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Spotify's decision to file a complaint against Apple with the European Commission, alleging unfair competition, should be of concern to the people of Cupertino.
At first glance, the streaming music company seems to have a legitimate complaint. In fact, what Apple is supposed to do is not so different from what caused Microsoft's problems with the antitrust authorities 20 years ago and what led to a $ 5 billion fine against Google last year.
If history is a guide, Spotify's complaint could result in a fine similar to that inflicted on the iPhone maker. It could also lead to restrictions that could hamper Apple's service sector, which the electronics giant claims as its future. And the complaint could trigger a parallel antitrust investigation in the United States.
But perhaps more importantly, Spotify's claims – any investigation that analyzes them in depth – could tarnish Apple's reputation with consumers. This could be extremely expensive for a company that has long enjoyed public adulation and hundreds of millions of dollars of free advertising that accompanies it.
Read it: Spotify goes to war with Apple, filing an antitrust complaint over its fears of crushing its competitors
Those who target big tech companies have not targeted Apple
Until now, Apple has been lucky enough. Although more and more calls have been launched to tackle market dominance by big tech companies, advocates have generally focused on Facebook, Google and Amazon.
Apple has often been excluded from the list of potential targets.
It is not difficult to understand why. Apple has a large number of fans, and 20 years after nearly going bankrupt, many still consider it an outsider. And while the iPhone maker is currently the second largest public company in the world, it does not seem to dominate the markets in the same way as other big companies.
Facebook is the dominant social network. Google owns the search market and the vast majority of smartphones in the world use its Android operating system. Both companies are expected to account for more than half of the global digital ad market this year.
In the meantime, about half of all online purchases made by the United States are via Amazon. And Microsoft still dominates the market for PC operating systems.
On the other hand, Apple does not seem to control any notable industry. Its Mac computers have long been a small part of the personal computer market. The iPhone is perhaps one of the most popular smartphone ranges in the world, but Samsung is selling more phones overall and Huawei has almost overtaken Apple in market share. Apple Music may have raised the spotify spot, but it still remains a second place behind Spotify in terms of subscribers.
But these high-level views underestimate Apple's current market power.
Apple holds the monopoly on the iPhone app market
According to the research firm you believe, between 35% and 40% of smartphones sold in recent months in the United States were iPhones. And, again, according to your company, about 45% to 55% of smartphones currently used in the United States were manufactured by Apple. In both cases, the number of Americans equipped with iPhones is huge.
Regardless of its market share in smartphones, Apple's operating system runs on 100% of iPhones used in the United States and around the world. In principle, you can not run an operating system other than Apple's iOS on an iPhone and you can not run iOS on devices other than iPhones.
In addition, Apple controls the distribution of applications for iPhone users. With few exceptions, iPhone users usually have to get their apps on the Apple App Store.
Apple's control of the operating system and iPhone's app store is comparable to a railroad that is the only rail link in any part of the country, said Matt Stoller, a member of the Open Markets Institute. , research group and advocacy the dangers of corporate concentration. This railway may not dominate the entire national market, but for the sector in which it operates, it is a monopoly.
Spotify and other app makers "can not contact their iPhone user customers except through the Apple App Store," Stoller said, adding that the "App Store "is a monopoly, at least for a significant number of Spotify customers".
Apple seems to abuse its power
Apple, no doubt, has abused this monopoly. Unlike the Spotify music app or the Google Chrome browser, competing applications from Apple, Apple Music and Safari, are integrated with iOS and preinstalled on the iPhone. On the iPhone, users can not choose other applications as default settings. Typically, if they click on a web link, it will open in Safari, even if Chrome is installed. According to Spotify, Apple's Siri still does not play songs in his music app, but has no problem playing them in Apple Music.
And Spotify says that Apple has done a lot worse than that. Apple requires that applications listed in its App Store offering subscriptions use its payment service, for which Apple charges a commission of 30%.
The company prohibits developers from directing users to their websites so that they subscribe to subscriptions.
Developers are faced with a choice: they can pay Apple's taxes to make it easier for users to subscribe to subscriptions, or they can save money and offer an even worse experience.
