Apple Reportedly Facing Scrutiny Over Fees, Restrictions for Music Services in App Store

Jimmy Iovine
David Paul Morris/Bloomberg via Getty Images 

Jimmy Iovine, co-founder of Beats Electronics, speaks during the Apple World Wide Developers Conference (WWDC) in San Francisco, California on June 8, 2015.

Apple's sizable cut of all in-app purchases in its iTunes store, along with restrictions to keep companies from avoiding that fee, are reportedly getting a close look by the Federal Trade Commission. According to Reuters, U.S. antitrust regulators are exploring whether Apple is mistreating rivals by taking 30 percent for all digital goods, a requirement that some music streaming services have complained cuts into already-slim profit margins.

Sources cited in the report indicate that the FTC has met with multiple concerned parties, but has not opened a formal investigation into whether Apple is violating any antitrust laws with the practice. While he declined to say whether his company has spoken with regulators, Deezer CEO Tyler Goldman told Reuters that Apple's cut leaves little room for profit.

"The margin in music is quite small, and the App Store diminishes the margin," he said. "It will be an issue for the industry going forward. You can either raise your prices and not be competitive with Apple's price, or you can have no margin."

Section Five of the FTC Act prohibits "unfair or deceptive acts or practices.”

Most music subscription services, including Spotify and Rdio, are priced at $9.99 per month and are available to purchase in the iTunes store. (The new Apple Music charges the same, but obviously does not have to pay the 30 percent cut.)

What many consumers may not know is that you can also sign up for the third-party services on their respective websites, thereby slicing Apple out of the equation.

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Some of the FTC's chief concerns are regarding these restrictions, which include a ban on companies letting consumers know they can buy the product directly from them, and a ban on including a link to a company's website from inside the app. Apple also doesn't allow apps — all of them, not just music — to mention that the app is available on other platforms, like Google Play.

Google also charges a 30 percent fee in its app store, but it places fewer marketing restrictions on third-party apps.

The investigation comes a few months after Attorneys General Eric T. Schneiderman of New York and George Jepsen of Connecticut looked into possible collusion between Apple and the major record labels around streaming competition.


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