The European Commission Fines Apple 1.84 Billion Euros and Spotify Still Isn’t Happy
By: Randy Picker (Pro Market)
On March 4, the European Commission imposed a fine of 1.84 billion euros on Apple for exploiting its dominant position by enforcing anti-steering provisions on providers of music streaming apps through the App Store. Although the Commission did not directly name Spotify, its investigation, initiated in response to Spotify’s complaint in March 2019 and launched in June 2020, led to this substantial penalty. While this fine might seem like a victory for Spotify, the reality is quite different.
To understand the situation, it’s essential to consider Apple’s revenue streams from iPhones and the App Store. Apple profits not only from selling iPhones but also from the royalties it charges developers. The relationship between devices and services is integral here. Developers offering free apps pay no royalties to Apple, and many users initially opt for Spotify’s free, ad-supported tier. When users download this version of the Spotify app from the App Store, Apple doesn’t receive any revenue, despite providing various services related to the download, such as App Store maintenance and patent licensing.
Spotify’s goal is to convert free users into paying subscribers, preferably through in-app purchases. However, Apple imposes a 30% commission on such transactions, which Spotify refuses to pay. While Apple could charge Spotify for each app download, it has historically only charged royalties when users transition to paid services within the app. To ensure collection of these royalties, Apple restricts how Spotify can inform users about alternative subscription methods outside the app, leading to what the European Commission deemed as an anti-steering rule.
Specifically, the Commission identified Apple’s practices as “unfair trading conditions,” potentially resulting in higher prices for music streaming subscriptions for iOS users over the past decade. However, it’s debatable whether Spotify passed on these charges to its customers. Looking beyond the question of market dominance, with Apple holding around 33% of the smartphone operating system market in Europe and Spotify claiming 56% of the music streaming market, the financial dynamics come into focus. Despite benefiting significantly from the iOS platform, Spotify resists paying Apple any fees. Consequently, Spotify does not allow its customers to subscribe to its premium service through the app, a practice it gradually phased out for both new and existing customers. The exact amount Spotify has paid Apple remains unclear, but Apple asserts that Spotify currently pays nothing, a claim that appears accurate…
Featured News
UK Probes Lindab’s Acquisition of HAS-Vent Amid Fears of Market Monopoly
Apr 28, 2024 by
CPI
Shein Faces EU Regulations Over User Data
Apr 28, 2024 by
CPI
Google Fights Back Against US Antitrust Lawsuit
Apr 28, 2024 by
CPI
US Homeland Security Establishes Blue-Ribbon Board with Tech CEOs to Advise on AI
Apr 28, 2024 by
CPI
FTC Accuses Amazon Executives of Using Disappearing Messaging Apps to Conceal Evidence
Apr 28, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Economics of Criminal Antitrust
Apr 19, 2024 by
CPI
Navigating Economic Expert Work in Criminal Antitrust Litigation
Apr 19, 2024 by
CPI
The Increased Importance of Economics in Cartel Cases
Apr 19, 2024 by
CPI
A Law and Economics Analysis of the Antitrust Treatment of Physician Collective Price Agreements
Apr 19, 2024 by
CPI
Information Exchange In Criminal Antitrust Cases: How Economic Testimony Can Tip The Scales
Apr 19, 2024 by
CPI