I'm not a lawyer, but I've seen this story before.
You don’t have to be Woodward or Bernstein to see Spotify’s fingerprints on the flood of Apple antitrust stories to which we’ve been treated in the weeks before and after the launch of Apple Music.
Taking a page from Amazon’s playbook, Spotify operatives have been working the levers of power in Washington and New York, trying to get someone—anyone—to take Apple to court for violations of Sections 1 and 2 of the Sherman Act.
Ironically, Spotify’s latest salvo—leaked to Reuters last week—crossed in the mail with a letter from the Authors Guild and several bookseller’s associations urging the DOJ to file antitrust charges against Amazon. Five years after Apple’s entry in the market, the 800-pound gorilla of e-commerce still plays the heavy in e-books.
But back to Spotify.
Its complaints against Apple in the music market took two forms.
The first, reportedly pursued by attorneys general in New York and Connecticut, accused Apple of conspiring with the three big music labels to force a change in the way streaming music is monetized on the Internet. According to the New York Times:
“The attorneys general wanted to know whether Apple pressured the music labels—or whether the labels conspired with Apple and one another—to withdraw support for popular ‘freemium’ services offered by companies like Spotify in favor of Apple’s paid music subscriptions.”
The air went out of that argument when Apple Music launched with Spotify’s freemium model intact. “At that stage the conspiracy theory goes away,” says an antitrust lawyer familiar with some of the parties involved.
The second Sherman Act complaint—a so-called Section 2 complaint—emerged after the Apple Music launch. It’s unfair, Spotify protested, that Apple makes its streaming music service app available on the App Store for $9.99 per month but charges $12.99 for Spotify’s. In a mass e-mail to iOS customers last week Spotify urged them to cancel their $12.99 App Store subscription and get a new one from Spotify.com for $9.99, avoiding Apple’s 30% cut.
Amazon filed a similar complaint against Apple three years ago, saying that Apple was disadvantaging competitors by taking a 30% cut of all e-book sales. Given that Amazon at that point controlled 90% of the e-book market, their argument didn’t get much traction.
To make Spotify’s Section 2 case against Apple Music, the government would have to have show that Apple had, and was abusing, monopoly power in the relevant markets.
That’s a tough one. Apple may have the lion’s share of digital downloads, but it’s the new boy in town in streaming music. Moreover it’s a minority player—albeit a profitable one—in a smartphone market dominated by Android.
I learned watching the e-book trial two years ago that the DOJ likes to keep things simple. The antitrust division saw the case it filed against Apple and five book publishers as a straightforward violation of Section 1 of the Sherman Act, no ifs, ands or buts.
Section 2 cases are harder to make, and the DOJ hasn’t filed one since 1999, when it went after American Airlines for predatory pricing.
It lost that case.