Apple is to be formally investigated by the European Commission after Spotify accused the company of using the App Store to deliberately disadvantage other app developers.
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According to a report by the Financial Times, EU competition commission has decided to launch a formal antitrust investigation into Apple's conduct "in the next few weeks" after surveying customers, rivals and others in the market.
Spotify in March filed an antitrust complaint against Apple with the EU in which it argued that the iPhone maker enforced App Store rules that "purposely limit choice and stifle innovation at the expense of the user experience."
Apple swiftly hit back at the accusation, labeling it as "misleading rhetoric" and arguing that "Spotify wants all the benefits of a free app without being free."
Spotify's complaint focuses on Apple's policy of charging a 30 per cent fee on App Store purchases, which means Spotify has to charge existing subscribers $12.99 per month for its Premium plan via the App Store just to collect its standard $9.99 per month charge.
Spotify CEO Daniel Ek claimed that the policy gives Apple an "unfair advantage," since Spotify is unable to fairly compete with Apple Music's standard $9.99 per month price within the App Store.
Alternatively, if Spotify chooses not to collect payments via the App Store, Ek said that Apple "applies a series of technical and experience-limiting restrictions" on the company. Over time, this has also included "locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch."
The EU can force companies to change business practices they deem unlawful and levy fines of up to 10 per cent of a company's global turnover. However, investigations by the European Commission can take years to resolve unless the companies involved offer to settle the probes by making legally binding agreements to change their behavior.
For further details on each company's stance on the issue, see Spotify's Time to Play Fair website and Apple's press release addressing Spotify's claims.
Top Rated Comments
Now, in terms of Spotify (the "brand name") not being able to compete with Apple (the supermarket "own brand" products) on price...again this is nothing new! Here in the UK you often see a supermarket's "own brand" versions of "brand name" products on sale right alongside, and usually significantly cheaper as well. Those that by the "brand name" do so because they feel it is a better product or because of customer loyalty.
In the Spotify/Apple scenario, Spotify wants to not pay anything to the "retailer" (Apple/iOS App Store) for all of the infrastructure they have developed and the inherent costs (however small they may be) of hosting and fulfilling the downloads, let alone the costs associated with actual payment processing if the monthly subscription is billed through the App Store. They then cite it as anti-competitive behaviour which is just ludicrous! So if Apple decides to price Apple Music at $4.99 per month will Spotify then demand $5 per month per user from Apple because it's "uncompetitive" for Apple to offer a similar product at a cheaper price? Sounds ridiculous doesn't it? But how is that different from exactly what they are proposing now?
Spotify are completely at liberty to price their product/service however they choose, and equally Apple, as a retailer, is completely at liberty to set their own "mark up" on third-party products that they sell on their own store. I would understand the anti-competitive narrative if Apple routinely charged 10% but were charging direct competitors 30%...but that's not what is happening. All apps on the App Store are subject to the same T&C's. Basically, Spotify want all of the benefits of the App Store and the Apple platform but don't want to pay for the privilege of being "stocked" at the App Store.
Not being on the App Store doesn't mean that they can't sell subscriptions. They routinely sell them on their website in fact. But it seems like they want access to all of the Apple customers but don't want to pay for it! Apple has invested billions of dollars in R&D and marketing over the last decade to build its iOS platform into what it is today with the huge user-base that it has. Spotify seems to feel entitled to have access to those customers for free just because Apple creates a competing product. Spotify could just leave the price at $9.99 in the App Store and accept that 30% as a cost of doing business in the same way that most B2C companies have "cost of sale" considerations.
Look at it this way, if they didn't have their app on the App Store and no way for iPhone users to use Spotify on their phone then some percentage of those iPhone users would still subscribe to Spotify (for laptop/browser use) but a good number wouldn't. Let's then say that they put their app on the App Store (at $9.99 per month) and they then pick up an additional 10 million subscribers that they didn't have before. Their revenue will now be $70 million per month more versus not having a presence on the App Store. I would consider that worthwhile but no, they won't be happy with $70 million...they want the whole $100 million because it's "unfair" that Apple can make more money than they do...even though Apple invested huge amounts of money in the tech and the platform...
No need for bloodshed like this. No need for the 30% cut since the purchase system is handled directly by Spotify.
This is fair and square since Apple Music also put in the giant "Try It Free" button inside the Music app that redirects to AppStore subscription page.