Tuesday, March 19, 2019

Apple under attack from Spotify for 'anti-competitive' business practices

By Emmanuel Legrand

Apple has dismissed the formal complaint filed by Spotify with the European Commission's Competition Directorate accusing the tech giant "anti-competitive" practices. The music streaming service argued that the tech giant is using unfair measures to favour its own streaming service, in particular by charging a 30% fee for in-app transactions.

  “Apps should be able to compete fairly on the merits, and not based on who owns the App Store,” said Spotify CEO and co-founder Daniel Ek in a blogpost. “We should all be subject to the same fair set of rules and restrictions — including Apple Music.”

  Ek elaborated: "As you are aware, Apple is both the owner of the iOS platform and its App Store and a competitor to services like Spotify. In theory, this is fine. But in Apple’s case, they continue to give themselves an unfair advantage at every turn — setting themselves up to be both referee and player in the world of audio streaming. This deliberately hurts Apple’s competitors, like Spotify, but even more importantly, it harms consumers."

Ensure fair competition

  "We’re now requesting that the EC take action to ensure fair competition," said Ek. Spotify's antitrust complaint could lead to formal investigation into Apple's practices but the Commission hasn't indicated whether it would follow this route. “The Commission has received a complaint by Spotify, which we are assessing under our standard procedures,” said the department led by Commissioner Margrethe Vestager.

  Apple responded to Spotify in a combative mode. In an unsigned but strongly worded blogpost, it claimed that Spotify "wouldn’t be the business they are today without the App Store ecosystem, but now they’re leveraging their scale to avoid contributing to maintaining that ecosystem for the next generation of app entrepreneurs. We think that’s wrong." Apple said that Spotify was seeking "to keep all the benefits of the App Store ecosystem – including the substantial revenue that they draw from the App Store’s customers – without making any contributions to that marketplace.”

  Apple added, “We share Spotify’s love of music and their vision of sharing it with the world. Where we differ is how you achieve that goal. Underneath the rhetoric, Spotify’s aim is to make more money off others’ work. And it’s not just the App Store that they’re trying to squeeze — it’s also artists, musicians and songwriters. Just this week, Spotify sued music creators after a decision by the US Copyright Royalty Board required Spotify to increase its royalty payments. This isn’t just wrong, it represents a real, meaningful and damaging step backwards for the music industry.”

Abuse of power?

  The Spotify complaint echoes many others that have been made by publishers and operators of subscription services, complaining about the fees they have to pay Apple. Apple in turn responded that the App Store gives access to more than 1.2 billion consumers and that comes at a cost.

  The European row between Apple and Spotify has certainly resonated on the other side of the Atlantic where Senator Elizabeth Warren of Massachusetts, who is running for President, suggested that if elected she would prevent big tech companies to be both platforms and users of these platforms. 

  “Spotify’s complaint is just the latest example of what can happen when these enormous companies abuse their power to undermine competition. We need a level playing field, and that starts by breaking up giant tech companies who both own a marketplace and operate in that same marketplace,” said Warren.