Spotify wants something for nothing, Apple claims after big EU fine

The European Commission slapped Apple with a big $1.95 billion fine for anti-competitive conduct in the music streaming market. Apple will appeal.

Apple, Apple Music, EU

The European Commission on Monday slammed Apple with a huge $1.95 billion fine for anti-competitive conduct in the music streaming market. In response to the decision, Apple fired back at the EU and Spotify, saying the move “just cements the dominant position of a successful European company that is the digital music market’s runaway leader.”

Apple will appeal.

The company also says it intends to comply with the EU’s Digital Markets Act (DMA) within days.

Apple sees it one way

Apple made some telling points in its rebuke, pointing out:

  • Spotify dominates the European streaming music market with 56% share. The app has been downloaded more than 119 billion times on Apple devices.
  • Spotify met with EC officers over 65 times during the investigation.
  • There are currently almost 160 million streaming music subscribers.
  • The streaming service doesn’t pay Apple a commission because it doesn’t sell subscriptions in app.

Europe sees it another way

About the fine, Margrethe Vestager, executive vice president in charge of competition policy, said: “For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store. They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over €1.8 billion.”

Apple disagreed: “The decision was reached despite the Commission’s failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast.”

A potted history

Spotify has been pressing EU authorities to act against Apple since 2015. During these attempts, the rival service claimed the digital music market had stalled and blamed Apple for that.

However, the market actually grew in that time, undermining that argument — which is why three different cases across the last eight years have “consistently” found no evidence of consumer harm. In fact, says Apple, the digital music streaming market in Europe has grown at a rate of 27% per year since 2015.

“The reality is that European consumers have more choices than ever. Ironically, in the name of competition, today's decision just cements the dominant position of a successful European company that is the digital music market's runaway leader,” Apple said.

Regardless of the back and forth, change is coming with the DMA, which has not yet come into force. Spotify also had opportunities it did not take — and most streaming music services also advertise elsewhere.

What about the DMA?

When you read through the EC statement, it feels as if there are some inconsistencies. For example, Apple’s status as the sole App Store provider on iOS has already been tested and is about to be changed. The Commission also seems to have failed to enumerate any actual consumer harm, saying simply in its case that Apple “may” have led “many” iOS users to pay higher prices for music streaming services,

Apple argues that it actually provides a great deal to Spotify.

  • Apple’s competitor enjoys access to tools, platforms, distribution, and developer APIs, as well as in-person support for no cost.
  • Spotify also gains access to Apple’s customers.
  • The App Review team have handled 421 versions of the Spotify app.
  • Apple has even flown engineers to Spotify HQ in Stockholm to help with the app.

It’s hard to not recognize that what Apple provides should be seen as having intrinsic value — surely it is appropriate for that value to be recognized? Apple doesn’t see it being recognized. “But free isn’t enough for Spotify,” Apple wrote in its response. “They also want to rewrite the rules of the App Store — in a way that advantages them even more.”

What Spotify wants, Apple argues, is to offer subscriptions within App Store distributed apps without paying for it. “They want to use Apple’s tools and technologies, distribute on the App Store, and benefit from the trust we’ve built with users — and to pay Apple nothing for it.”

The horse is already back inside the stable

Apple has another problem with the decision, which it notes has been announced just before the DMA comes into play. Apple says it will comply with the DMA within days, and that its plans include changes to the rules challenged by this judgement.

That’s a statement that’s easy to just read through, but for Apple it means that the decision that has been forced upon it “is not grounded in existing competition law. It’s an effort by the Commission to enforce the DMA before the DMA becomes law.”

What that means is that Apple feels that its contribution to Spotify’s success has not been recognized while holding it to a set of standards that don’t yet exist, as those are enshrined in the DMA.

Free trade no more

For me, there is another inherent concern. Mobile World Congress this year saw European telecoms firms begin to voice reluctance to fund 5G and broadband as big US tech firms seem to draw the biggest benefit.

At the same time, voices in the EU continue to note the dominance of Big Tech and Europe’s lack of similarly powerful competitors in the field.

It seems plausible to think statements like these reflect growing nativism across EU governments, which means the quest to maintain an open and free market becomes increasingly politicized. To some degree, some politicization is usually the case, of course. But given the many other challenges enterprises and people face, a move to more extreme politicization threatens a more complex business environment at a time when economies desperately require growth.

What about the money?

That brings me to what happens to the money Apple is being fined. According to the EU small print, this will be distributed across EU member states, including (through a historically weird anachronism I don’t really understand) former EU member the UK.

I’m sure Europe’s musicians struggling to get by on their music royalties will be glad to learn their music streams have ended up funding national economies.

And yet, the fundamental question remains:

Given that even supermarkets charge to stock goods on their physical shelves, what is the appropriate levy Apple and other platform providers can expect for inclusion on their virtual ones? That question still remains unanswered, and I predict a lot of rich lawyers will join the journey to figure that particular answer out. Rather like John Cage’s Silence, this one is going to get legendary.

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