requirements, much like they did with the EC’s Digital Market Act. This act was meant to promote competition in the app store market by allowing developers to launch independent app stores and manage their own payments. Apple’s solution was to charge a new fee, known as the Core Technology Fee, to developers accepting these rules.
Spotify fears that if similar requirements are put in place, Apple will continue to find ways to sidestep them.
According to reports from the Financial Times, the fine that the EC would impose on Apple was estimated to be around €500 million (approximately $539 million USD). However, the final decision turned out to impose an even bigger penalty.
This ruling comes after years of complaints from Spotify and other smaller streaming services, such as Deezer, about Apple’s business model and associated rules. In 2019, Spotify filed an antitrust complaint against Apple leading to the EU’s formal investigation announced in 2020. By April of the following year, the EU had issued a statement accusing Apple of distorting competition in the streaming market.
Spotify argues that Apple’s rules have “muzzled” their ability, and that of other streaming music services, to communicate with their own customers through their apps. This includes restrictions on informing customers about subscription upgrades, promotions, and discounts. Apple, on the other hand, counters that Spotify pays them nothing for using their services and yet wants “limitless access to all of Apple’s tools.”
Part of the issue at hand is Apple’s App Store commission structure. Developers are charged a 15% to 30% commission on subscriptions for digital services, such as streaming music, that they offer to customers on iOS devices. Spotify claims that this “30% tax” is unfair and hurts consumers by preventing developers from informing their app’s users about alternative ways to pay that may be cheaper. In essence, Spotify wants to be able to direct customers to their website where they can pay for their subscription directly, without incurring a commission fee.
“Spotify pays Apple nothing for the services that have helped them build, update, and share their app with Apple users in 160 countries spanning the globe,” Apple stated in response to these claims. They also emphasized that despite offering subscriptions through their website, Spotify has never lowered their prices. Apple also pointed out that Spotify holds a 56% share of the music streaming market in Europe, significantly higher than Apple Music’s 11% share.
However, this comparison is not entirely fair as it does not take into account that Spotify offers a free, ad-supported service alongside their paid plan, similar to how Apple operates. Furthermore, Apple has stated that 85% of App Store developers do not pay them a fee because they do not offer “digital goods and services.” However, when considering how popular services like Uber and Airbnb use Apple’s platform to conduct their business, the distinction loses its significance.
Despite the imposition of the hefty fine by the EC, Spotify is adamant that the fight is far from over. “Our work will not be done until we succeed in securing a truly fair digital marketplace everywhere, and our commitment to helping make this a reality remains unwavering,” they reassured their customers in a final statement.
