What you need to know
- Apple Music unfairly competes with Spotify, according to the EU Commission.
- Apple charges 30% of in-app purchases, affecting Spotify's ability to make money.
Apple is again in hot water over the way it runs the App Store after the EU Commission announced that it has informed the company of a "preliminary view that it distorted competition in the music streaming market." In other words, the commission believes that Apple Music has an unfair advantage over Spotify – a company that has complained about Apple on the regular.
According to Executive Vice-President Margrethe Vestager, Apple's charging of "high commission fees" is enough to give Apple Music an unfair advantage over the competition.
Our preliminary conclusion: @Apple is in breach of EU competition law. @AppleMusic compete with other music streaming services. But @Apple charges high commission fees on rivals in the App store & forbids them to inform of alternative subscription options. Consumers losing out.Our preliminary conclusion: @Apple is in breach of EU competition law. @AppleMusic compete with other music streaming services. But @Apple charges high commission fees on rivals in the App store & forbids them to inform of alternative subscription options. Consumers losing out.— Margrethe Vestager (@vestager) April 30, 2021April 30, 2021
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "App stores play a central role in today's digital economy. We can now do our shopping, access news, music or movies via apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options."
For the record, it's important to note that Spotify doesn't allow users to sign up for its music subscription service via its iPhone and iPad apps, presumably to avoid paying Apple its 30% cut. Spotify removed the ability after initially offering it. Users must now sign up via the Spotify website, with 100% of the monthly subscription going to the company.
The commission also raised concerns that App Store practices are bad for customers, saying that many streaming providers charge more for their services when someone signs up via the App Store – with Apple's 30% cut passed on to customers.
The mandatory use of Apple's proprietary in-app purchase system ("IAP") for the distribution of paid digital content. Apple charges app developers a 30% commission fee on all subscriptions bought through the mandatory IAP. The Commission's investigation showed that most streaming providers passed this fee on to end users by raising prices.
With this only being a preliminary judgment Apple isn't on the hook for any fines. That could come later though, with the commission now set to speak with Apple about its App Store stance.
