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Spotify, which is one of the largest music streaming websites in the world, has filed an anti-trust lawsuit against Apple Incorporated. Spotify alleges that Apple has been using unfair strategies in order to gain an unassailable competitive advantage. The spat between Spotify and Apple is nothing new. However, now it has embroiled into a full-fledged lawsuit. Both companies are also spending a lot of money on public relations in order to ensure that they can influence public opinion as well. In this article, we will understand the economic impact of the lawsuit between Spotify and Apple.
Since Spotify is a digital music streaming application, it has to sell its services on digital play stores. At the present moment, Apple and Android are two of the biggest play stores in the world. These play stores are ideally expected to provide a platform where different developers can provide their applications for consumer use. Being unbiased is essential to the nature of such play stores. Spotify is alleging that Apple is not unbiased. Instead, they feel that Apple has deliberately set up the playing field in such a way that it will automatically gain an unfair advantage over any of its competitors.
For instance, digital services which are sold on the Apple play store have to pay 30% of their fee to Apple. This 30% fee is applicable to Spotify because it is an external company. However, the same fee is not applicable to Apple’s own music streaming app. Hence, by default, Spotify’s prices will always be higher than Apple’s prices for the same service since it has to pay a 30% “Apple Tax”.
This is the reason that Spotify has filed a lawsuit against Apple. Spotify is appealing to the courts that Apple should be allowed to either provide a platform for the apps to sell a subscription or compete on the platform. It should not be allowed to manage both since that creates a situation wherein Apple has an unfair advantage.
Spotify has raised the pertinent question that Apple does not charge a fee to all the apps that are sold on its play store. For instance, services like Uber and Lyft do not have to pay a 30% tax. Spotify alleges that this amounts to discrimination on the part of Apple.
Apple, on the other hand, insists that it is not adopting unfair trade practices against any application on its platform. Apple claims that it only charges the 30% fee to companies which provide services in the digital world. For instance, Spotify provides its services using the digital medium. Hence, it is charged a fee. However, on the other hand, Uber’s services are not provided on the play store. Instead, they are provided in the real world. This is the reason why Apple levies a charge on Spotify but not on Uber.
Apple’s rebuttal plays into Spotify’s argument. It is a known fact that Apple is a digital corporation. As a result, they are trying to compete against other digital organizations using this unfair policy. Since Apple has no interest in running a cab service in the real world, they do not see Uber as a competitor, and hence are not using competitive strategies in order to beat Uber or undermine its value proposition.
Spotify isn’t the only company which is tired of paying this Apple tax. There are other companies such as Netflix which also have to pay a 30% fee to Apple if they use their platform. However, Netflix has found a workaround. Netflix and Spotify are only liable to pay Apple the 30% commission if the money changed hands using Apple’s platform. If the users sign up for the services outside the Apple platform, i.e. on the web, they can continue to stream music and other content on an Apple phone. This means that Netflix and Spotify wouldn’t have to pay the fee in such cases.
This is the reason why Netflix redirects its customers to a webpage which is off the Apple platform to avoid paying this fee. Spotify has also tried to do so. However, this method is quite inconvenient. Consumers end up following an external link for Netflix because it has exclusive content. However, as far as Spotify is concerned, customers simply avoid the roundabout way of buying the subscription and end up buying Apple’s subscription instead.
Spotify has taken a strategic decision to file this lawsuit in Europe. This is because Spotify is aware of the fact that European courts tend to prefer smaller companies. European courts have earlier ruled against a corporate giant like Google. The ruling says that Google’s practice of pre-installing Chrome app in all devices is anti-competitive. Spotify is fighting a battle for its survival. If it fails to win this lawsuit, it's business model might simply wither away over the course of time. Hence, it has decided to file the lawsuit in a location where it is most likely to have a sympathetic judge and jury. Spotify does face an uphill task. However, looking at the merits of some of these arguments, it is definitely not impossible.
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