Apple has a Spotify problem—and it just cost the iPhone maker $2 billion from the European Commission.
For years, the two companies have been at war as the streaming service lured users away from Apple’s iTunes and accused the tech giant of exploiting its dominance to stamp out innovation. In their long-running conflict, each has encroached on the other’s territory. When Apple launched its streaming service, Apple Music, in 2015, Spotify claimed that Apple was able to lower platform costs because Apple didn’t have to pay the same App Store fees as competitors. In 2019, Spotify launched an ambitious podcast spending spree, distributing on high-profile shows, in another direct challenge to Apple.
The early days of feudalism were civil, with few barbs traded in public. “We worry about taking the humanity out of music,” Apple CEO Tim Cook said in 2018, a cryptic comment widely interpreted as a joke at Spotify’s heavy use of algorithmic recommendations. But Spotify became more visible as EU politicians began calling for laws to rein in Big Tech. The 1.8 billion euro ($1.9 billion) fine on Apple announced today by the European Commission shows that its strategy is working.
The fine stems from a legal complaint filed by Spotify with the European Commission in 2019, challenging the restrictions and fees Apple places on developers listing their apps in the App Store. Today the European Commission agreed, saying that Apple’s App Store restrictions amount to unfair trading conditions that may cause iOS users to pay higher prices for music streaming subscriptions.
“For over a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” Margaret Vestager, the EU’s competition chief, said in a statement. “They did so by restricting developers from informing consumers about alternative, affordable music services available outside the Apple ecosystem.”
Apple’s App Store rules restrict music streaming companies and other apps from informing their users on Apple devices how to upgrade or sign up for subscription offers outside of the app. Instead, app users can only see sign-up options for app subscriptions through Apple’s payment system, where prices are higher because Apple takes a cut. Some app makers, including Spotify, don’t offer in-app purchases because they don’t want to pay this commission. “Some users may have paid more because they didn’t know they could pay less if they subscribed outside of the app,” Vestiger said. “This is illegal under EU antitrust rules.” Apple, which says the EU has failed to provide credible evidence of consumer harm, has vowed to appeal.
big number
The fine was larger than expected, prompting Apple’s stock to drop 3 percent on Monday. Media reports had predicted a fine of 500 million euros based on anonymous sources. It’s also the largest fine the EU has ever issued against a tech company, trailing only the two Google fines of $5.1 billion and $2.4 billion. Vestager explained in a press conference that the purpose of the penalty measure is to prevent the company from breaking the rules in the future. He added that the amount includes a “lump sum” to “get protection.” The $1.9 billion amount is 0.5 percent of Apple’s global turnover, he said.
Although Spotify’s CEO Daniel Eck has expressed his disapproval of Apple’s business strategy, he is also an unpopular figure in Europe’s battle against Apple. The self-described introvert has taken on the role of spokesperson for disgruntled European app developers who finally feel their grievances about Big Tech are being heard.
On Monday, Eck posted Video on x In which he described Apple as a threat to the open internet. “Apple has decided that they want to shut down the Internet and make it their own, and they make every single person using an iPhone their customer and they have to determine what the user experience should be, ” he said. Eck also claimed that Apple wants to tax Spotify while exempting its own music service, Apple Music.