There was a need to redesign Spotify
Spotify versus Apple: iPhone manufacturer engages in unfair competition
Billing model for music apps May 3, 2021, 7:47 am
The music streaming market leader Spotify had filed a complaint with the EU - Apple is said to discriminate against other providers of apps in its store. The EU Commission now agreed that Spotify was right.
The EU Commission accuses Apple of unfair competition in its App Store on iPhone and iPad. Apple is discriminating against other providers of music streaming apps, said competition commissioner Margrethe Vestager today after a complaint from market leader Spotify.
The Brussels authority sees, among other things, a problem that the sales of subscriptions in the apps must be processed via Apple's payment platform. The group retains 30 or 15 percent of the income.
Spotify finds it unfair that Apple would have more money left over from its rival music service because of this App Store levy for the same subscription price. There was no alternative to installing apps on the devices. "Apple has a monopoly," Vestager said, referring to the App Store.
If the EU Commission prevails, this would also call Apple's business model for the App Store into question for other services. "It will not be the last procedure in which the App Store is concerned," emphasized Vestager. The Commission is also taking a close look at the competition in e-books and game apps.
The competition watchdogs expressed concern that users of Apple devices would have to pay higher prices for music streaming subscriptions or that some subscriptions could not buy in their apps. In their preliminary findings, they also concluded that Apple had a dominant market position in the distribution of music streaming applications in the App Store. Vestager emphasized that the company was at the same time "gatekeeper" and competitor with its own Apple Music service.
Apple countered: "The Commission's reasoning in favor of Spotify is the opposite of fair competition." Spotify wants to "use all the advantages of the app store and thinks that they don't have to pay anything for them". Spotify welcomed the Commission's decision. This is "a crucial step to hold Apple accountable for anti-competitive behavior".
Since the download platform was launched in 2008, Apple has generally levied a 30 percent tax on income from digital items or services such as subscriptions. For subscriptions that run for more than a year, the commission drops to 15 percent - and recently also for developers who earn less than a million dollars a year.
Second competition violation
The commission concluded that most streaming providers passed the fee on to their customers at higher prices. Spotify, for example, offered its subscriptions in the iPhone app for 12.99 instead of 9.99 euros per month. A few years ago, however, the service switched to selling iPhone customers' subscriptions via a website in order to avoid the fee. The video streaming service Netflix is also going this way.
With this model, the second competition infringement comes into play from the point of view of the Commission: The providers are not allowed to include a link to the website directly in the app, on which the subscriptions can be bought from Apple. Apple counters that, for example, it would not allow a competitor's electronics market to advertise alongside their own price tags. The iPhone group also points out that Spotify has won more than 100 million subscription customers since it withdrew from in-app purchases in 2016. In addition, Spotify does not pass on the reduction in the fee from 30 to 15 percent to customers.
Spotify is the clear number 1 in the music streaming business ahead of Apple. The Swedish-based provider had 356 million users at the end of the last quarter, of which 156 million are paying subscription customers. The iPhone group had more than 60 million subscription customers in its Apple Music service in the summer of 2019 - and has not given any new figures since then. Unlike Spotify, Apple does not offer a free version. Vestager admitted that it did not know how the market would have developed without the Apple specifications.
In addition to the Spotify case, there have long been allegations from banks that see themselves at a disadvantage when it comes to contactless payments. Among other things, they criticize the fact that they cannot bypass Apple to access the so-called NFC chip. Apple Pay is the only way to get access to the NFC chip on iPhones, with which you can use the phone at the till instead of a bank card. Apple sees this as a technical solution to ensure the security of payments and ensures that everyone who wants access to Apple Pay will get it.
Solution for fair competition
Vestager was optimistic today that a solution could be found with which fair competition would be possible. For the moment, however, they want Apple to address the Commission's concerns. The company now has twelve weeks to reply.
The EU competition watchdogs have been scrutinizing American technology platforms for years. Vestager fined Google in three cases totaling 8.25 billion US dollars. Among other things, the focus was on the Android smartphone system and the shopping search with item offers. At Amazon, the commission is investigating whether the group is unfairly competing with other retailers who use its platform. According to the preliminary results of investigations by the EU Commission, the American company is abusing its market power and thereby violating antitrust regulations.
If companies violate EU competition rules, they risk fines of up to ten percent of their annual global turnover. The problem with such sentences, however, is that they are only imposed after years of investigation and then often go through court instances for more years. Potential competitors may then no longer exist.
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