Spotify vs. Apple comes to Washington

The escalating fight between Spotify and Apple is turning heads in Washington.

Spotify, a Swedish service, last week blasted Apple for rejecting an updated version of its popular streaming app in the online store used by iPhone users.

{mosads}At issue, according to Apple, is Spotify’s decision to take out a feature that let its users buy premium subscriptions through Apple’s in-app purchase feature or take steps to sign up online. In the most recent version, users are simply told that premium service is available.

When users buy through the in-application purchase tool, Apple gets a cut; when they buy online, Apple gets nothing.

Apple says that Spotify is violating rules designed to prevent an end-run around the commissions system. Spotify says Apple is trying to stifle competition. 

Lawmakers, including Sen. Elizabeth Warren (D-Mass.) and members of the Senate Judiciary Committee, are paying attention to the debate. 

The Federal Trade Commission reportedly began looking into the issue last year, though not through a formal investigation, as streaming services ramped up their criticism of Apple. Sen. Al Franken (D-Minn.) also asked for a federal probe into the issue. 

Spotify has been making its case on Capitol Hill. The company reached out to over a dozen offices over its most recent criticisms of Apple, according to a person familiar with the effort. Their pleas have not gone unnoticed.

“I remain concerned about how Apple’s in-app purchasing practices have affected transparency and prices for consumers,” Franken said in a statement first obtained by Politico.

“I am currently reviewing whether further action is necessary to allow for meaningful competition in the music streaming industry and to ensure that consumers have access to important information about the products and services available to them.”

Sen. Elizabeth Warren (D-Mass.) said last week that Apple was one of several companies whose platforms “can become a tool to snuff out competition.” 

“While Apple Music is easily accessible on the iPhone, Apple has placed conditions on its rivals that make it difficult for them to offer competitive streaming services,” she said in a speech delivered days after Spotify’s letter to Apple. 

A spokesperson for Sen. Mike Lee (R-Utah), who chairs the Senate Judiciary Committee’s antitrust subcommittee, said that committee staffers had met with the FTC over the issue and declined to comment further.

The office of Sen. Amy Klobuchar (Minn.), Lee’s Democratic counterpart on the subcommittee, said in a statement that she was interested in fighting monopolies online generally. She and her staff have spoken with stakeholders related to the issue.

Sen. Chuck Grassley (R-Iowa), who chairs the full Judiciary Committee, said that he wasn’t knowledgeable enough to voice an opinion on Apple and Spotify’s specific case but said that he is “very interested in anything where the free market system and the competitive market system isn’t working.” 

The most recent blowup over the app store began last week, when Spotify general counsel Horacio Gutierrez sent Apple’s top lawyer a letter blasting the company for rejecting an updated app for inclusion in its store.

Gutierrez argued that Apple is simply trying to harm a primary rival to its own streaming service, Apple Music. He said that it “cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors.”

The company said that Apple is “taking the extraordinary position that a simple notice or ad inside Spotify’s own app — features that have been present in Spotify’s iOS apps for years — now all of a sudden violate Apple’s App Store rules.”

Apple’s top lawyer, Bruce Sewell, fired back in a letter of his own. 

“Thousands of app developers have taken advantage of the in-app purchase feature, including Spotify,” Sewell wrote. 

“And ever since the in-app purchase feature was made available, App Store rules have prohibited developers from redirecting customers inside of an app to purchase digital content or subscriptions outside of the app to avoid paying Apple’s standard commission.” 

Spotify contends that Apple’s policy of taking commissions on in-app purchases hurts its competitors in the music streaming space by forcing them to charge higher prices for their subscription services. 

Apple takes a 30 percent cut on in-app purchases. That number goes down to 15 percent if a subscriber sticks around for more than a year.

Spotify says the policies forces the company to charge more in its premium subscriptions when they sell it in the application. The company charged $12.99 per month for a subscription sold through the in-app option and only $9.99 when it was purchased online. Apple Music’s individual plan costs $9.99 a month.

One of Spotify’s support pages even gives users step-by-step instructions on how to stop payments through Apple’s system and use Spotify’s website instead. Last year, the company sent out an email urging customers to sign up through their websites and the save three dollars they’d pay when buying a subscription through iTunes.

Apple accused Spotify of seeking “special treatment” for the updated app. 

“We understand you want special treatment and protections from competition, but we simply will not do that because we firmly adhere to the principle of treating all developers fairly and equitably,” Sewell wrote to Spotify’s Gutierrez.