Apurv Umredkar, a Legal Associate at a leading Indian law firm, discusses the European Commission's stance on the Spotify-Apple feud...
With the commencement of 2021, antitrust investigations on a global level grew exponentially. The reason being, despite the world grappling with catastrophic COVID-19, surprisingly these enterprises added billions of dollars to their total market capitalization value. The regulatory concern is not with their increased revenue, but with their ignorant attitude and ever-growing dominance, which pose a threat to overall market (the consumers and small competitors therein). As a result, their act or even an omission is likely to attract the antitrust regulatory action. As far as litigation in antitrust space goes, most of the cases are against the five big tech corporate giants, which interestingly also hold the position of being world’s behemoth enterprises. Because the financial figures of these companies revolve around billions, or sometimes maybe even trillions, the fines and penalties in antitrust lawsuits are staggering.
From the rate at which big technology enterprises like Google, Apple, Amazon, Facebook, and Microsoft are being sued in various individual and class-action lawsuits across various jurisdictions, one thing is clear—the 2021-2030 decade will not be very friendly for these conglomerates; rather, it will make matters worse for the respective in-house legal departments of these firms. These multinational conglomerates form the top five positions among the most valued & prestigious companies across the globe, and are therefore under the constant vigilant scrutiny of antitrust regulators. It can easily be construed that these enterprises are often sued by companies forming a vertical link in the production chain with them. The recent Spotify-Apple case is a prime example. It is not the first time a global tech enterprise has come into the limelight of competition penalties, but certainly the authorities are expanding their scope and ambit in order to grab as much entities as possible.
The European Commission’s Antitrust Division has recently raised objections in Apple Inc’s misconduct regarding the app store policies and practices and took charge against the tech giant for breach of antitrust regulations by distorting competition in the music streaming market. This preliminary view was a result of a 10-month long investigation by the commission initiated due to various complaints filed by Spotify over a period of time. Some speculate that the complaint was filed in the European jurisdiction because the regulations therein may prove to be more favorable for the Spotify than any other antitrust jurisdiction. The formal antitrust investigation began in June of last year. Lately, the UK competition regulator Competition and Markets Authority started investigations on the same matter. Apple was subsequently booked for abusing its dominant position for distribution of music streaming apps by way of its own app store and for which it was granted a time of 12 weeks from the date of issuance of statement of objections.
The main issue observed by the Commission here was Apple’s conduct, which coerced the music application developers to mandatorily use Apple’s own in-app purchase system if they wish to provide music streaming services to Apple consumers via Apple’s app store. The Commission also took cognizance on the conditions imposed by Apple, which ultimately prevented developers to intimate the consumers or users about the arbitrary price hike and substitutable cheaper options available for purchasing their services. Apparently, these restrictions were imposed in order to facilitate Apple own music streaming app ‘Apple music’ over the competitor apps which helps in attracting large number of users towards Apple music.
The commission by way of a detailed Statement of Objections, raised 2 major sets of objections—(a) the mandatory use of in-app purchase system (IAP System) and (b) Anti-steering provisions which restricted app developers from informing consumers about the alternative purchasing options. The first objection pertained to the 30% commission charged by Apple from all app developers in lieu of granting them accessibility to publish their application on Apple’s app store. This led to the ultimate price burden being shifted to consumers. The second objection deals with the limitations by Apple on music app developers that restricted them from informing consumers about the alternative purchase options, which led to buying subscriptions at a higher price than what they are supposed to pay. The statement of objections released clearly specified that the Commission found Apple to be in a dominating position in the market for distribution of music streaming apps via app store. And the fact that app store is the only way by which Apple users can get access to all the applications adduces the dominating position.
Apple is one of those rare companies that create products based on a closed ecosystem. Everything right from software, applications, operating system, browser and other services found in apple devices is solely manufactured by Apple itself. There is hardly any external manufactured part which apple uses in providing its products and devices. This exclusivity criteria is another reason why Apple can enforce its arbitrary conditions and restrictions and why apple users are loyal to this brand. Apple users often stick to their Apple devices because of the unavailability of Apple products on other platforms. Consequently, they only have Apple’s app store for accessing any application services, and neither the Apple users nor the app developers have a choice other than the Apple app store to avail services. As a result, Apple is accused of abusing its dominating position. As of now, the 12-week time frame has been allotted to Apple for replying back with their side of story. If the charges alleged in this case are proved against Apple, then a fine may be levied for a up to 10% of its annual global revenue. As part of their rivalry, the two entities can be clearly seen doing confrontation in the public opinion space apart from the ongoing high stakes legal battle. From directly addressing each other in their respective blogs to publishing notices and giving clarification by providing their side of the story, both companies have carried on the strife to express bitterness and to date continue to do so.
In the last one year or so, the European Commission received multiple complaints against Apple from various stakeholders including Epic Games, Telegram, ZAW (German Advertising Company) etc. In the app store matter (the present case itself), the Commission since June 2020 commenced gathering evidence and proof, which could clearly elaborate whether apple is guilty of allegations charged against it. The future seems a bit dark for apple as antitrust regulators across various jurisdictions especially the European ones, are tightening their grip on it, which will definitely cause harm to Apple to a much greater extent than what can we imagine. Expressing her views on the matter, the Executive Vice President of European Commission, Margrethe Vestager tweeted from her official profile informing her followers and antitrust enthusiasts about the recent step taken in this matter by the commission. She also gave a hint of various upcoming legal proceedings related to audiobooks and e-books which are pending and soon going to be investigated against the Apple.
Spotify CEO Daniel Ek took to twitter to express his fulfillment with the Commission decision. He tweeted stating that this step will make sure the level playing field among the competitors and added the beneficial impact this will have on European ecosystem. Meanwhile, Apple rejected all the claims made against it, and contended that it is proud of making Spotify a global market leader in music streaming services. In its statement it was contended that “Once again, they want all the benefits of the App Store but don’t think they should have to pay anything for that. The Commission’s argument on Spotify’s behalf is the opposite of fair competition.” Replying to the Commission’s findings, Apple stated that “at the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows.”
As of now, the Commission has given 12-week time to Apple to respond to the statement of objections. If the charges alleged are proved against it, it could be held guilty and liable under Article 102 of the Treaty on the Functioning of the European Union, which deals with Abuse of Dominant Position and the punishments regarding it. Although it is clearly stipulated that the issuance of Statement of Objections must not pre-judiciously affect the final decision-making stance. The odds are in favor of Spotify because the complaint it filed is similar to various other complaints filed by Apple Music’s competitors. Also, the Commission itself is of the prima facie view that Apple has blatantly breached the European Competition Rules. Since the judgment is still pending, we antitrust enthusiasts can only wait for the final decision to come. The rest is beyond our control.
Apurv Umredkar is a Legal Associate at one of the leading Indian law firms. He is also a member of the Advisory Council at Harvard Business Review. He may be contacted at email@example.com
Suggested citation: Apurv Umredkar, The European Commission’s Stance on the Recent Spotify-Apple Feud, JURIST – Professional Commentary, June 10, 2021, https://www.jurist.org/commentary/2021/06/apurv-umredkar-european-commission-on-spotify-apple-feud/.
This article was prepared for publication by Heidi Johnson, JURIST Assistant Editor. Please direct any questions or comments to her at firstname.lastname@example.org
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