Apple lashes out at Spotify after €1.8 billion EU fine

The decision comes after Brussels investigated a complaint from music streaming giant Spotify some five years ago. In response Apple launched a blistering attack on Spotify – essentially accusing its rival of insatiable greed – and vowed to launch a legal challenge.

The latter was to be expected: Apple was never going to take a fine of that magnitude lying down. We don't know the absolute total of the penalty incidentally. The Commission noted that it had applied a base line fine (of unspecified amount, but determined through its revenue-based guidelines) and slapped an additional lump sum of €1.8 billion on top "to ensure that the overall fine imposed on Apple is sufficiently deterrent."

The Commission's ire stems from the way Apple distributes music streaming apps to iPhone and iPad users via its app store. It has ruled that Apple employed illegal – under EU antitrust rules – anti-steering provisions by banning music streaming app developers from fully informing iOS users about cheaper ways of securing music subscription services from outside the app.

Apple collects 30% commission from music streaming services when their customers sign up to paid service within an app downloaded from the App Store, the Commission explains. Ultimately, that charge gets passed on to the end user. In theory, consumers can avoid the 30% price hike by signing up from outside the app – on a streaming provider's website, say – but the Commission claims that Apple has made it difficult for them to do that by preventing the streaming service from providing that information inside their own app, including links, or contacting their own users directly to inform them of alternative pricing options.

Put that way, and setting aside the size of the fine, it seems like a reasonable complaint. But funnily enough, Apple takes a very different view.

"The decision was reached despite the Commission's failure to uncover any credible evidence of consumer harm, and ignores the realities of a market that is thriving, competitive, and growing fast," Apple said, in the opening paragraph of a lengthy diatribe aimed as much at the source of the complaint as at the European Commission itself.

"Today, Spotify has a 56 percent share of Europe's music streaming market — more than double their closest competitor's — and pays Apple nothing for the services that have helped make them one of the most recognizable brands in the world," Apple said. Spotify, like many developers in the App Store, do not sell subscriptions within their app, but only on their website, meaning that Apple collects no commission.

And to Apple's mind, that means Spotify is essentially getting a free ride.

"But free isn’t enough for Spotify. They also want to rewrite the rules of the App Store – in a way that advantages them even more," Apple said.

"Spotify wants to bend the rules in their favor by embedding subscription prices in their app without using the App Store's In-App Purchase system. They want to use Apple's tools and technologies, distribute on the App Store, and benefit from the trust we've built with users – and to pay Apple nothing for it," it wrote. "In short, Spotify wants more."

The implication there is clear; the dominant player in the music streaming market, which happens to be an EU-based company, is seeking to boost its position at the expense of one of the companies essentially facilitating its presence and reach.

There are, of course, other sizeable players in the music streaming market, Apple being one of them, but Spotify holds most of the sway. And as far as Apple is concerned, it has got there both by exploiting the App Store platform and by leaning on the EU over a period of eight years, during which time it has built a number of different cases against Apple.

Apple insists those cases are without merit, at least in so far as they have failed to show any evidence of consumer harm – the market burgeoning, as it is – or of anti-competitive behaviour.

But competition commissioner Margrethe Vestager sees it differently.

"Apple's rules ended up in harming consumers. Critical information was withheld, so that consumers could not effectively make an informed choice. Some consumers may have paid more because they were unaware that they could pay less if they subscribed outside the app. And other consumers may not have managed to subscribe to their preferred music streaming provider at all, because they simply couldn't find it," Vestager said. "The fine we impose today reflects both Apple's financial power and the harm Apple's conduct inflicted on millions of European users."

But while Vestager talks freely the damage inflicted on millions of users, there is a lack of data in the Commission's ruling. And that might help Apple as it embarks upon its appeal.

It has been ordered to remove anti-steering provisions and to allow developers to communicate freely with their own users, and it seems unlikely that a court would overturn that element of the ruling. A precedent has likely been set on that score. And Apple insists it was ready to change its policies in accordance with the upcoming Digital Markets Act anyway, so the actual market impact going forward is effectively irrelevant.

The appeal will be more about that fine. Apple claims that the decision is not grounded in existing competition law, but rather marks an attempt by the European Commission to enforce the Digital Markets Act before it has even come into force, which may be a factor in its favour. And it may be able to challenge the size of the fine on the grounds that the Commission has not shown real evidence of market harm.

Whatever the outcome, we're probably looking at a protracted legal battle that will well outlast the current Commission.