Exclusive: Antitrust probers in Congress ask Spotify to detail alleged Apple abuses - sources

[October 05, 2019]  By Diane Bartz and Stephen Nellis

(Reuters) - U.S. lawmakers have requested information from Apple critic Spotify as part of an antitrust probe, according to two sources briefed on the investigation into allegations the iPhone maker engages in anti-competitive behavior to support its own apps.

The U.S. House of Representatives Judiciary Committee reached out to the music streaming service with broad requests for information, according to one source, who added the request to the company was narrowed in follow up telephone calls.

Spotify Technology SA filed an antitrust complaint against Apple in the European Union in March, but the contact with the committee marks its first known participation in congressional inquiries into the iPhone maker, whose Apple Music streaming service is Spotify's biggest rival.

Spotify and other developers have alleged that Apple engages in anticompetitive behavior by imposing rules that hamper distribution via its App Store, the only way for third-party developers to reach more than 900 million iPhone users.

At the same time, Apple sometimes copies the features of their apps for its own offerings, developers have said. Multiple apps in the App Store offered female cycle tracking before Apple added the same feature to its own health tracking app this fall, for example.

Apple has said it acts in the best interests of its users and treats all developers equally. It has denied Spotify's claims and says its streaming music rival is seeking to pay it nothing and play by a different set of rules than the millions of other apps on its App Store.

Spotify has been pressing for antitrust action against Apple for several years.

Its representatives have met with Justice Department officials, as well as members of the FTC's Technology Task Force, a group of some 17 attorneys that was set up in February to focus on online platforms and other Internet competition issues, according to one source.

App developers also complain that Apple's Siri, which responds to verbal commands and can control Apple's own apps, has long had limited functionality with the vast majority of non-Apple apps, including Spotify.

Apple announced an update to its software in June that would allow Siri to access Spotify and other music services.

Beyond Spotify, the congressional probe has tapped many companies for details on the four big tech firms.

A screen displays the company logo and trading info for Spotify on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 13, 2019. REUTERS/Brendan McDermid

In addition to the Judiciary Committee probe, the big tech companies face a plethora of other antitrust investigations.

The Justice Department is probing Alphabet's Google, Facebook and Apple while the Federal Trade Commission is investigating Facebook and Amazon.com. Groups of state attorneys general have also been formed to probe Google and Facebook.

Spotify has complained also about the 30 percent fee that Apple charges outside app developers who sell so-called digital goods such as music or e-books on the App Store, using Apple's in-app billing system. Apple bars app makers for collecting payment any other way on the App Store or showing users links or buttons to other ways to pay.

At one point, Apple told Spotify to stop sending emails to users who had just signed up for a free version of its streaming music prompting them to upgrade to the paid service, Spotify has said. Apple has said those emails were a workaround strategy to solicit payments outside its App Store system, violating the spirit of rules that all other app makers must follow.

Spotify has said the shifting rules, and Apple's threats to block routine app updates, have made it difficult to compete with Apple's own music service on a level playing field.
 

Asked for comment, Apple referred to its previous responses, published in March, to Spotify's claims. The company says it enforces its App Store rules evenly among all developers and that more than eight out of every 10 apps are free and pay nothing to Apple. Apple has said Spotify pays nothing for users of its free service or for paid Spotify members who signed up outside the App Store.

Apple has said Spotify pays a revenue share on about half a percent of its 108 million premium users, paying 15% fees on roughly 680,000 customers that Spotify acquired between 2014 and 2016 when it used Apple's payment systems.

"Even now, only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model. Spotify is asking for that number to be zero," Apple said in response to Spotify's claims it published in March.

(Reporting by Diane Bartz in Washington and Stephen Nellis in San Francisco; Editing by Nick Zieminski)

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