Two of the biggest players in the music streaming market are preparing for war amidst claims of unfair business practice.
Spotify is accusing Apple of leveraging its App Store to disadvantage competitors by taking a 30% tax on digital services purchased through the platform.
And according to reports, the European Union is now set to begin an antitrust investigation into the claims under its legislative institution, the European Commission.
Spotify founder and CEO Daniel Ek announced the action.
“In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers,” he said.
“After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition.”
Ek criticised Apple for using its iOS platform and App Store to give itself “an unfair advantage at every turn”.
His complaint ultimately rested on the 30% tax that Spotify and other digital services are made to pay on all purchases made through Apple’s payment system.
The 30% tax only applies for the first year of an annual subscription, after which it drops to 15%.
“If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music,” Ek said.
“And to keep our price competitive for our customers, that isn’t something we can do.”
If Spotify refuses to pay the tax, its product is blocked from Apple services like Siri and Apple Watch, detailed his claim.
This tax applies to some digital services, but not all, with the likes of Uber and Deliveroo excluded, pointed out Ek.
Apple bites back
Apple was quick to dismiss Ek’s claims, warning Spotify not to bite the hand that feeds it.
“Apple connects Spotify to our users,” said an Apple statement.
“We provide the platform by which users download and update their app. And we built a secure payment system — no small undertaking — which allows users to have faith in in-app transactions.
“Spotify is asking to keep all those benefits while also retaining 100% of the revenue.
“Spotify wouldn’t be the business they are today without the App Store ecosystem.”
The accusations and impending legal action mark yet another chapter in what is fast becoming a heavyweight tech feud.
Apple didn’t pay much attention to Spotify when it first came onto the scene as a desktop app in 2007, but when Apple allowed third-party developers to build multi-tasking features in 2010 – allowing Spotify music to run in the background (previously only Apple’s music app could do this) – the competition began.
Spotify’s more affordable streaming model led it to grow to a billion-dollar company, forcing Apple to launch its own streaming service – Apple Music – in 2015.
Apple Music has quickly grown to reach 50 million paying subscribers, yet this is still only half of Spotify’s 100 million.
If the legal proceedings go ahead and the EU finds Apple guilty of unlawful conduct, the maker of the iPhone could be fined up to 10% of its global revenue.