Apple is being dragged before the European Competition Commission by Spotify, which is claiming abuse of dominant position. It’s just the latest front in the battle between the world’s top two music streaming companies.
It was a first for the music streaming industry: On March 13th Spotify, the Swedish music-streaming service, made an official complaint to the European Competition Commission. The reason? It says Apple is abusing its dominant position in the market to crush the competition.
The unseemly tussle between Apple and Spotify goes back a while, but with this move Spotify is taking things to the next level by crying foul over how Apple uses the App Store: a platform through which users can download applications, of which Apple is both the owner and a user. Spotify say the App Store is not a level playing field in the music streaming market and has even created a website, timetoplayfair.com, dedicated to its gripes with Apple which contains a video explaining the reasons why it is taking Apple to court. Spotify’s complaint centers around a number of issues. The first is the 30% cut Apple claims on the price of a Spotify subscription taken out using the Spotify app. Spotify claims that this tax is discriminatory as it obliges it to “artificially increase the price of a Spotify subscription well above the price of a subscription to Apple Music,” states Daniel Ek, Spotify’s CEO.
“The action taken by Spotify before the European Commission constitutes a rebellion against the terms and conditions of use of the App Store,” explains Gerard Haas, an IP law specialist. In addition to creaming off profit, Apple restricted what Spotify could do on the platform in terms of promotions, which increased the Swedish company’s sense of unhappiness to the point where Spotify no longer makes its app available on the App store. While Netflix and Fortnite have also withdrawn their apps from the App Store after pointing the finger at the Apples payment system, Spotify is the first music streaming company to do so.
The right body
This is not the first time that Apple has been subject to an antitrust proceeding. In 2012 eBizcuss, the main independent reseller of Apple goods in France, took an unfair competition and abuse of dominant position case to the Paris commercial court and competition authority. However the court found that it had no jurisdiction to rule on the case given that the contract between Apple and eBizcuss stipulates that disputes between the parties must be heard by a court in the Republic of Ireland.
The Spotify complaint, relating not to sales of a physical product in a specific geographic location but, rather, online services, has a better chance of being heard by Brussels than any national court. According to Haas, “Spotify has gone to the right body in taking its case to the European Commission.” However, proving that Apple is guilty of unfair competition will not be easy, according to the lawyer, “this latest legal battle is looking a lot like the one Apple fought against Samsung over patents.” This legal case could prove crucial in that it may lead to a re-evaluation of the relationship between the supplier and the intermediary.
The law of the market
In its indictment, Spotify cites the commercial practices of Apple’s music streaming service, but it does not offer any proof of abuse. “It is not a crime to have a dominant position, that’s the law of the market – there will be winners and losers: what is illegal, however, is the abuse of that dominant position,” explains Haas.
If the Commission rules that Apple did act illegally, then it can impose a fine that reflects the length and seriousness of the abuse, which could be as much as 10% of Apple’s annual turnover, almost $30 billion. Brussels must first determine whether, in fact, Apple is in a dominant position, and if so, if it abuses that position. To determine this, the EU’s competition commissioner Margrethe Vestager will study the ability of Apple’s competitors in the music-streaming business to establish themselves in the market.
As a pointer of what may be to come, the Commission ruled in November that Apple’s instant messaging service was ‘insufficiently dominant in the market’ for it to abuse its position.
In response to Spotify, Apple point out that it is “an intermediary between app developers and users of the App Store” and thus is perfectly within its rights to charge a 30% commission on subscriptions taken out on rival services using the App Store. Apple accuses Spotify of wanting to have all the benefits of its platform without paying for them. “Apple’s App Store is not a public space, if you want to use it you have to abide by Apple’s terms and conditions,” asserts Haas. While competition has never been fiercer between the two music-streaming platforms, one pattern to emerge is that Europeans prefer Spotify, while Apple Music is the go-to music streaming service of Americans. Nevertheless, the affair could have repercussions for Apple’s image in its home market as this is as much a battle for hearts and minds as it is a legal one.
Law as strategic weapon
Recently announced, the case has already caused quite a stir. For Gerard Haas the move can be interpreted in two ways: either Spotify is looking to mark its territory in the music-streaming market or its business has run out of puff and can no longer operate under the yoke of the App Store. Whichever is true the two bitter rivals seem in no mood to compromise. “The law is at once a strategic weapon for businesses and a massive deterrent.” The suspicion is that in this “sumo wrestling match” as Haas puts it, the legal debate will be used as an instrument to publicize Spotify and Apple, but in any case “fines are always bad and can lead to others,” states the founding partner of Haas Avocats. It remains to be seen whether the European Commission will hand down any.