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EU probe threatens Apple's acquisition of Shazam

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EU probe threatens Apple's acquisition of Shazam

Margrethe Vestager - Photo EU Council

(BRUSSELS) - The European Commission opened an in-depth investigation under the EU Merger Regulation Tuesday into U.S. tech giant Apple's proposed acquisition of the UK's Shazam music identification service.

The Commission's main concern is that the merger could reduce choice for users of music streaming services. "The way people listen to music has changed significantly in recent years, with more and more Europeans using music streaming services," said Competition Commissioner Margrethe Vestager: "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."

Apple's acquisition of Shazam would combine two significant and well known players in the digital music industry that are mainly active in complementary business areas. In particular, Apple offers the music streaming service "Apple Music", which in the last three years has become the second largest music streaming service provider in Europe. Shazam offers the leading music recognition app for mobile devices in the European Economic Area (EEA) and worldwide. Music recognition applications allow consumers to recognise music based on a short audio sample by using microphones built into their mobile devices.

The Commission says its 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.

At this stage, 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.

As a result, competing music streaming services could be put at a competitive disadvantage, says the EU executive. In addition, while at this stage the Commission does not consider Shazam as a key entry point for music streaming services, it will also further investigate whether Apple Music's competitors would be harmed if Apple, after the transaction, were to discontinue referrals from the Shazam app to them.

The transaction was notified to the Commission on 14 March 2018. The Commission now has 90 working days, until 4 September 2018, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Background

Apple is a US based global technology company which designs, manufactures and sells mobile communication, media devices, portable digital music players and personal computers. It also sells and delivers digital content online through the ''iTunes Store'', the ''App Store'', ''iBookstore'' as well as ''Mac App Store''. It also offers the music and video streaming service ''Apple Music''.

Shazam is a UK based developer and distributor of music recognition applications for smartphones, tablets and PCs.It mainly generates revenues from online advertising, and commissions earned on referrals of users to digital music streaming and download services, such as Apple Music, Spotify and Deezer.

On 6 February 2018, the Commission accepted a request from Austria, France, Iceland, Italy, Norway, Spain and Sweden to assess the acquisition of Shazam by Apple under the EU Merger Regulation. The proposed transaction was initially notified to Austria for regulatory clearance as the transaction did not meet the turnover thresholds of the EU Merger Regulation. Austria submitted a referral request to the Commission pursuant to Article 22(1) of the EU Merger Regulation on 21 December 2017.

More information on the transaction will be available on the Commission's competition website, in the public case register under the case number M.8788.


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