A couple of months ago, Spotify filed a complaint with the European Commission because it doesn't like the way that Apple takes a 30 percent cut of in-app purchases when subscription services like Spotify sign up new customers. The music streaming giant claims that Apple is giving itself an "unfair advantage at every turn". Now, the EU is set to launch a formal competition inquiry.
According to a report in the Financial Times ($), the EU's regulatory body has deemed Spotify's complaint worthy of a formal investigation, due to start in the next few weeks.
The complaint, which was published on March 13 by Founder and CEO of Spotify, Daniel Ek, was titled 'Consumers and Innovators Win on a Level Playing Field'. In that post, Ek said that Apple requires that Spotify and other digital services pay a 30% "tax" on purchases made through Apple’s payment system. "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," wrote the Spotify CEO.
Ek also explained that companies such as Spotify can choose not to use Apple’s payment system, thus avoiding the charge, but then Apple applies a series of technical and experience-limiting restrictions on that app for going its own way. One example of these restrictions given was limiting communication with customers.
Ek also wrote that Apple routinely blocks Spotify's experience-enhancing upgrades, including locking the music streaming app and other competitors out of Apple services such as Siri, HomePod, and Apple Watch. "We simply want the same treatment as numerous other apps on the App Store, like Uber or Deliveroo, who aren’t subject to the Apple tax," wrote Ek.
What will happen next?
For a while, nothing. The investigation is likely to take years to complete and battles between huge tech companies of this size are always slow to reach a conclusion. However, Apple could potentially face a ridiculously large fine. As is standard practice, the EU has the power to fine the Cupertino company up to 10 percent of its global revenue. Google has totted up fines totaling some €8.2 billion ($9.3 billion) for its own antitrust violations in Europe.
Apple could also, of course, change its behavior and meet Spotify's demands, which include Spotify being subject to to the same set of rules and restrictions as other apps, including Apple Music.
What do you think? Is the EU being too hard on US tech companies? Or do the Silicon Valley giants need reining in?