The music streaming wars under European antitrust law - Apple hit with €1.8 bn fine following Spotify complaint.

On the 4th of March, the EU issued a 1.8 bn euros fine for breaking competition laws over music streaming and giving Apple Music an unfair advantage over its long-standing rival Spotify.

This landmark penalty is the result of a long-going investigation by the Commission, after Spotify accused Apple in 2019 of engineering the App Store rules to restrict competition. The complaint stemmed from Apple’s infamous 30% tax over in-app user purchases; Spotify argued that Apple had implemented policies to prevent competitors from informing users of discounts and promotions, prohibiting in-app links, buttons or push notifications. As they noted, Apple Music was not subject to the same limitations imposed on competitors.

In the opening press release of the investigation, executive VP Margrethe Vestager had noted that “Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a “gatekeeper” role when it comes to the distribution of apps and content to users of Apple's popular devices. We need to ensure that Apple's rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books.”

On its TimeToPlayFair.com website, created with the purpose of documenting Apple’s discriminatory behaviour, Spotify claimed that the App Store rules were used speciously in order to make it challenging, if not outright impossible, to promote the latest innovations to consumers. Spotify goes on explaining how the aforementioned policies ended up being detrimental for users: “That deal we had for you last month to upgrade to our Premium service that would have saved your family a lot of money? Sorry, there was little we could tell you about it. We aren’t even allowed to tell you something as simple as how and where to upgrade to Premium via the app.”

Indeed, four years later, the Commission found the US tech giant in breach of antitrust rules; as at the time of the complaint it was the sole provider of an App Store for iOS users,  Apple controlled every aspect of the iOS user experience and was able to lay out arbitrarily terms and conditions by which developers had to abide in order to reach the iOS users market.

The Commission held that Apple had violated article 102 of the Treaty on the Functioning of the European Union, which sanctions the abuse of dominant position. In fact, the article states that “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States” First and foremost, even though Apple is a US-based company, it is considered to have an “undertaking” in the European Economic Area, as the ECJ stated in Hofner v. Elsen that "The concept of an undertaking encompasses every entity engaged in economic activity regardless of the legal status of the entity and the way in which it is financed”. Not every abusive undertaking would be caught under art 102, but only the dominant undertaking which expresses abusive behaviour. As before the Digital Markets Act, which opened up the way for sideloading on iOS and will be analysed later, Apple had a monopoly over the downloading of apps for iOS users.

Market dominance is not prohibited per se under union antitrust rules, however dominant companies must abstain from using their privileged position to skew market competition. Specifically, Apple’s behaviour integrates the case described in clause (a) “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions”, by forcing anti-steering provisions which are neither necessary nor proportionate. 

Meanwhile, Apple rebutted that the Spotify app has been downloaded 119 billion times onto its devices and is currently available on the App Store in over 160 countries, and despite that “Spotify pays Apple nothing, (since) Instead of selling subscriptions in their app, they sell them on their website. And Apple doesn’t collect a commission on those purchases”. While true, the reason isn’t as straightforward as Apple is presenting it. In the years between 2016 and 2023 Spotify has asked customers to switch out Apple’s in-app payment system with another method of their choice, in order to circumvent Apple's fees.

As expected, Apple did not particularly enjoy that trick, but claimed that the final straw was Spotify complaining to the EU. On its website, Apple issued a statement lamenting how “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”.

They accused the Commission and Spotify of conspiring together since 2015 to launch an investigation with “little to no grounding in reality” and discredited the Commission's accusation by stating that “Eight years of investigations have never yielded a viable theory explaining how Apple has thwarted competition in a market that is so clearly thriving.”

Apple is appealing the EU ruling, arguing that it constitutes an attempt to punish the company for violating the Digital Markets Act before it had even entered into force.

In fact, the DMA, which was enacted just three days later, is aimed to help foster competition in the technology market, by breaking down the chokehold that Apple and Google have over the sector. In order to adhere to the new legislation, Apple had to allow customers to download apps outside of the App Store, thus allowing developers to avoid paying the 30% fee.

Not even a week before, Spotify had challenged Apple’s proposed scheme of compliance with the DMA, which depicts the DMA as a privacy concern and still includes high fees for developers, ”  objecting that “Apple’s new terms not only disregard both the spirit and letter of the law, but if left unchanged, make a mockery of the DMA and the considerable efforts by the European Commission and EU institutions to make digital markets competitive”.

However, Apple is not the only one unwilling to bury the hatchet: indeed, Spotify’s battle against Apple’s policies appears far from finished. As the last update of the TimeToPlayFair.com states “The decision marks an important moment in the fight for a more open internet for consumers. The European Commission (EC) has made its conclusion clear: Apple’s behaviour limiting communications to consumers is unlawful. And while we are pleased that this case delivers some justice, it does not solve Apple’s bad behaviour towards developers beyond music streaming in other markets around the world”.

-------------------------------------------------------------------------------------------------

The contents of the article represent solely the ideas and opinions of the author and in no way the opinions of Bocconi University or the IUS@B association.