EU regulators accused Apple on Friday of distorting competition in the music streaming market, siding with Spotify in a case that could lead to a hefty fine and changes in the iPhone maker’s lucrative business practices. The preliminary findings start a process that will allow Apple and Spotify to respond. If the case is pursued,
EU regulators could demand concessions, and even impose a fine of up to 10% of Apple’s global turnover, or as much as $27 billion, although they rarely levy the maximum penalty. Apple found itself in the European Commission’s crosshairs after Spotify complained two years ago that the U.S. tech giant unfairly restricted rivals to its own music streaming service Apple Music on iPhones.
The EU competition enforcer, in its so-called statement of objections setting out the charge, said the issue related to Apple’s restrictive rules for its App Store that force developers to use its own in-app payment system and prevent them from informing users of other purchasing options.”
By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition,” European Competition Commissioner Margrethe Vestager said in a statement.” This is done by charging high commission fees on each transaction in the App Store for rivals and by forbidding them from informing their customers of alternative subscription options,” she said.
Apple rebuffed the EU charge.”Spotify has become the largest music subscription service in the world, and we’re proud of the role we played in that,” Apple said in a statement.” Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The Commission’s argument on Spotify’s behalf is the opposite of fair competition,” it added.
Spotify welcomed the EU move.”The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behaviour, ensuring meaningful choice for all consumers and a level playing field for app developers,” its Head of Global Affairs and Chief Legal Officer Horacio Gutierrez said.
This is the first EU antitrust charge against Apple. Reuters was the first to report about the imminent EU antitrust charge in March. Spotify is the market leader in music streaming with 356 million active users and 158 million paid subscribers. Apple Music launched more recently in 2015, is estimated to have more than 70 million subscribers although the company does not give a separate figure for that part of its business. Competition between the two companies has intensified in recent weeks, with both seeking to build their customer base via supremacy in the market for podcasts.
The EU charge comes a week before Apple’s face-off with Epic Games in a U.S. antitrust trial following a lawsuit by the “Fortnite” creator alleging that Apple has abused its dominance in the market for mobile apps. Epic has complained to the Commission on the same issues. Last month, the UK Competition and Markets Authority opened an investigation into Apple after complaints the iPhone maker’s terms and conditions for app developers were unfair.