Fees charged by Apple may render competing services non-competitive. To recover its Apple commission payment costs, Spotify billed its iPhone users $ 12.99 per month, $ 3 more than those billed to their subscribers through its website. In contrast, Apple Music does not have to pay these fees and iPhone users have been able to subscribe to subscriptions in their app for only $ 9.99, says Spotify.
In addition, Spotify claims that Apple has forbidden him to advertise or offer promotional rates for his service in his app. He also repeatedly deferred the approval of Spotify's application updates, the streaming music service said.
And for years, according to Spotify, Apple has prevented it from offering an Apple Watch application and still prevents it from offering an application for the Apple HomePod smart speaker.
Apple shares look similar to those of Microsoft and Google
These alleged actions are a reminder of the anti-competitive and illegal actions by Microsoft and Google. In both cases, it was found that the companies had used their dominant position on an operating system to give an unfair advantage to their own applications or services.
In the case of Microsoft, he used Windows to promote Internet Explorer and thwart Netscape's rival browser. In Google, he used his control of Android and the Google Play Store to force smartphone makers to make his search engine and default Chrome browser apps on their devices.
Similarly, Apple has "a dominant power over what is a vital artery of commerce," Stoller said.
Spotify's complaint is only the beginning of what could become a multi-year investigation by the EC's competition regulators. But even the possibility of such an investigation should worry Apple's CEO, Tim Cook, and his team.
While US antitrust regulators have been lax in their obligations in recent years, the EC has been much more aggressive.
The competition authority has fined Google $ 5 billion for illegally abusing its market power. More recently, he fined $ 5 billion as part of the Google investigation forcing smartphone makers to install his Android apps. Microsoft has also sentenced Microsoft to more than $ 1 billion fine for abusing its monopoly on Windows.
With more than $ 200 billion in bank, Apple could easily afford such a fine. What could be more painful for her, however, are the restrictions that the EC might impose on her business. As part of its decision against Google, the EC ordered it to no longer require smartphone manufacturers to install its apps as a prerequisite for Android's use and access to Google Play Store. Regulators could also order Apple to stop granting preferential treatment to its own applications.
Warren's call could be expensive at Apple
And if Senator Elizabeth Warren of Massachusetts was doing well and involving US regulators, they could do much more than that. Warren called for an end to the practice of companies with both a platform and participating. It specifically designated Apple as a company violating this principle.
In the case of Apple, such a rule would mean that it would not be allowed both to operate an application store and to offer applications that rival the applications on it. So the company could choose to operate the App Store or offer Apple Music, but not both.
Although Warren does not want to become president, she is only one of the growing choir members on this side of the Atlantic, calling on regulators to dismantle tech giants. Even if she does not reach the White House, her ideas on what to do about them might well influence whoever is elected next year.
Warren's type of ban could hinder the development of Apple's service business. Much of this segment's revenue comes from Apple's sales commissions on the App Store and Apple Music subscription revenues. Later this month, it is planned to launch a subscription streaming video service that will compete with Netflix and bring in additional dollars to services.
While Apple's iPhone sales have begun to decline, the company is banking on its service business to drive future growth. But regulators could undermine this effort.
Apple could suffer more than most bad public relations
But the biggest danger for Apple stemming from Spotify's complaint could be the public relations this could cause. In the mid-90s, before the antitrust lawsuit, Microsoft was one of the most respected companies in the United States and Bill Gates was one of the most admired business leaders.
But this case, which uncovered Microsoft's fierce tactics and Gates' seemingly disdainful attitude toward government oversight, has tarnished the reputation of both.
This negative PR has no doubt encouraged consumers and businesses to look for alternatives to Microsoft and has created a space in the market for products from Google, Mozilla and, of course, Apple.
Today, Apple is among the most admired companies in the world.
And the overwhelmingly positive feelings and enthusiasm that it has aroused among its many fans have brought millions, if not billions of dollars of free and largely positive publicity over the years to the company.
Due to this, the iPhone manufacturer's marketing budget was a fraction of the size of other mainstream businesses.
An antitrust complaint could transform public perception towards Apple to become a cool, consumer-friendly alternative company, into another ruthless profit-driven company.
You can bet that Apple really does not want to deal with this music.
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