EU investigating Apple’s response to Spotify complaint [U]

The European Union is investigating Apple’s response to a Spotify complaint, to determine whether the anti-steering changes made by the Cupertino company are sufficient to comply.

Update: GamesFray had suggested that this amounted to a fourth DMA non-compliance investigation into Apple, but it’s now my understanding that they have misinterpreted remarks made by a regulatory risk company …

What you need to know about Apple and the DMA

Europe’s Digital Markets Act (DMA) requires tech giants to ensure that they are not using a dominant market position to give their own products and services an unfair advantage over competing ones.

The first step in the process was to decide which companies qualified as “gatekeepers” under the law – that is, companies whose power was enough to effectively harm competitors. Apple was found to be a gatekeeper in terms of the App Store, as there was no other way for a developer to sell iPhone apps. That meant the company was obliged to make policy changes to comply with the DMA.

Apple announced that it would allow third-party app stores, but with a mass of asterisks. These included charging a Core Technology Fee for any app sold outside of its own App Store, which could potentially bankrupt small developers.

We said at the time that these proposals were not going to satisfy the EU, and that was soon confirmed. The European Commission initially announced that it was not satisfied with two of Apple’s responses to the new law, later adding a third.

Apple under three DMA non-compliance investigations

Apple is currently under three DMA non-compliance investigations:

• App Store anti-steering policies (see following section)
• Alternative app store fee structure, including the Core Technology Fee (CTF)
• Web browser choice screen, during iPhone setup

These investigations may take up to a year, before the EU determines whether or not Apple has complied with the law.

So what’s going on now?

Spotify has long complained that Apple’s App Store policies created an uneven playing field between its app and Apple Music.

Specifically, Apple Music allows in-app sign-up to a paid subscription, and Apple doesn’t have to pay a cut of this to, well, Apple. Spotify, in contrast, would have to pay 30% to Apple, meaning that it cannot compete on equal terms.

Additionally, Apple didn’t allow Spotify to escape this by steering users to its website, to subscribe there instead. It couldn’t link to the website, and couldn’t even specifically tell users that’s where they needed to go to subscribe. (Hence this is known as an anti-steering policy.)

Spotify complained about this back in 2019, and just last month Apple was found guilty of anti-competitive behavior under an older antitrust law. The company was fined €1.8B (roughly $2B). Apple wasn’t happy with this, and has appealed. However, it subsequently loosened its anti-steering policy to comply with this ruling.

Spotify remains unhappy with Apple’s response, and the EU is investigating.

Spotify says Apple can now be fined

Lewis Crofts, editor-at-large of regulatory risk service MLEX, noted Spotify’s allegation that Apple’s changes are insufficient to comply with the DMA.

He subsequently confirmed that the EU is investigating:

GamesFray interpreted this to mean that a fourth DMA investigation has been opened, but my understanding now is that it has misinterpreted Croft’s remarks.

Spotify claims Apple can be fined now

Spotify has suggested that Apple is not in compliance with the DMA, and could be fined from Saturday – the day after Apple announced changes to its policy.

However, app developer and intellectual property activist Florian Müller suggested that Spotify was on shakey ground here. The reason is that the streaming music giant had deliberately filed its complaint in very narrow terms, reasoning that the more specific the charge against Apple, the more likely the iPhone maker would be found guilty.

Müller expressed the view that this excluded a ruling on Apple’s fees, and Crofts agreed.

So the situation appears to be that the existing investigation into the CTF continues.

One thing’s for sure: these matters will take years to be resolved. The EU has said it may take up to a year to make its rulings, and if Apple is found guilty for any or all of it, the company will for sure appeal, setting us up for literally years of court battles.

Photo: Apple