EU to Start Formal Probe on Spotify's Apple Complaint, FT Says

(Bloomberg) -- The European Union will start a formal probe of Apple Inc. in the next few weeks following Spotify Technology SA’s antitrust complaint, the Financial Times reported.

The music streaming giant had complained to the EU’s antitrust agency earlier this year that Apple’s 30 percent cut of revenue was effectively a tax on competitors. The feud came as the iPhone maker moved into new business areas that compete with third-parties on its platform.

Apple has said it doesn’t charge for distributing free apps and only takes the 30 percent from paid subscriptions on its platform. It also said that rate drops to 15 percent for subscriptions of more than a year. In the case of Spotify, the Cupertino, California-based company has said that the majority of customers of the music streaming service use the free, ad-supported product, and only “a tiny fraction” of the subscriptions fall under Apple’s revenue-sharing model.

The EU has studied the complaint and surveyed customers, rivals and others in the industry, which prompted the formal investigation, the FT said, citing three people familiar with the probe it didn’t identify. The authorities haven’t set deadlines for the investigation and it could take years to reach a resolution, it said.

EU enforcers have been able to push companies to alter business practices they consider unlawful, and fines could be as high as a 10th of global sales, the FT said.

Daniel Ek, Spotify’s chief executive officer, said its battle with Apple has become “untenable,” which would drive him to raise prices, the FT reported.

Apple earlier fired back at the Stockholm-based company’s complaint, saying the music streaming giant wants all the benefits of its app store without contributing to the marketplace. Spotify said at the time that Apple “routinely blocks” some of its product upgrades, such as integration with the Siri digital assistant and the Apple Watch.

In the past week, Spotify said it has reached 100 million paid subscribers, a first for any online music service, adding more customers in the latest quarter than analysts expected and boosting confidence the company has lots of room to grow.

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