Spotify files complaint with European Commission against Apple - Music Ally

Spotify is filing a complaint against Apple with the European Commission, accusing the latter company of anticompetitive behaviour in the way it manages its App Store, and thus gives its own Apple Music streaming service an advantage over rivals.

“In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers,” wrote CEO Daniel Ek in a blog post, as Spotify launched a dedicated Time to Play Fair microsite to illustrate its complaints against Apple.

“After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition. Apple operates a platform that, for over a billion people around the world, is the gateway to the internet. Apple is both the owner of the iOS platform and the App Store—and a competitor to services like Spotify. In theory, this is fine. But in Apple’s case, they continue to give themselves an unfair advantage at every turn.”

Ek cited the 30% “tax” on in-app purchases levied by Apple (although it drops to 15% once an individual subscriber has been paying for a year) suggesting that “if we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music. And to keep our price competitive for our customers, that isn’t something we can do”.

But Ek also said that if Spotify avoids in-app purchases “Apple then applies a series of technical and experience-limiting restrictions on Spotify. For example, they limit our communication with our customers—including our outreach beyond the app. In some cases, we aren’t even allowed to send emails to our customers who use Apple. Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.”

Spotify is holding a conference call with journalists at 10.30am UK-time this morning to talk about today’s news. We’ll update this story with the key quotes from that call.

There’s history here though, stretching right back to the speculation back in 2009 over whether Apple would approve Spotify’s first iPhone app – it ultimately did, but only after several months’ speculation in the media about whether Spotify would be allowed onto the App Store.

In 2016, Spotify protested after Apple rejected its latest app update, which it claimed was due to “business model rules” surrounding Spotify’s promotion of a subscriptions offer on its own website – rather than using Apple’s in-app purchases. General counsel Horacio Gutierrez wrote to his counterpart at Apple Bruce Sewell claiming that “this latest episode raises serious concerns under both US and EU competition law”.

“It continues a troubling pattern of behaviour by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors,” added Gutierrez.

Last August, Music Ally reported on Spotify’s decision to stop using Apple’s in-app purchases system for new subscribers. “It was possible to pay for Spotify Premium using Apple’s in-app payment system (iAP). However, this has been discontinued for new subscribers,” explained the company’s support website, which also gave existing subscribers advice on how to cancel their in-app subscription and then re-subscribe directly with Spotify.

There’s also history of Spotify protesting about the way Apple and other big-tech companies manage their platforms, from app stores to smart speakers. In

In May 2017, Spotify co-founders Daniel Ek and Martin Lorentzon, along with Deezer CEO Hans-Holger Albrecht, were among the co-signatories of a letter to European Commission president Jean-Claude Juncker that aimed to “highlight concerning practices of some online platforms”. Among their complaints:

“Our collective experience is that where online platforms have a strong incentive to turn into gatekeepers because of their dual role, instead of maximising consumer welfare, they can and do abuse their privileged position and adopt B2B practices with adverse consequences for innovation and competition. These practices range from restricting access to data or interaction with consumers, biased ranking and search results to lack of clarity, imbalanced terms and conditions and preference of their own vertically integrated services.”

In November that year, Spotify, Deezer and SoundCloud were among the founding members of the coalition Digital Music Europe, which made fair “access to online platforms” one of its key lobbying goals. The next month, a follow-up letter to Juncker again co-signed by Spotify and Deezer called for more protection to ensure European digital services got a “level playing field” on platforms owned by large US tech companies including Apple.

The European firms called for “clear and enforceable obligations that are a deterrent and prevent unfair businesses practices by platforms”, adding that “these obligations should include but go beyond mere transparency requirements, which alone will not ensure platforms act as gateways rather than become gatekeepers to the digital economy”.

This February, the European Parliament, European Commission and Council of the European Union issued their first ‘platform-to-business’ regulations, covering internet/tech companies running platforms from search engines and app stores to smart speakers.

Spotify CFO Barry McCarthy has also talked about the “competitive advantage” that Apple’s ecosystem of devices and App Store provides it. He told Goldman Sachs’ Communacopia conference last September that Spotify’s strategy is “to build a bigger ecosystem in total than their phone, with partner companies like Samsung, Microsoft, and the Android operating system – which is substantially bigger outside the United States than iOS… and have our success across those platforms enable us to compete. If we do that well, I think our business will prosper. If we don’t? Roadkill”.

Spotify’s action today is an attempt to enlist European regulators to help it avoid such a stuck-to-the-tarmac fate in the future.

It’s also an issue that’s live in the US as well as Europe. Last November, Amy Wang at Rolling Stone published a story about a long-running non-music consumer lawsuit – Apple v Pepper – focusing on Apple’s App Store policies.

At the time, Wang suggested that any decision in that case that Apple had an ‘unlawful monopoly’ on its store could pave the way for “putting non-Apple music streaming services on equal footing with Apple Music” – freeing them from having to pay it 30% (or 15% once someone’s been paying for a year) of every in-app subscription.

Today’s news means Spotify will have its hands full, legally, in the coming months. The company is already enmeshed in a row with music publishers in the US, over its decision to appeal against new royalty rates for songwriters set by the US Copyright Royalties Board. Plus there’s the small matter of the latest set of renewals of Spotify’s licensing deals with major labels, which are also due this year.

Stuart Dredge

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