Spotify, Apple Fight Heats Up in Washington

Original Source

Spotify has declared all-out war on Apple in Washington, as the music streaming service tries to convince federal regulators to scrutinize the iPhone maker for allegedly freezing out its competitors.

For more than a year, Spotify has bristled over Apple’s practice of taking a 30 percent cut of all subscriptions sold through its App Store — a policy, Spotify says, that allows Apple to prioritize its own music service over others.

The battle spilled into public view last week, when Spotify slammed Apple in an open letter for “causing great harm” to the company and its customers. Apple strongly rebutted Spotify's claims and criticized it for "publicly resorting to rumors and half-truths." Behind the scenes, though, Spotify has intensified its efforts to recruit new allies in Congress.

The music streaming service has been a regular visitor to members of the Senate Judiciary Committee in recent weeks, as it makes its case that Apple's conduct raises antitrust concerns, multiple congressional aides told POLITICO. Leading the Capitol Hill charge is Tom Manatos, the veteran Capitol Hill aide Spotify hired to open its D.C. office earlier this year. Apple has also been playing defense with the panel.

As the companies trade barbs, top lawmakers are taking notice. “I remain concerned about how Apple’s in-app purchasing practices have affected transparency and prices for consumers," Sen. Al Franken (D-Minn.) said in a statement to POLITICO.

Franken, who sits on Judiciary's antitrust subcommittee, previously asked federal agencies to take a look at the matter. With the latest blowup, he said he's "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.”

The two companies began fighting over the App Store as Apple prepared to announce its own, competing music streaming service in 2015. That April, Spotify registered four outside lobbying shops to address “platform neutrality,” a move multiple sources described as an early attempt to counter Apple in Washington. Reports at the time indicated the Federal Trade Commission began to inquire about the issue, but talk of the potential probe soon quieted — and the agency declined to comment for this story.

The conflict reached a new intensity last week, after Spotify alleged that Apple had rejected the latest version of its app in an attempt to stifle competition. Apple shot back that Spotify had designed its proposed update so that new users would be redirected elsewhere to purchase their subscriptions — a violation of Apple's developer rules.

Spotify did not respond to multiple requests for comment. Apple declined to comment for this story, but pointed to its recent letter to Spotify, in which Apple General Counsel Bruce Sewell slammed Spotify for its accusations. "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," he said.

Spotify appeared to be energized by a speech last week by Massachusetts Sen. Elizabeth Warren. The Democratic lawmaker, whose name has been floated as a potential vice presidential pick for Hillary Clinton, took aim at Apple for having "placed conditions on its rivals that make it difficult for them to offer competitive streaming services." In response, the head of Spotify's policy team, Jonathan Prince, tweeted a portion of Warren's speech.

The senator did not respond to a request for comment.

The chairman of the Senate antitrust panel, Mike Lee (R-Utah), has expressed some interest in the issue — and an aide said the lawmaker had met with FTC staff for a briefing on the matter. A spokesman for the subcommittee's top Democrat, Sen. Amy Klobuchar (D-Minn.), told POLITICO that the lawmaker is also generally "very concerned about preventing monopolies in online commerce."

One of Spotify’s allies in Washington, the Application Developers Alliance, recently surveyed its developer members on their policy priorities. And while the group, which counts Spotify as a member, is still collecting results, its president, Jake Ward, said it has gotten an earful about Apple.

Asked if the group would call on Congress to take a closer look, Ward replied: “If there is a clear and present danger ... then, yeah, we’ll ask for hearings.”

“The general sentiment is, over the past five years, as Apple has gotten more and more into the media business, companies that have been competing in those verticals have a real feeling they are at a competitive disadvantage with the platform itself,” he said.

An aide to Sen. Ron Wyden (D-Ore.) later described the skirmish this way: “As with pretty much any internet issue, our office has heard from all sides of this early and often.”