Apple Responds to Spotify's Anti-Competitive Allegations in EU

Apple has filed a response in the European Union to Spotify's lawsuit accusing Apple of over-charging developers that sell their products on the App Store and use Apple's in-app payment system to pay for subscriptions. The lawsuit protested against what is being called "Apple Tax" -- the 30 percent cut that Apple takes from revenue generated by app developers that market their products on the App Store.

According to Spotify, because of this, it is forced to charge users a premium of $3 over its standard subscription price of $9.99 (in USA), thereby bringing up the cost of monthly subscription to $12.99. It argued that one of its major competitors, Apple Music, does not face the same roadblock since it is developed by Apple itself, and hence, gets an unfair edge in the competition of in-demand streaming apps by undercutting Spotify's pricing. The latter also argued that it is almost impossible for the company to absorb this 30 percent margin into its own costs, for that would write off a significant chunk from its operating profit.

Apple has dismissed this claim by stating that it charges a 15 percent cut on subscriptions of 680,000 users that subscribe to Spotify using the App Store, and not 30 percent. The company argued that while it did charge a 30 percent revenue cut initially, that was done only for the first one year of subscription, and for users that subscribed to the service between 2014-16. Post the first year, Apple has been charging a 15 percent cut on yearly renewals, and any user that subscribed to Spotify after 2016 could not make the subscription from within the App Store, hence taking the possibility of any such margin out of the equation.

Apple also dismissed allegations made by Spotify that users that subscribe from outside the App Store do not get company emails or even fail to update the app. Apple has been facing antitrust allegations that claim the App Store to be a monopoly, and hence a biased market that Apple has complete control over. The same does not hold true for the Android ecosystem, that allows apps to be sideloaded from sources other than the Google Play Store.

The European Union is yet to issue its judgement on this issue, but given that Spotify is not the only company to have accused Apple of anti-competitive practices, the suit may pan out over a longer span of time and scope.