Spotify escalated tensions in their ongoing competition with Apple earlier this week, formally petitioning members of Congress to review perceived abuses of power by Apple.
Apple is blocking Spotify’s attempts to update the Spotify app, which Spotify alleges is a reactionary measure to Spotify’s subversion of Apple’s billing procedures.
The streaming giant’s grievance stems from Apple’s upcharge on all in-app purchases. Apple currently charges a 30% percent charge on all in-app purchases and subscriptions. An Apple upcharge would raise the price on a Spotify subscription from $10 to $13, a considerable difference when charged at a monthly rate.
The existing iOS Spotify app does not allow users to make subscription payments via Apple’s standard billing system. Instead, users must pay through Spotify’s specific billing website. This circumvents Apple’s subscription upcharge and prevents Apple from making profit on the in-app purchase.
Spotify contends that Apple’s block on app updates violates fair business practices. A subscription to Apple Music, Apple’s own streaming service, costs $9.99 a month. An Apple upcharge on a Spotify subscription would make Spotify a more expensive product than Apple Music, allowing Apple to offer a cheaper service than Spotify. By this rational, Apple’s rejection of Spotify’s app update requests would violate multiple free antitrust regulations.
In May, Spotify general council Horacio Gutierrez sent letter to Apple general council Bruce Sewell, formally announcing Spotify’s objections to Apple’s business model. The letter has since been distributed to the offices of unannounced Congress members.
“This latest episode raises serious concerns under both U.S. and EU competition law,” Gutierrez said in the letter. “It continues a troubling pattern of behavior by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors.”
On Friday, Sewell replied to Gutierrez, rejecting Spotify’s allegations that Apple has engaged in anti-free market practices. Sewell said their refusal of Spotify’s request stems from Spotify’s violation of long-standing, long-enforced rules.
“Our guidelines apply equally to all app developers, whether they are game developers, e-book sellers, video-streaming services or digital music distributors; and regardless of whether or not they compete against Apple,” Sewell wrote. “We did not alter our behavior or our rules when we introduced our own music streaming service or when Spotify became a competitor.”
Sewell further claimed that Spotify has only benefited from its relationship with Apple. He said the constantly high level of Spotify downloads through Apple’s App Store reflects Apple’s entirely fair business model, and that Spotify’s allegations are based solely on rumors.
Although Sewell seems confident in his employer’s business model’s legality, Congress is beginning to question Apple commitment to free market practices. At a recent Washington D.C. conference, Elizabeth Warren specifically questioned Apple’s seemingly monopolist actions.
“While Apple Music is easily accessible on the iPhone, Apple has placed conditions on its rivals that make it difficult for them to offer competitive streaming services,” Warren said.
The Federal Trade Commission is currently conducting an antitrust review into Apple’s business model, suggesting the tech kingpins may be in more danger than they are willing to admit. This review is specifically targeting Apple’s in-app upcharge on streaming services.
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