Photo Credit: Felipe Pelaquim
Spotify and Apple have been going at each other legally for more than four years now—what is happening and why? What’s the ‘Apple Tax’? Why does Spotify have complaints about Apple’s business practices? Here’s a quick catch-up on the last four years of legal trouble.
In 2019, Spotify filed an anti-competition complaint about Apple with the European Commission. The company alleges that Apple Music limits innovation and “constraining user choice.” Spotify CEO Daniel Ek said the 30% fee that Apple takes from all third-party apps constitutes a ‘tax’ to do business on the App Store.
“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 wrote in a blog post explaining his company’s decision to seek legal action. “And to keep our price competitive for our customers, that isn’t something we can do.”
Daniel Ek also outlined several other pain points Spotify has when trying to do business in the iOS ecosystem. “If we choose not to use Apple’s payment system, Apple then applies a series of technical and experience-limiting restrictions on Spotify. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.”
In response to Spotify’s complaint, the EU began an investigation and issued a preliminary report in 2021. That report found that Apple was in breach of EU laws over its promotion restrictions and anti-steering measures—but not with the App Store payment issue.
After the preliminary report was released, Spotify demanded swift action against Apple. Meanwhile, Apple claimed to have changed its rules enough to satisfy Spotify’s initial complaints. Apple’s revisions to what it called ‘reader apps’ allows them to link to their websites for account setup and management within the app.
As Spotify looked to expand into selling audiobooks on its service in 2022, Spotify continued to call Apple’s practices anti-competitive. “The audiobooks purchase flow that Apple’s rules force us to provide consumers today is far too complicated and confusing,” the blog post from October 2022 reads. “This harms not only consumers, but this time authors and publishers who now find themselves under Apple’s thumb.”
To comply with Apple’s App Store policies, Spotify does not show the price of audiobooks in-app and doesn’t allow them to buy audiobooks. Want to purchase an audiobook on Spotify from an iOS device? Spotify will email you a link to check out the purchase page on the web.
“In the absence of government intervention—in Europe, the U.S., or any other market around the world—Apple has shown time and again that it will not self-regulate and has no real incentive to change,” Daniel Ek said after Spotify launched audiobooks on its app. If audiobook purchases were added to the Spotify app, they would be subject to the same 30% processing fee that its music subscription service faces.
Fast forward to July 2023 and the battle between Spotify and Apple heats up, with Spotify cutting off existing App Store subscribers. Spotify stopped allowing new Premium subscribers through the App Store in May 2016, but anyone that maintained that subscription was forced to switch.
Apple recently lost its Supreme Court appeal in its legal battle with Epic Games—which shared many of Spotify’s complaints about Apple’s anti-competitive practices. The outcome of this case forced Apple to allow third-party App Store devs to link to outside payment methods. But the rub here is that Apple is still charging a commission on these sales.
Apple announced a new 27% cut for outside payment links (12% for small business), plus the added headache of providing accounting details for all out-of-app purchases so that Apple can audit developers’ accounting to ensure compliance. The move is an interesting one, as the EU has long planned a Digital Markets Act that would likely ban such practices. Meanwhile, the U.S. Department of Justice is rumored to be preparing antitrust action against Apple as early as Spring 2024.
Spotify’s reaction to this decision was one of furor. “One again, Apple has demonstrated that they will stop at nothing to protect the profits they exact on the backs of developers and consumers under their App Store monopoly,” the statement provided to the press read.
