Apple shares fell Monday following a report that the DOJ is considering an antitrust investigation of the Silicon Valley giant.
CNBC reports that Apple shares fell this week following a report from Reuters which alleged that the Department of Justice is considering a probe of the company. Reuters also reported that Google is very likely to also face an investigation. The DOJ investigation into Apple is part of a broader investigation into the anti-competitive behavior of big tech firms.
Apple stock dropped by two percent following the report after trading higher earlier in the day. Apple CEO Tim Cook will be presenting updates to the company’s software at the annual Worldwide Developers Conference taking place between June 3 and June 7. Google, Amazon, and Facebook also saw a drop in share prices following Reuters report of DOJ investigations.
The investigation into Apple is reportedly linked to the broader probe of Google, according to Reuters, and is a result of a meeting between the DOJ and the FTC. CNBC states in its article: “The headlines together paint a daunting picture for Silicon Valley and the stock market’s most valuable companies. Big tech has long faced scrutiny from European regulators, but has so far shrugged off calls for government regulation in the U.S.”
In March, music streaming service Spotify filed an antitrust complaint against Apple with the E.U. related to the 30 percent cut that Apple takes from subscriptions made via their app store. Spotify’s CEO Daniel Ek outlined in a blog post the issues that Spotify has with Apple, the music streaming service also started their own website called Time to Play Fair.
Ek believes that this app subscription “tax” is designed to harm streaming services that compete with Apple’s own services, such as Apple Music. Ek says that if Spotify were to pay this tax it would be forced to “artificially inflate” its prices “well above the price of Apple Music,” causing harm to the company’s business. Ek says that if the company doesn’t comply with Apple’s tax, it faces “a series of technical and experience-limiting restrictions,” on its app. Ek added that Apple “routinely blocks our experience-enhancing upgrades,” locking competitors out of Apple devices such as Siri, Apple Watch and Homepod.
Apple, however, refused to take Spotify’s recently claims lying down, instead choosing to publish a scathing response letter to the music streaming service. In a statement, Apple harshly responded to Spotify’s antitrust claims, laying out the steps that Apple had taken to help Spotify in the development of its app and how Spotify benefited from the App Store.
“After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store ecosystem — including the substantial revenue that they draw from the App Store’s customers — without making any contributions to that marketplace,” Apple said in the statement. Apple also noted that in its complaint over the 30 percent “App Store Tax” Spotify failed to note that after the first year, this figure drops to 15 percent.
Apple stated that the only a “tiny fraction of their [Spotify’s] subscriptions fall under Apple’s revenue-sharing model.” The statement further added: “Spotify wouldn’t be the business they are today without the App Store ecosystem, but now they’re leveraging their scale to avoid contributing to maintaining that ecosystem for the next generation of app entrepreneurs. We think that’s wrong.”