House Judiciary Committee asks Spotify to rat on Apple
Back in March, music streamer Spotify lodged a complaint against Apple with the European Union (EU). Spotify complained that rival streamer Apple Music had an unfair advantage in Apple's App Store thanks to the so-called "Apple Tax." This is the 30% of in-app revenue that Apple takes as its cut. It also applies to the first year of subscription fees that an app like Spotify collects from iOS users for its premium service (and Apple's cut drops to 15% starting with the second year and every year afterward). Two months later, the EU competition commission said that it would investigate Apple with tens of billions of dollars in fines at stake.
Today, Reuters is reporting that Spotify is ratting out Apple again, this time to the U.S. House of Representatives Judiciary Committee. Actually, Spotify didn't initiate the conversation this time and merely responded to the committee's request for intelligence on Apple. The House committee first asked Spotify for a wide range of information before narrowing down the scope of their questions during subsequent phone calls. It's believed that the House is looking at the App Store as the centerpiece in any investigation to see whether Apple violated antitrust laws. Remember, unlike Android users, those with an iOS device are not allowed to sideload apps.
Earlier this year, the U.S. Supreme Court ruled that a class-action suit against Apple could proceed. The suit claims that because of the 30% Apple Tax and the company's refusal to allow device owners to sideload apps from third-party storefronts, iOS users pay higher prices than they should have to for apps and games. The majority opinion was written by Justice Brett M. Kavanaugh who teamed up with four of the more liberal justices. The court defined Apple's role in the App Store as the actual seller of apps and games to iOS users; Apple said it is only an "intermediary" and should not have been named in the suit. The Supreme Court ruling means that the case will now go back to the lower courts to be heard.
Spotify has also met with a special internet-focused group that is part of the Federal Trade Commission
The same issues found in the class-action suit mirror what the House is hearing about Apple from Spotify. Being a closed system, the App Store is the only place where third party developers can do business with 900 million active iPhone users. By the way, these are the same users that Apple is targeting with its focus on the Services segment of its business. With global iPhone sales peaking in 2015, the manufacturer has focused on making money by selling active users a number of subscription services including Apple Music. Included under the Services umbrella is the revenue generated by the Apple Tax. Apple has already publicly stated its goal of hitting $50 billion in Services revenue by next year.
The House appears to be focusing its investigation of Apple on the App Store
According to one unnamed source, Spotify has met to discuss Apple with officials of the Justice Department (DOJ) and the FTC’s Technology Task Force. The latter is a group of 17 attorneys who investigate competition among internet companies and online platforms.
Reuters' report also points out that Apple has been known to copy some features of third-party apps that it adds to its own listings in the App Store. This obviously could be an example of anticompetitive behavior that lawmakers will have to sift through. The news agency mentions as an example that several third-party apps found in the App Store already offered a way to track a female's monthly reproductive cycle; Apple announced that this would be added as a feature on the company's own health tracking app this year. Another complaint made by developers is that virtual assistant Siri has much more limited functionality on their apps compared to the apps developed by Apple itself.
Even though the House is currently bogged down and is in the middle of what many would consider to be more important investigations, it does appear that tech firms like Apple, Google, Facebook, and Amazon are still going to be probed for antitrust violations in the year ahead.
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