Tag Archives: antitrust

Apple vs Spotify. App Store antitrust violations

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Recently, the EU Commission preliminary stated that Apple with its App Store commission on mandatory in-app purchase system (IAP) and anti-steering provisions, which prevent users from being informed about alternatives, distorts the competition. Now Apple has 12 weeks for official response.

What is IAP?

IAp or in-app purchase system is the element of an App Store application with which user/customer is able to make an in-app transaction to buy a subscription or any stuff inside an app. For that kind of utility, Apple charges about 30% of the initial price.

Why is that important?

You may say that Apple has created their marketplace platform on their iOS. This marketplace is again on their Iphones or IPads. Hereby they are the ones who can charge apps such a price and, as Fortnite case showed us, you will be absolutely right. At the same time there is one but. Apple owns Apple Music. With that argument, Spotify claims that they have unfair price advantage as they can charge customer 30% less and earn the same amount of profits or they can pay more to the musicians. This actually happens as Apple pays $0.0076 per stream while Spotify pays in the range of $0.0026-0.0049.

What is anti-steering provisions?

Basically, anti-steering provisions is the tool that limits the ability of app developers to inform users about alternative purchasing possibilities outside apps.

The influence of the feature

We know that Apple cuts 30% from in-app transactions. The logical behavior of the developer is to offer a purchase outside the app, which is allowed by App Store rules. Nonetheless, it is really a burden to inform a user about such possibility as there are restrictions on that notion.

Back to the Case

In response to Commission’s allegation Apple stated that at this timeframe Spotify leads the market of music streaming and 99% of their users have no connection to IAP. Moreover, they have said that Apple charges only 15% of Spotify subscription. They have also added that Spotify wants all the benefits of Apple’s marketplace and does not want to pay a penny for that which is unfair competition.

Below you can see how Spotify’s founder, Daniel Ek reacted to Antitrust case

Aftertaste

Apple has been struggling with antitrust cases for a while now. All of the proceedings by now have been won by Apple. However, if only once in a blue moon they are punished it will lead to even more allegations towards Apple monopoly. In that case, Apple will lose tons of reputation and money earned on commission.

Sources:

https://www.businessofapps.com/data/apple-music-statistics/

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Apple may have to pay a fine which amounts to $27 billion

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EU has accused Apple of improper competition practices. The Commission accused Apple of breaching EU rules of fair competition as they believe Apple holds a dominant position – specifically in the market of music streaming.

Apple’s App Store charges a 30% commission fee on all subscriptions bought through their system. On top of that, they forbid advertising other subscription options through their app on the App Store. If you remember their dispute with Epic Games, Fortnite was kicked from the App Store exactly for breaching their latter part of the policy mentioned.

EU claims that Apple is distorting what was supposed to be a healthy competition and that ultimately the system takes toll on the customers, due to the fact that companies partnering with Apple have to up their prices in order to combat the 30% ‘Apple tax’.

If Apple is found guilty they will have to face a fine of 10% of annual revenue which accounts to $27 billion, and adjust their business model so that it works in a way that doesn’t affect healthy competing.

Apple responded to the accusations with:

“Spotify has become the largest music subscription service in the world, and we’re proud for the role we played in that. Spotify does not pay Apple any commission on over 99% of their subscribers, and only pays a 15% commission on those remaining subscribers that they acquired through the App Store. 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. 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.”

Spotify has its own take:

“Today is a big day. Fairness is the key to competition… we are one step closer to creating a level playing field, which is so important for the entire ecosystem of European developers.”

“Ensuring the iOS platform operates fairly is an urgent task with far-reaching implications. The European Commission’s Statement of Objections is a critical step toward holding Apple accountable for its anticompetitive behavior, ensuring meaningful choice for all consumers and a level playing field for app developers.”

Another parties also join in opposing apple in their anticompetitive practices as Apple is pressured the situation is yet to escalate, although slowly Apple is seen taking a step back – lowering the % fee, and skipping it for some services. We have yet to see what will happen as Apple is pressed with more and more antitrust complaints.

resources:

https://www.theverge.com/2021/4/30/22407376/apple-european-union-antitrust-charges-app-store-music-competition-commission-margrethe-vestager

https://techcrunch.com/2021/04/30/europe-charges-apple-with-antitrust-breach-citing-spotify-app-store-complaint/

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