Industry experts call Apple’s $2bn EU antitrust fine over Spotify complaint ‘performative’

In its decision, the Commission found that Apple systematically hampered competition in the music streaming category by violating anti-steering provisions. In essence, the iPhone maker, as a policy, disallows other app developers, including music streaming platforms, from advertising alternative, lower priced offers outside of the Apple App Store. This practice, the Commission said in a statement today, “negatively [affects] the interests of iOS users, who cannot make informed and effective decisions on where and how to purchase music streaming subscriptions for use on their device.”

The decision is a result of an investigation into Apple’s music streaming practices that opened in 2020 after Spotify filed an antitrust complaint alleging that the tech company’s App Store rules “purposely limit choice and stifle innovation at the expense of the user experience.”

In a statement published today, Spotify said it was pleased with the ruling. “Today’s decision marks an important moment in the fight for a more open internet for consumers,” the company said. “The European Commission (EC) has made its conclusion clear: Apple’s behaviour limiting communications to consumers is unlawful. This decision sends a powerful message – no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers.”

Material harms to Spotify and others come into question

Apple says it plans to appeal the Commission’s decision.

The company disputed the investigation’s findings in a lengthy statement published today. “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 company said.

In particular, Apple argues that there is no evidence that its App Store practices have harmed consumers or engaged in anti-competitive behavior. The company said that European consumers today “have more choices than ever,” pointing to the fact that the digital music market has grown from 25m to nearly 160m subscribers in the last eight years, and that Spotify is “the biggest winner.”

On this point, Apple is not wrong. Spotify owns 56% of Europe’s music streaming market – more than twice the share of its closest competitor. In 2023, the company’s subscriber base grew 17% from the year prior.

Considering Spotify’s market share, the variety of choice in the EU digital music market and dispute over the extent of legal ‘harm’ shouldered by consumers and competing music services, some policy and economics experts are rolling their eyes at the €1.84bn penalty.

“The magnitude of antitrust fines are typically measured relative to consumer injury proven,” says Joshua Wright, founding partner at consultancy Lodestar Law & Economics and a former commissioner of the US Federal Trade Commission. “What stands out about the size of this fine is that it is difficult to imagine anticompetitive harm of that magnitude in a market that is growing exponentially. The evidence of any such harm is notably underwhelming.”

The idea is underscored by others, including Greg Silverman, global brand economics director at marketing consultancy Interbrand. “There’s a very dynamic competitive market [in Europe], even though the scale of Apple has caused what the European Commission thinks are inequities. There’s still a question of whether or not the fine matches the reality of the specific damages.”

Spotify, Silverman says, is pointing a finger at Apple, when the reality is that it already dominates the European music streaming market. “I’m not even sure that the playing field is uneven,” he says. “Streaming music is not a category where you don't know that there are options.”

’Performance’ tactics from regulators?

In many ways, Silverman sees the fine as an optics maneuver for EU regulators, who have made it a point in the last few years to signal their increasing scrutiny of tech companies’ competition and data practices. In 2018, the European Commission fined Google €4.34bn for using Android’s mobile operating system to unfairly buoy its dominance in the search market. The year prior, Google was fined €2.42bn for similar antitrust violations in Europe.

Silverman’s skepticism is echoed by other experts, who view the Commission’s crackdown on Apple as a slap on the wrist with no real-world policy implications. Cristina Caffarra, an economist who serves as co-founder and vice chair of the Competition Research Policy Network, Centre for Economic Policy Research in London, advised Apple on the case. She wrote in a post on X today that the Commission’s decision is “performative.”

This decision and fine are just performative. Zero policy value, narrow “remedies” and fine would be 40m but let’s bump it up randomly because 40m does not make headlines. Need to have something to show for 10 years of investigating. https://t.co/722J2hZLrD

— Cristina Caffarra (@Caffar3Cristina) March 4, 2024

Of course, should Apple’s forthcoming appeal be rejected, there are indeed likely to be real-world consequences for the company. It will no longer be allowed to block music streaming services from advertising cheaper subscriptions outside of the App Store.

Caffarra and others also take issue with regulators’ rationale for the size of its fine. The initial fine for violating EU rules is approximately €40m; however the Commission said in its announcement today that it had tacked on a “lump sum” of €1.8bn meant to account for non-monetary harm and is “necessary to achieve deterrence.”

One expert taking issue with the calculation of the Commission’s fine is Lazar Radic, a professor of law and a senior scholar of competition policy at the International Center for Law & Economics, who calls the lump sum “rather arbitrarily determined.” He adds that “it is unclear why such deterrence is needed” in light of the EU’s Digital Markets Act (DMA), which allows regulators to issue fines of up to 10% of an organization’s global turnover, or up to 20% for repeat infringements.

The DMA, a sweeping piece of legislation designed to support competition and fairness in the digital economy, went into force in November of 2022. However, a handful of key players in the digital ecosystem, including Apple, Meta, Microsoft, Alphabet, ByteDance and others, have been given until March 6, 2024 to come into full compliance with the law.

It’s this timing that has also rung alarm bells for some experts over the European Commission’s crackdown on Apple today.

“The timing of this fine is somewhat puzzling, as Apple would have either way been precluded from including anti-steering provisions in its contracts with developers following the entry into force of the DMA on 6 March – two days after the fine – which prohibits such practices,” says Radic.

It’s possible that the Commission is using antitrust mechanisms as a way to unofficially penalize Apple for what some have viewed as an ineffective DMA compliance plan. The company published its plan on January 25, and was met with widespread criticism.

On March 1, 34 companies and associations – including Spotify, Epic Games and other developers like music streamer Deezer and payments platform Paddle – sent a joint letter to the Commission raising concerns about Apple’s proposed plan. The letter raises issue with the fact that Apple would require developers to stay within the current App Store regime or force them into new catch-22-type terms that disincentivize leaving the App Store.

“Apple’s new terms not only disregard both the spirit and letter of the law, but if left unchanged, make a mockery of the DMA and the considerable efforts by the European Commission and EU institutions to make digital markets competitive,” the organizations wrote.

It wouldn’t be surprising, at least in Radic’s telling, if EU regulators have similar concerns and have inflated their music streaming competition fine to signal their disapproval of the company’s DMA compliance plan.

“The decision raises an interesting question about the relationship between EU competition law and the DMA,” says Radic. “Anti-steering provisions such as the one at stake here are prohibited by the DMA. The decision thus confirms that there is a continuum between antitrust investigations and DMA obligations, despite the Commission consistently denying this link. This also raises a broader question about the necessity of the DMA which should give countries looking to mimic it some pause: if DMA obligations can be imposed through competition law, why is the DMA necessary?”

Lodestar Law & Economics’ Wright also notices the blurring between the decision and potential DMA enforcement. Like Radic and other critics, he sees the possibility for ulterior motives behind the Commission’s decision to penalize Apple in such a way.

“Increasingly,” he says, “large American companies simply must price in the inevitable fact that the EU and a handful of other competition regulators will target them to raise revenue, protect a national champion, coddle a rival or make political waves.”

In the Spotify-Apple battles, it remains unclear who will have the last laugh. At least for now, Spotify can rest assured that it’s won this round in the ring.

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