By Chris Cooke | Published on Wednesday 17 June 2020
Spotify yesterday welcomed the news that the European Commission has formally opened an investigation into whether or not Apple’s rules for app developers making products distributed via its app store are anti-competitive. Meanwhile Apple said EU officials were wasting their time advancing “baseless complaints” from a small number of tech sector freeloaders.
Various digital music companies have complained over the years that if they sign up subscribers via an iOS app they have to do so via Apple’s transactions system which charges a 15-30% commission.
For digital music platforms that pay up to 70% of their revenues over to the music industry, that’s a major problem. Their choices are basically to either pass the Apple charge on to the customer for in-app subscriptions or to just not allow people to subscribe in-app. But in both scenarios, Apple won’t let the streaming service tell customers that they can also sign up via said service’s own website.
Of course, Apple Music doesn’t have any of these problems. So, for a company like Spotify, depending on which of those two choices you go for, either your service on Apple devices looks more expensive than that of your main competitor, or – unlike your main competitor – becoming a premium subscriber is a slightly complicated process.
Having quietly – and sometimes not so quietly – moaned about this for years, Spotify ramped things up in March last year by filing a formal complaint with the European Commission, arguing that Apple’s policies in this domain were anti-competitive and shouldn’t be allowed. Such a big issue has this become for Spotify, it even set up a standalone website to air its grievances.
A public war of words them followed between Spotify and Apple. For its part, Apple argued that it had invested heavily in its app ecosystem over the years and Spotify was a key beneficiary of all that investment. Therefore it was entirely fair for Apple to expect Spotify to pay its way if it wanted to use all the functionality of its app platform.
Apple wrote in a blog post last year: “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”.
The European Commission announced yesterday that it was now formally investigating Apple’s app store policies in response to both Spotify’s complaint and another from an unnamed e-book and audio-book provider.
Its investigation, the Commission said, would “assess whether Apple’s rules for app developers on the distribution of apps via the App Store violate EU competition rules. The investigations concern in particular the mandatory use of Apple’s own proprietary in-app purchase system and restrictions on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps”.
The Commission’s Executive Vice-President Margrethe Vestager, who is in charge of competition policy, added: “Mobile applications have fundamentally changed the way we access content. Apple sets the rules for the distribution of apps to users of iPhones and iPads”.
“It appears”, she went on, “that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices”. We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books. I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules”.
Responding to the news that a formal investigation was now underway, Spotify said in a statement: “Today is a good day for consumers, Spotify and other app developers across Europe and around the world. Apple’s anticompetitive behaviour has intentionally disadvantaged competitors and deprived consumers of meaningful choice for far too long. We welcome the European Commission’s decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy”.
Needless to say, Apple was less impressed by the development. “It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else”, it said.
Though it added that it welcomed the opportunity to prove to the EC that it’s the good guy here. “At the end of the day, our goal is simple”, its statement continued, “for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality”.