Apple Accused of ‘Distorting Competition In the Music Streaming Market’ by European Commission

Apple Music Indie Royalty Fund

Photo Credit: Zhang Kaiyv

Back in June of 2020, the EU’s European Commission announced that it was opening two antitrust investigations into Apple. Now, the Commission has officially accused the Cupertino-headquartered company of distorting “competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store.”

The European Commission’s antitrust inquiry into the Apple App Store – and specifically the 30 percent commission that the iPhone maker charges third parties on digital-content sales – came to light in June of 2020 and resulted from a formal complaint levied by Stockholm-based Spotify (as well as Rakuten-owned Kobo) in March of 2019.

As an aside, the second inquiry, though similar to the first, was set in motion by a preliminary investigation conducted by EU higher-ups and centers largely on Apple Pay, which officials are concerned “may distort competition and reduce choice and innovation” in the market.

In a testament to the highly charged nature of the underlying dispute, Spotify CEO Daniel Ek publicly acknowledged his company’s antitrust complaint against Apple in a blog post, while Spotify launched a standalone website, “Time to Play Fair,” that explained its qualms in detail. Apple then fired back with a different blog post yet.

Additionally, reports in early March of this year suggested that the European Union – which has fined Google a staggering $10 billion to date – was preparing to issue Apple a “Statement of Objections,” and the company’s separate (and similarly high-profile) courtroom confrontation with Fortnite owner Epic Games will go to trial next week.

In terms of the Statement of Objections that the European Commission forwarded to Apple today, the EU executive branch “takes issue with the mandatory use of Apple’s own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple’s App Store.

“The Commission is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.,” the text continues.

Digging into the specifics of these concerns, the document states that “Apple charges app developers a 30% commission fee on all subscriptions bought through the mandatory IAP” (in-app purchase system), and “most streaming providers passed this fee on to end users by raising prices.”

And on the “alternative purchasing possibilities” front, the message indicates: “While Apple allows users to use music subscriptions purchased elsewhere, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper.

“The Commission’s preliminary view is that Apple’s rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices,” the entity relays towards the text’s end.

Apple addressed the European Union’s antitrust charges in a statement provided to The Verge, noting in part: “Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that.

“Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store. At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows.”

Daniel Ek, who’s expressed interest in purchasing the Arsenal Football Club, promptly weighed in on the development in a tweet, writing: “Today is a big day. Fairness is the key to competition. With the @EU_Commission Statement of Objections, we are one step closer to creating a level playing field, which is so important for the entire ecosystem of European developers.”

Earlier this week, Spotify revealed that it had achieved only modest premium-subscriber growth during the first quarter of 2021, whereas Apple’s quarterly revenue grew by over 50 percent – including a year-over-year earnings increase of almost $8 billion from consumers in Europe.

3 Responses

  1. Johnny

    The least important part of the music business are now the musicians! Yep, they make the least amount of money while providing great music and usually LOSE MONEY doing so. My band got a 8% deal but Apple gets 30% cut. Seems somewhat unfair that the people how distribute the Music make three times what the people who make the music earn??!! No solution in sight for hard working musicians in 2021

  2. Eilo

    And Ek’s a greedy Billionaire. BTW Apple gets 30% commission in some of the deals, not the majority. Apple also pay music rights holders way more than Ek and always will.

    • Umlaut

      1. People don’t get to be billionaires by not being ambitious and greedy.
      2. Apple gets 15%, actually.