The European Commission has opened an in-depth investigation to assess 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.
Commissioner Margrethe Vestager, in charge of competition policy, 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 proposed transaction involves Apple’s acquisition of Shazam. It 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.
Rather than play music itself, Shazam instead points users towards streaming services that have the track available to play. While the Android version of the app has hooks for multiple services, including Google Play Music All Access and Deezer, the iOS version is mostly limited to Apple Music, iTunes, and Spotify.
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.
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. 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.
The investigation follows after requests from Austria, France, Iceland, Italy, Norway, Spain, and Sweden to assess the acquisition under EU merger regulations. The governments have expressed similar concerns over competition, asking the European Commission to look into the matter as early as February.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).