Spotify Accuses Apple of Anticompetitive Practices in Europe

LONDON — Apple’s powerful role as gatekeeper of the App Store has long frustrated the makers of apps who must abide by its rules or risk losing access to hundreds of millions of customers who own Apple devices.

Now one of Apple’s biggest rivals, the music streaming service Spotify, says Apple is abusing its position and violating European antitrust laws.

In an aggressive attempt to undercut Apple’s power, Spotify said on Wednesday that it had filed a complaint with European regulators, accusing Apple of using its App Store to squash companies that compete with its services, including Apple Music.

Spotify’s complaint comes at perilous moment for the world’s biggest tech companies. Scrutiny over Silicon Valley’s power has been increasing in recent years, and has already become a topic among Democratic presidential hopefuls.

One of them, Senator Elizabeth Warren of Massachusetts, last week proposed breaking up the tech giants as a remedy to their unfair advantages. One of her ideas was to separate the App Store from Apple.

“Spotify’s complaint is just the latest example of what can happen when these enormous companies abuse their power to undermine competition,” Ms. Warren said in a statement Wednesday. “We need a level playing field, and that starts by breaking up giant tech companies who both own a marketplace and operate in that same marketplace.”

On Wednesday, a British government report also called for tougher antitrust laws for the industry.

Apple’s role as a make-or-break arbiter has long frustrated app makers by imposing rules and charging a fee of up to 30 percent on anything sold through its App Store.

Spotify, which has headquarters in Luxembourg and Sweden, said it had told the European Commission, an aggressive regulator of the tech industry, that the policies were not just a costly nuisance but a “tax” that violated competition laws and merited an investigation.

The policies have been particularly vexing for companies, like Spotify, that compete with Apple. Spotify and Apple Music are the world’s largest music streaming services.

“They continue to give themselves an unfair advantage at every turn,” Daniel Ek, Spotify’s chief executive, said in a message posted on the company’s website. He said Apple was acting as both “player and referee to deliberately disadvantage other app developers.”

Apple did not respond to a request for comment. The company has said the fees are reasonable given that it must maintain the App Store and is providing access to millions of potential customers who own Apple devices.

Apple’s introduction of the App Store in 2008 revolutionized the mobile-phone industry, creating a new marketplace for consumers to download games, productivity tools and social networking services. There are now more than two million apps available on the App Store.

Companies like Spotify have thrived on Apple’s platform, which typically generates more money for app developers than Google’s Play Store.

Spotify’s overall sales last year rose 29 percent to 5.3 billion euros, or about $6 billion, but the company is not profitable and is under pressure from investors to improve its margins. The company paid about 74 percent of its revenue to cover music rights and related costs.

Spotify has been a formidable competitor to Apple in attracting customers for music streaming. Spotify said that it ended 2018 with 207 million active users around the world, including 96 million who were signed up for a paid subscription that did not include ads. In January, Apple said that its Apple Music service had 50 million paying users.

Apple’s control over the App Store has been an increasing source of tension as the company has focused more on online services that compete with many of the apps sold on its platform. As iPhone sales have leveled off, Apple has relied more on sales of software and services. The largest driver of that sort of revenue is the App Store.

Spotify said Apple was continually changing its policies to harm competitors.

“Apps should be able to compete fairly on the merits, and not based on who owns the App Store,” Mr. Ek said. “We should all be subject to the same fair set of rules and restrictions — including Apple Music.”

A search for “music” on the App Store on Wednesday showed how Apple can give itself an advantage. The top result was an ad for Apple Music, followed by eight more results for Apple apps. Spotify was listed 11th.

Companies are finding ways to reduce the fees they pay to Apple. In 2016, Spotify started sending customers to an outside website to make a payment rather than processing charges within its app. Netflix and Amazon have made similar moves.

As a result, Spotify generally does not share revenue with Apple for customers who signed up after 2016, but pays 15 percent for customers who signed up before that period. Apple’s fee decreases to 15 percent from 30 percent after the first year of a subscription.

Sensor Tower, an app-data firm, estimated that Apple still took in 23 percent of the roughly $670 million consumers spent on Spotify on the App Store from 2015 through 2018.

But Apple punishes companies that do not use its payment system by restricting their ability to communicate with customers and preventing the release of app updates, Spotify claimed. Spotify accused Apple of blocking its app and other Apple competitors from services such as Siri, HomePod and Apple Watch.

Spotify said Apple also treated companies differently. Uber, for example, is not required to pay a fee to Apple for charges through its app.

Apple demonstrated its power this year when, in response to Facebook’s violating its app rules, it temporarily shut down Facebook’s internal apps, including those for the company’s cafeteria menu and shuttle schedule.

The European Commission has a history of turning a company’s antitrust complaints into larger investigations of tech platforms. Last year, it fined Google a record €4.34 billion, about $5.1 billion at the time, for antitrust abuses related to its Android operating system, and forced Google to effectively loosen its grip over the platform. Google is appealing. European officials are also investigating possible anticompetitive practices by Amazon.

European regulators have expressed concerns about Apple’s dominance in music. Last year, the European Commission held up Apple’s acquisition of the song-identification app Shazam over concerns it would harm competition, though the deal was eventually approved. In 2016, the commission accused Apple of a tax avoidance scheme and ordered the company to pay $14.5 billion in back taxes to Ireland, a decision Apple is appealing.

It is unclear whether Spotify’s complaint will lead European regulators to start a formal investigation of Apple. The term of Margrethe Vestager, the top antitrust official in the European Commission, ends this year, meaning the decision could fall to her successor.

“The commission has received a complaint by Spotify, which we are assessing under our standard procedures,” the commission said in a statement.

In the United States, the Supreme Court is considering a suit brought by consumers claiming that Apple’s control over the App Store represents an unfair monopoly, forcing customers to pay higher prices than they would in a more open market.

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