Spotify Technology (SPOT -5.70%) has been arguing for years that Apple (AAPL -1.35%) undermines competition with its App Store, and the 30% cut that third-party developers must fork over to sell through the platform makes it hard for rivals to compete on a level playing field. In order to skirt the fees, Spotify does not offer in-app subscriptions to its premium music streaming service, urging customers to sign up outside of the App Store.
The Swedish company has filed official complaints with antitrust regulators around the world, including as recently as December. The European Commission has just announced that it has opened an "in-depth investigation" into Apple, but this time, the issue revolves around its proposed $400 million acquisition of Shazam.
Image source: Shazam.
Shazam could undermine competition
Apple Music and Shazam both enjoy strong positions in music streaming and music recognition, respectively, and combining those "complementary business areas" could potentially hurt competition. Shazam has approximately 150 million monthly active users (MAUs), according to early Shazam investor Nenad Marovac, who also argued that Shazam would be a steal if Apple could convert just 1% to 5% of those users into Apple Music subscribers.
The European Commission is also concerned with the data that Apple would be acquiring. That user data "could allow Apple to directly target its competitors' customers and encourage them to switch to Apple Music," which would put rivals at a competitive disadvantage. More broadly, the European Union is preparing to implement its General Data Protection Regulation (GDPR), which dramatically strengthens protections over user data.
The regulatory body notes that it does not consider Shazam to be a "key entry point" for music streaming at the moment. Shazam does refer users to music services, which is its primary monetization model, including Apple Music and Spotify, among others. One concern cited by the European Commission is that if Apple closes the deal, Shazam could stop referring to other services and only send users to Apple Music.
In a statement, Commissioner Margrethe Vestager said: "The way people listen to music has changed significantly in recent years, with more and more Europeans using music streaming services. Our investigation aims to ensure that music fans will continue to enjoy attractive music streaming offers and won't face less choice as a result of this proposed merger."
The European Commission has until Sept. 4 to make a decision regarding the investigation, which is 90 working days after it was notified of the proposed deal.
