Apple challenges €1.8 billion EU antitrust fine Tuesday, May 21, 2024 12:17 pm 2 Comments
Apple is challenging a €1.8 billion (US$1.9 billion) European Union fine alleging the company thwarted fair competition among music-streaming rivals, including the perpetually whining Spotify.
Samuel Stolton for Bloomberg News:
[Apple] has filed a suit at the EU’s General Court in Luxembourg to topple the March decision, according to people familiar with the matter who spoke on condition of anonymity.
The EU’s crackdown on Apple also included an order to stop preventing music-streaming apps from informing users of cheaper deals away from its App Store.
Apple’s appeal sets up yet another court battle with the EU regulator, which previously slapped the Cupertino, California-based company with a record €13 billion tax bill in a dispute over Irish state aid. The final outcome is still pending after Apple won an early round.
MacDailyNews Take: Apple in March released a statement, “The App Store, Spotify, and Europe’s thriving digital music market,” which addresses the European Commission’s decision claiming the App Store has been a barrier to competition in the digital music market and fining Apple $2 billion.
Apple Inc.:
Today, the European Commission announced a decision claiming the App Store has been a barrier to competition in the digital music market. 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.
The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation.
Today, Spotify has a 56 percent share of Europe’s music streaming market — more than double their closest competitor’s — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world. A large part of their success is due to the App Store, along with all the tools and technology that Spotify uses to build, update, and share their app with Apple users around the world. We’re proud to play a key role supporting Spotify’s success — as we have for developers of all sizes, from the App Store’s earliest days.
The App Store Journey
Since the App Store launched more than 15 years ago, Apple has had two simple goals: creating a safe and trusted marketplace for our users, and an incredible business opportunity for developers. That approach seems simple, but the app economy it inspired helped drive one of the fastest growth curves in the history of technology. Today, developers compete on a level playing field on the App Store. Apps are reviewed according to a comprehensive set of rules, which are designed to protect our users. And meeting those rules means developers of all sizes can reach more than a billion devices around the world.
Over time, the App Store has offered developers even more value. But the vast majority of developers — about 86 percent — never pay Apple a commission.
Today, there are just two circumstances where a developer on the App Store pays Apple a commission. That’s when a user buys a paid app from the App Store or an in-app digital good or service — like a subscription or a power-up in a game.
If a developer sells physical goods, serves ads in their app, or just shares an app for free, they don’t pay Apple anything. The same is true if a developer sells a subscription on the web for users to buy, before they use it in an app on their device. Music app developers can even include information about other offers available outside of their app, along with a link directing users to a website to create and manage their account. Over time, the App Store has helped developers of all sizes build successful businesses and reach people around the world. And few companies embody that story better than Spotify.
Spotify’s Dominant Share of the Market
Starting out as a small startup in Stockholm, Sweden, Spotify has grown their company into the largest digital music business in the world. They have a more than 50 percent share of the European market, and on iOS, Spotify has an even higher share than they do on Android.
But that’s just part of the picture, because Europe’s digital music market has absolutely exploded. Companies compete for new customers. Consumers have many options to choose from. And last year, there were nearly 160 million subscribers — up from 25 million in 2015 — a staggering 27 percent growth rate per year. Companies like Google, Amazon, Deezer, SoundCloud, and Apple compete for customers every day — but Spotify stands at the top.
Spotify Pays Apple Nothing
Despite that success, and the App Store’s role in making it possible, Spotify pays Apple nothing. That’s because Spotify — like many developers on the App Store — made a choice. Instead of selling subscriptions in their app, they sell them on their website. And Apple doesn’t collect a commission on those purchases.
All told, the Spotify app has been downloaded, redownloaded, or updated more than 119 billion times on Apple devices. It’s available on the App Store in over 160 countries spanning the globe. And there are many more ways Apple creates value for Spotify, at no cost to their company:
• Our engineering helps ensure that Spotify’s apps can work seamlessly with Siri, CarPlay, Apple Watch, AirPlay, Widgets, and more.
• Like every developer, Spotify can access Apple’s more than 250,000 APIs — and uses 60 of our frameworks — so their apps can connect with Bluetooth, send notifications, play audio in the background of a user’s device, and more.
