Why the EU Is Holding Up Apple’s Shazam Takeover

February 7, 2018, 12:39 PM UTC

Apple’s takeover of the music-recognizing service Shazam has hit a possible snag in the European Union, after the bloc’s competition authorities said they want to take a closer look.

It’s not entirely clear what the problem is, but Austria—the EU country where Apple (AAPL) submitted a notification for regulatory clearance—wants the Commission to take over the case, as do France, Iceland, Italy, Norway, Spain, and Sweden.

The reportedly-$400 million deal is too small to automatically trigger a Commission probe. Last year Shazam posted revenues of just £40.3 million ($56 million), which brings it in well below the Commission’s thresholds for automatic review (€100 million or more, depending on the circumstances).

However, the rules say countries can nonetheless ask the Commission to wade in, and that’s what’s happened here.

“On the basis of the elements submitted by Austria and the countries joining the referral request, and without prejudice to the outcome of its full investigation, the Commission considers that the transaction may have a significant adverse effect on competition in the European Economic Area. The Commission has also concluded that it is the best placed authority to deal with the potential cross-border effects of the transaction,” the Commission said in a statement.

Apple’s purchase of Shazam is probably intended to steer Shazam users towards its Apple Music service when they use the app to identify songs playing in the background. Midia analyst Mark Mulligan recently suggested this could net Apple millions more Music subscribers.

However, some observers have highlighted Shazam’s rich trove of user data, and the fact that the Commission is increasingly keen on treating data as an asset when looking at the merits and competition risks of mergers.

Competition commissioner Margrethe Vestager said back in 2016 that “companies need to make sure they don’t use data in a way that stops others competing.”

“It’s possible that…data could be an important factor in how a merger affects competition,” she said at the time. “A company might even buy up a rival just to get hold of its data, even though it hasn’t yet managed to turn that data into money. We are therefore exploring whether we need to start looking at mergers with valuable data involved, even though the company that owns it doesn’t have a large turnover.”

Apple had not responded to a request for comment at the time of writing, and the Commission declined to comment.

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