The FTC is getting serious about its crack down on Apple, recently issuing subpoenas to competing music streaming services to see if Apple has been gaining an unfair advantage over competitors with its App Store fees, The Verge reported Wednesday.
The issue at stake is the 30% fee Apple charges to all subscription services that sign up new members through their iOS apps.
If you’re Spotify, 30% of the $US9.99 monthly membership fee goes to Apple. Spotify can avoid this fee if they sign up new members through their mobile website, but most users are not aware of that. As a result, most music streaming apps like Spotify, Rdio, Tidal, and Rhapsody charge $US12.99 for in-app memberships.
By contrast, Apple’s own music streaming service, Apple Music, doesn’t have to worry about the 30% fee, and thus, is able to charge “only” $US9.99 for its monthly subscription fee — giving itself a distinct price advantage in a highly competitive space.
Apple also blocks competing services from offering free promotions or discounted family package plans, both of which are available on its own Apple Music service, The Verge said.
The 30% fee hasn’t been an issue until now, because other music streaming apps simply took it as an industry standard. But after Apple launched its own music streaming service, and was able to get a clear price advantage, the FTC decided to launch an investigation. The Verge did not specify which streaming music services received subpoenas.
We’ve reached out to Apple and to the FTC for comment and will ud pate if we hear back.
Today’s news comes on the heels of Senator Al Franken sending a letter to the Department of Justice and FTC, urging for an investigation looking into Apple Music’s business practices. He wrote:
“Increased competition in the music-streaming market should mean that consumers will ultimately benefit through more choices of better products and at lower prices. I am concerned, however, that Apple’s position as a dominant platform operator may actually undermine many of the potential consumer benefits of its entry into the market. To protect consumer choice and promote greater transparency of pricing, I ask that you review Apple’s business practices with respect to its competitors in the music streaming market.”
Antitrust issues can get extremely complicated because little in antitrust is black or white, and a lot depends on how you interpret the situation. Much of the regulation is based on the Sherman Act, which states its objective as: “To protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.”
Apple’s late co-founder Steve Jobs famously had some brushes with antitrust issues in the past, including Apple practices such as hiring and e-book pricing. New York Times columnist James Stewart even once question whether the former Apple CEO should be in jail if he was still alive.
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