Spotify is cheering the European Commission’s decision to hold Apple accountable for anticompetitive practices in the streaming music market to the tune of a massive €1.84 billion fine, announced today. The streamer called the fine a “powerful message” that sends a signal that even “a monopoly like Apple” is not able to “wield power abusively” to control how other companies interact with their customers.
“Today’s decision marks an important moment in the fight for a more open internet for consumers. The European Commission (EC) has made its conclusion clear: Apple’s behaviour limiting communications to consumers is unlawful,” Spotify shared in a statement on its corporate blog.
Despite the EC ruling favoring Spotify and other streamers over Apple, the company was still cautious about how Apple would proceed. The Cupertino tech giant has already promised to appeal the ruling, and Spotify adds that in cases like this, “the details matter.”
“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 wrote.
Apple, notably, cleverly worked around the EC’s Digital Market Act requirements, meant to foster new competition in the app store market by allowing developers to launch independent app stores and manage their own payments. But Apple’s solution was to charge iOS developers accepting its new DMA rules a new, additional fee, the Core Technology Fee, as a means of recouping its lost revenue.
Spotify is likely concerned that Apple will again find a way to sidestep any new requirements, as well, if not carefully spelled out.
The Financial Times had earlier reported that the fine would be around €500 million (about $539 million USD). As it turns out, they had the decision right, but not the price tag.
The ruling follows years of complaints led by Spotify and other smaller streamers, like Deezer, over the App Store’s business model and associated rules. In 2019, Spotify first filed its antitrust complaint against the tech giant, which later led to the EU’s formal investigation of Apple’s App Store announced in 2020. In April of the following year, the EU issued a statement of objections, accusing Apple of distorting competition in the market for streaming services.
Spotify says that Apple’s rules “muzzled” it and other streaming music services from communicating with their own customers in their apps about how to upgrade subscriptions, access promotions, discounts and other perks. Apple countered that Spotify doesn’t pay Apple anything, but still wants “limitless access to all of Apple’s tools.”
A part of the issue here is the nature of Apple’s App Store commission structure, which charges developers a 15% to 30% commission on subscriptions for digital services, like streaming music, that iOS developers offer to their customers. (In year two, subscriptions drop from 30% to 15%). Spotify argued that Apple’s “30% tax” was unfair and that Apple’s rules hurt consumers as they prevented developers from informing their app’s users about alternative — and sometimes cheaper — ways to pay. In other words, Spotify wanted the opportunity to drive customers to its website where they could arguably pay for the subscription directly, which wouldn’t involve a commission.
“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 last month. It also stressed that despite offering subscriptions via its website, Spotify had never lowered its prices. And it noted that Spotify had a 56% share of the music streaming market in Europe, compared with Apple Music’s 11% share.
Of course, that’s not a fair comparison, given that Spotify offers a free, ad-supported service as well as a paid plan, like Apple’s, allowing it to funnel a number of free users into the paid product over time. And, as Apple has repeatedly pointed out, 85% of App Store developers don’t pay Apple a fee because they don’t offer “digital goods and services” — a distinction that loses its impact when you think about how services like Uber, Airbnb and others rely on Apple’s platform to acquire and sell their offerings to customers.
Following the announcement of the EC’s fine, Spotify said the fight was not over.
“Our work will not be done until we succeed in securing a truly fair digital marketplace everywhere and our commitment to helping to make this a reality remains unwavering,” it wrote. Spotify CEO Daniel Ek also explored this sentiment in a video post on X, where he added that “Apple has a history of skirting these rules,” referring to other cases, like the antitrust order in the Netherlands, where Apple ignored the penalty and allowed the fine to increase for half a year before resolving its concerns.
The @EU_Commission finally ruled against Apple today. A lot of you have been asking for my take on what this means and what will – and won’t – change. I made a video with my thoughts including why this is a good first step, but also why there’s still more to be done. pic.twitter.com/pdICn2Jq6S
— Daniel Ek (@eldsjal) March 4, 2024
The Coalition for App Fairness, a lobby group that counts Spotify, Deezer, Epic Games and other app developers as members, also issued a statement in response to the fines.
“Today the European Commission sent a clear message that Apple’s anti-steering policies, which prevent developers from communicating directly with consumers, are anticompetitive and illegal,” stated CAF Executive Director Rick VanMeter. “Apple’s restrictions on app developers have stifled innovation, driven up prices, and limited consumer choice for far too long. We applaud the Commission for taking this meaningful first step towards bringing competition to iOS devices. However, more needs to be done to truly create a fair and open mobile app ecosystem that benefits consumers and developers. In less than 48 hours the Digital Markets Act will be enforced, and consumers and developers across Europe are relying on the Commission to demand real compliance from Apple and Google to ensure the entire app store ecosystem benefits from the promises of the law,” he said.
Updated, 3/4/24, 11 a.m. ET with CAF statement
Source @TechCrunch
