EU Fines Apple $2 Billion Over Music Streaming, Apple to Appeal

The European Union has hit Apple with a $2 billion fine for anticompetitive behavior in the music streaming industry. This is somewhat odd, as Apple does not hold a dominant position in that industry.

The European Commission’s competition head, Margarethe Vestager, announced the fine, saying that Apple violated antitrust rules by not permitting developers to inform users in the App Store that there were options other than Apple Music.

“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” Vestager said. “They did so by restricting developers from informing consumers about alternative, cheaper music services available outside of the Apple ecosystem. This is illegal under EU antitrust rules, so today we have fined Apple over [2 billion euro].”

Apple Music is only the third or fourth-largest streaming service in the European Union. Spotify holds the lion’s share of the European streaming market with 56% of the market.

As you might imagine, Spotify is clearly pleased with the fine, as you can tell from the following statement.

Apple’s rules muzzled Spotify and other music streaming services from sharing with our users directly in our app about various benefits— denying us the ability to communicate with them about how to upgrade and the price of subscriptions, promotions, discounts, or numerous other perks. Of course, Apple Music, a competitor to these apps, is not barred from the same behaviour.

By requiring Apple to stop its illegal conduct in the EU, the EC is putting consumers first. It is a basic concept of free markets— customers should know what options they have, and customers, not Apple, should decide what to buy, and where, when and how.

Apple has already made a statement regarding the matter, noting that it plans to appeal the fine.

Today, the European Commission announced a decision claiming the App Store has been a barrier to competition in the digital music market. 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.

The primary advocate for this decision — and the biggest beneficiary — is Spotify, a company based in Stockholm, Sweden. Spotify has the largest music streaming app in the world, and has met with the European Commission more than 65 times during this investigation.

Apple also noted that Spotify holds a 56% share of the European music streaming market, double that of its closest competitor. Spotify pays nothing for the services the Cupertino firm provides in the App Store, which Apple claims has made the streaming service one of the most recognizable brands in the world. Spotify uses Apple’s App Store and related tools and technology to create, update, and distribute its app to hundreds of millions of its customers around the globe.

In the statement, Apple also pointed out Spotify’s dominant position in the EU music streaming market. The company said that EU listeners have more choices than ever, and the EU’s decision simply cements the dominant position of a successful European company that is the digital music market’s runaway leader.

Spotify complained to the EU back in 2019 that Apple was abusing its position by forcing developers to use only the App Store’s in-app payments, requiring them to pay Apple a 30% commission on all subscriptions purchased through the app. This gives Apple Music an “unfair advantage” over Spotify, the company argued, since Spotify is forced to raise its prices to compensate for the “Apple tax,” while the price Apple charges for its own streaming service remains unaffected by that. Apple’s “anti-steering” provisions have also prevented Spotify and other companies from informing users that lower subscription rates are available by paying directly on the Spotify website.

The EU began an investigation, publishing a preliminary report in 2021. The report said Apple was guilty of breaching EU laws.

In 2016, Apple changed the cut of the action it receives for subscriptions, instituting a new 15% tier for subscriptions that continued into a second year to help encourage customer retention, instead of the 30% Spotify still claims it is required to pay for in-app subscriptions. Spotify stopped accepting new in-app subscriptions that same year, although it allowed those who had signed up that way to continue paying through Apple’s billing system until last summer, so it was only giving up 15% for the few customers that continued paying that way, although there likely weren’t very many; in 2019, Apple reported that Spotify was paying this commission to Apple on less than 1% of its total number of worldwide customers.