The European Commission’s investigation into music streaming: Why Spotify has good reasons to be impatient

Yesterday, a group of app developers and trade associations urged the Commission to take swift action to bring Apple’s anticompetitive conduct to an end.

It is easy to sympathize with their impatience. Almost two years ago, i.e., in April 2021, the Commission sent a statement of objections to Apple on the ground that “it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store.”

The Commission’s concerns related to the combination of the following two rules that Apple imposes in its agreements with music streaming app developers: (i) the mandatory use of Apple’s proprietary in-app purchase system (“IAP”) for the distribution of paid digital content, which allows Apple to charge a 30% commission and (ii) “anti-steering provisions” which limit the ability of app developers to inform users of alternative purchasing possibilities outside of apps.

Since then, not much has happened, but for the fact that Apple has fought tooth and nail regulators in Europe and elsewhere that sought to bring these practices to an end. In the meantime, the harm to app developers and consumers has continued unabated.

The Commission’s lack of action for the past two years is irritating and hard to justify. The slowness of competition law proceedings, exemplified by the Commission’s tech cases, is one of the reasons that suggested the need for ex ante regulation. In this context, the EU legislator was quick to adopt the Digital Markets Act (“DMA”), which inter alia prevents the very practices that are at stake in the Commission’s Apple investigation.

One of the differences between the DMA provisions and Article 102 TFEU is that the former do not require the definition of relevant market(s), the proof of dominance and the showing of an abuse and its effects. These provisions are per se rules, hence facilitating the task of the Commission.

A cynic may say that the fact that the conducts at stake in the Apple investigation are regulated in the DMA may be the reason why the Commission is not proceeding to a decision. Perhaps the Commission finds it convenient to wait until March 2024 at which time Apple’s anticompetitive conducts will be banned in any event without the need to demonstrate an abuse.

While the Commission may be thinking in these terms, I disagree with that approach. First, competition law decisions are public goods. They help develop the law, especially because they usually lead to appeals. In this case, the Commission has presumably done most of the necessary work by adopting a statement of objections, hence there are limited resources to save by not pursuing the case. The case could also potentially be solved through commitments (assuming Apple is willing to play ball), which may be more granular than the provisions contained in the DMA. In the case of an infringement decision, Apple would also incur a fine, which would deter it (only to a certain extent, I must admit) from engaging in additional abusive conduct.

But there is also another reason why the argument that the DMA is around the corner is not as strong as it looks, which is that there is no guarantee that Apple will comply with the DMA by March 2024 (although in theory it has to). As in the Dutch case where the ACM prohibited Apple from mandating the use of IAP for the sale of digital content in the case of dating apps, Apple could decide to drag its feet and find reasons not to comply (or only partially comply) by the requested deadline (as noted elsewhere, Apple is untrustworthy and a threat to the rule of law). This could force the Commission to open proceedings, which may take another year or so to deliver an outcome. In other words, a bird in the hand is worth two in the bush. The Commission needs to deliver now!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s