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From Antitrust Law Daily, March 13, 2019

Spotify files antitrust complaint with the EC against Apple

By Jody Coultas, J.D.

Apple’s 30% fee on purchases made in the App Store, guideline changes challenged by Swedish music-streaming service. Spotify asks EC to level the playing field.

In a blog post, Spotify founder and CEO Daniel Ek announced that the music-streaming service has filed a complaint with the European Commission (EC), alleging that Apple acts as both a "player and referee" in the app market, and that its app store rules deliberately disadvantage other app developers.

Apple requires that Spotify and other app developers pay a 30 percent fee for subscriptions, including upgrading from Spotify’s free to premium service. This so-called "Apple tax" allegedly harms consumer choice and stifles innovation. Companies that choose not to use Apple’s payment system are allegedly subject to technical and experience-limiting restrictions on Spotify, according to Ek. Spotify contends that Apple has charged its App Store guidelines to limit companies’ communications with customers, including outreach beyond the app. Also, Spotify alleges that, in some cases, companies are not allowed to send emails to our customers who use Apple. In addition, Apple purportedly blocks experience-enhancing upgrades. Specifically, Apple has apparently locked Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.

Ek noted that the company is seeking to have the same rules apply to all companies that place apps in the App Store, and that numerous other apps like Uber or Deliveroo are not subject to the Apple tax and do not face the same restrictions. The complaint asks that apps should be able to compete fairly on the merits and not based on who owns the App Store; consumers should have a real choice of payment systems, and not be "locked in" or forced to use systems with discriminatory tariffs such as Apple’s; and that app stores should not be allowed to control the communications between services and users, including placing unfair restrictions on marketing and promotions that benefit consumers.

"After trying unsuccessfully to resolve the issues directly with Apple, we're now requesting that the EC take action to ensure fair competition," Ek wrote.

U.S. consumer case. Spotify is not alone in its concerns about Apple’s App Store tactics. U.S. consumers have brought an action against Apple for monopolizing the distribution of iPhone apps.

Whether these consumers can sue Apple has been raised to the Supreme Court, and a decision is expected this term. The case alleges that Apple prohibits third-party developers from selling iPhone apps through channels other than the App Store and discourages iPhone owners from downloading unapproved apps under threat of voiding their warranties. Also, the case argues that Apple’s 30 percent commission charged on every third-party iPhone application purchased from the company’s App Store was anticompetitive (Apple Inc. v. PepperDkt. 17-204).

The U.S. Court of Appeals in San Francisco ruled in 2017 that Apple acted as a distributor of the apps, not a manufacturer or producer. Thus, the appellate court ruled, consumers who purchased iPhone applications from the company’s App Store were direct purchasers of those apps, and had standing to sue Apple for the monopolization and attempted monopolization of the market for the sales of iPhone apps. Apple is now waiting to hear on its petition, asking "[w]hether consumers may sue for antitrust damages anyone who delivers goods to them, even where they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense."

Companies: Spotify AB; Apple Inc.

MainStory: TopStory Antitrust

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