The European Commission has opened a formal investigation into the proposed acquisition of Shazam by Apple under the EU Merger Regulation. The Commission is concerned that the merger could reduce choice for users of music streaming services.
Competition Commissioner Margrethe Vestager said ‘The way people listen to music has changed significantly in recent years, with more and more Europeans using music streaming services. Our investigation aims to ensure that music fans will continue to enjoy attractive music streaming offers and won’t face less choice as a result of this proposed merger.’
The merger would combine Apple Music, which in the last 3 years has become the second largest music streaming service provider in Europe with Shazam, which is the leading music recognition app for mobile devices in the European Economic Area (EEA) and worldwide.
The EU Commission’s competition concerns
The Commission’s initial market investigation raised several issues relating to the combination of Shazam’s strong market position in the music recognition apps market and Apple’s market position in the music streaming services market.
The Commission is concerned that, following the takeover of Shazam, Apple would obtain access to commercially sensitive data about customers of its competitors for the provision of music streaming services in the EEA. Access to such data could allow Apple to directly target its competitors’ customers and encourage them to switch to Apple Music and as a result, competing music streaming services could be put at a competitive disadvantage.
Another of the Commission’s concerns was whether Apple Music’s competitors would be harmed if Apple were to discontinue referrals from the Shazam app after the merger completed.
The request to investigate the merger was made by 7 countries – Austria, France, Iceland, Italy, Norway, Spain and Sweden. The Commission noted that ‘the vast majority of notified mergers do not pose competition problems and are cleared after a routine review.’ Regulators will now have until 4th September 2018 to decide whether to permit the takeover.
The deal between Apple and Shazam for a reputed £300 million was made in December 2017 and is seen as Apple’s attempt to boost its Apple Music service which trails significantly behind Spotify in paid subscribers. In April 2018, Apple Music had 40 million paid subscribers and Spotify had 71 million (latest published numbers – 31st December 2017).
Incorporating music recognition into Siri would also boost Apple’s ability to compete with Google’s voice-assistant services. Google Assistant already includes a music-recognition system where Apple’s Siri does not, which in this area leaves it some way behind Google’s and Amazon’s Alexa offerings.
