Spotify’s Complaint Against Apple in EU Could Drive Real Change (Premium)

Tired of its discriminatory and anti-competitive behavior, Spotify has accused Apple of breaching EU antitrust laws. This complaint is the single greatest threat yet to Apple’s plans to grow its services business and overcome soft iPhone sales.

And it is about fricking time.

“After careful consideration, Spotify has filed a complaint against Apple with the European Commission (EC), the [EU-based] regulatory body responsible for keeping competition fair and nondiscriminatory,” Spotify founder and CEO Daniel Ek explains. “In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers. After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition.”

Spotify’s move comes on the heels of its announcement to provide Spotify Premium customers with free access to the Hulu movie & TV streaming service. Spotify is clearly trying to counter Apple’s coming video subscription service, which many feel it will tie in some way to Apple Music, Spotify’s biggest competitor.

The EC has confirmed receipt of Spotify’s legal challenge and says it is “assessing them under its standard procedures.” To be clear, this is a major escalation of a growing dissent by content makers about Apple’s rigid control of its ecosystem, their ability to interact directly with their own customers, and Apple’s policy of snagging 30 percent of all in-app revenues for itself.

And it may find some relief: The EC has shown itself to be quite open to aggressively punishing big U.S. tech firms for their market power in recent years. It has charged Google with various antitrust violations, and will no doubt add more soon, with fines reaching $7.5 billion so far. The EC also ordered Apple to repay $14.5 billion in illegal tax breaks to Ireland.

More to the point, Spotify’s complaints are reasonable. Apple does give itself an unfair advantage on iOS, as Spotify charges.

“Apple requires that Spotify and other digital services pay a 30 percent tax on purchases made through Apple’s payment system, including upgrading from our Free to our Premium service,” Mr. Ek notes. “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. And to keep our price competitive for our customers, that isn’t something we can do.”

The alternative, he correctly explains, is to make it impossible for Spotify’s own users to upgrade to Premium from within the Spotify app on Apple’s devices. Netflix, as you may recall, recently changed its app on iOS to prevent Apple from collecting its 30 percent vig. Other app makers, like Amazon, have long done so, leading to confusion for those users who naturally want to access Amazon’s retail, Kindle ebook, or Audible audiobooks stores from with Amazon’s own apps.

Apple also prevents app makers from linking to outside payment opportunities on its platform. But it’s even worse than that, as Apple’s restrictions even reach beyond the apps on its platform.

“Apple limits our communication with our customers—including our outreach beyond the app,” he continues. “In some cases, we aren’t even allowed to send emails to our customers who use Apple. Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.”

As Spotify notes, it’s not looking for special treatment. But then, only Apple gets special treatment on its own platform. And with over one billion customers locked-in to Apple’s one-way, dead-end street of an ecosystem, it has obviously reached the scale where some legal oversight is required.

And Ek’s solution to this problem is both fair and logical.

“Apps should be able to compete fairly on the merits, and not based on who owns the App Store,” he writes. “Consumers should have a real choice of payment systems, and not be ‘locked in’ or forced to use systems with discriminatory tariffs such as Apple’s. [And] app stores should not be allowed to control the communications between services and users, including placing unfair restrictions on marketing and promotions that benefit consumers.”

Bingo. It’s time for a change.