• Spotify has used our beta-testing tool, TestFlight, for almost 500 versions of their app to experiment with new features and capabilities.
• Our App Review team has reviewed and approved 421 versions of the Spotify app — usually with same-day turnaround — and frequently expedites reviews at Spotify’s request.
It takes continuous effort and a lot of investment for Apple to make the tools, the technology, and the marketplace that Spotify uses every day. We’ve even flown our engineers to Stockholm to help Spotify’s teams in person. And the result is that when a user opens the Spotify app, listens to music on their commute, or asks Siri to play a song from their library, everything just works. And again — Spotify pays Apple nothing.
When it comes to doing business, not everyone’s going to agree on the best deal. But it sure is hard to beat free.
Spotify Wants More
But free isn’t enough for Spotify. They also want to rewrite the rules of the App Store — in a way that advantages them even more.
Like many companies, Spotify uses emails, social media, text messages, web ads, and many other ways to reach potential customers. Under the App Store’s reader rule, Spotify can also include a link in their app to a webpage where users can create or manage an account.
We introduced the reader rule years ago in response to feedback from developers like Spotify. And a lot of reader apps use that option to link users to a webpage — from e-readers to video streaming services. Spotify could too — but they’ve chosen not to.
Instead, Spotify wants to bend the rules in their favor by embedding subscription prices in their app without using the App Store’s In-App Purchase system. 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.
In short, Spotify wants more.
Spotify’s Coordination with the European Commission
In 2015, Spotify started working with the European Commission on an investigation with little grounding in reality. They claimed the digital music market had stalled, and that Apple was holding competitors back. Unfortunately for their case, Spotify continued to grow — and thanks in part to the App Store, eclipsed every other digital music business in the world.
Over the next eight years, and more than 65 meetings with Spotify, the European Commission has tried to build three different cases. With every pivot, they’ve narrowed the scope of their claims — but each theory has had a couple of features in common:
• No evidence of consumer harm: European consumers have more choices than ever in a digital music market that’s grown exponentially. In just eight years, it’s gone from 25 million subscribers to almost 160 million — with more than 300 million active listeners — and Spotify has been the biggest winner.
• No evidence of anti-competitive behavior: Eight years of investigations have never yielded a viable theory explaining how Apple has thwarted competition in a market that is so clearly thriving.
The European Commission is issuing this decision just before their new regulation — the Digital Markets Act (DMA) — comes into force. Apple is set to comply with the DMA in days, and our plans include changes to the rules challenged here. What’s clear is that this decision is not grounded in existing competition law. It’s an effort by the Commission to enforce the DMA before the DMA becomes law.
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.
What’s Next?
Apple has been a part of Europe for over 40 years, and today, we support more than 2.5 million jobs across the continent. We’ve helped markets thrive, promoting competition and innovation at every turn — and the App Store is an important part of that story. So while we respect the European Commission, the facts simply don’t support this decision. And as a result, Apple will appeal.
The digital music market is a great example of the app economy at work. After all, over the App Store’s 15 years, a simple phrase — there’s an app for that — has become a universal truth. And today, behind every app is a wildly successful company or an aspiring entrepreneur chasing a dream.
Every day, teams at Apple work to keep that dream alive. We do it by making the App Store the safest and best experience for our users. We do it by giving developers the means to make incredible apps. Most of all, we do it because apps have an incredible capacity to drive innovations that empower people and enrich their lives.
MacDailyNews Take: As we wrote on March 4, 2024:
The European Union arose because the Europeans couldn’t compete on their own with the rest of the world, so they each lined up to surrender their national sovereignty, unique cultures, and dignity for an undemocratic, opaque, wasteful, bloated, bureaucratic quasi-governmental blob – and, even with the EU’s thumbs all over the scale, they still can’t compete.
MacDailyNews Note: Spotify does pay Apple something: $99 per year, the same as every other developer with an app in Apple’s App Store.
Related
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Google, fighting record $5.1 billion EU fine, slams regulators for ignoring Apple Monday, September 27, 2021 In "News"
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