On 6 February 2018, the EU Commission announced that it had accepted a referral request from a number of EU countries to assess Apple’s acquisition of Shazam, a UK based developer and distributor of music recognition software. Does this acquisition represent the latest example of tech companies buying their likely future competitors?
We reported in December 2017 how the German Federal Cartel Office (FCO) issued a press release alleging that Facebook had abused its dominant position on the market for social networks in Germany. Although concerning data protection, the case stemmed from Facebook’s acquisitions of Instagram and Whatsapp, and how the social media giant had effectively purchased its future competitors. Instagram represented one of its biggest social media threats, whilst Whatsapp represented a threat to its messaging service over smartphones. The acquisitions allowed Facebook to create a data nexus which further solidified its position, and which relate to the current data protection/competition law complaint by the German FCO. Is Apple’s acquisition of Shazam the same story?
I take the view it probably isn’t, but there are causes for concern. Shazam is not really a direct competitor to Apple Music, Apple’s streaming service, nor a rival to Spotify . Shazam is rather a middle man between consumers and these streaming services. It’s famous for using its artificial intelligence to recognise songs played through a phone’s microphone. It’s clear how the acquisition of this technology could enhance and be integrated into Apple music, but the competitive concerns allegedly relate to the effect that the acquisition could have on Spotify, the European rival to Apple Music. Both Spotify and Apple Music currently benefit from users being referred from Shazam to their platforms, reportedly at around a million referrals a day. Post-acquisition, Apple could end Spotify’s access. Such a problem could be easily remedied by a commitment from Apple for open access for Spotify on Shazam, but that would require Apple to keep Shazam as a separate app on users’ phones, something it is unlikely to want in the long term.
Whatever competitive assessment the EU Commission make, it is likely that this and all future tech acquisitions in Europe will face heightened scrutiny of attempts by technology companies to restrict competition by buying tomorrow’s competitors today.