Fairness or Favoritism? Google's Spotify Agreement Fuels Antitrust Concerns

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Nadeesh Kareemdathil, Apoorva Bajj

Dec 9, 2023 — 4 min read

Google's Spotify Agreement Fuels Antitrust Concerns

Google has officially acknowledged entering into a unique agreement with Spotify, allowing the music streaming service to bypass the standard Play Store commission fee. This revelation came to light during the ongoing antitrust case between Epic and Google, disclosed by Google's Head of Global Partnerships, Don Harrison.

As reported by The Verge, the terms of this arrangement stipulated that Spotify incurred a zero percent commission when users purchased Premium subscriptions through the company's payment system. In contrast, if a user utilized Google's payment system, Spotify was obligated to pay a 4 percent commission, significantly lower than Google's usual 15 percent fee.

In response to inquiries from the trial judge regarding the Spotify deal, Google asserted that disclosing specific figures would negatively impact ongoing negotiations with other parties. Although Google confirmed the details provided by Harrison, the company sought to rationalize the arrangement by emphasizing that certain developers investing directly in the Android and Play Store ecosystem receive deals that reduce commission fees.

Harrison further disclosed that Google and Spotify had committed to jointly invest $50 million in a 'success fund.' He defended the special agreement by asserting that ensuring the proper functioning of Spotify across play services and core services was crucial for the success of Android phones.

Introduced the previous year, Google's User Choice Billing program typically imposed a 15 percent commission on payments made through the Play Store. However, if developers opted for their payment platform, Google offered a 4 percent discount, lowering the commission to approximately 11 percent. Despite this, Google's VP of Play Partnerships previously acknowledged that, regardless of developers choosing User Choice Billing, they ultimately paid the same amount.

When questioned about potential similar arrangements with other companies, Google declined to provide further details. Recent revelations indicated that Google had proposed a 10 percent discount to Netflix, which the video streaming platform declined. Consequently, Netflix users are unable to purchase memberships through Android devices.

Spotify has consistently voiced concerns about in-app purchase fees. In the middle of 2023, the platform took a significant step by discontinuing support for Apple's App Store billing system, aiming to evade the imposition of a commission as high as 30 percent. Spotify emerged as a prominent participant in the Coalition for App Fairness, a collective that included Epic, and endorsed the antitrust lawsuit initiated by the Fortnite publisher against both Apple and Google. However, in contrast to Epic's sustained legal pursuit against both tech giants, Spotify seems to have identified a more straightforward and cost-effective resolution to disengage from the legal dispute with Google.

Epic's Stand Against Google
Does Google Favor Big Tech Companies with Lower Commission Fees?

Epic's Stand Against Google

Epic, the developer behind the widely popular mobile game Fortnite, has initiated legal proceedings against Google, alleging that the search giant engages in unlawful price gouging by imposing commissions ranging from 15% to 30% on in-app digital transactions, according to a report by AP.

In the ongoing antitrust trial, Tim Sweeney, the CEO of Fortnite, testified, asserting that Google Play Store policies are illegitimate and contribute to Google's monopoly in the mobile app distribution sector, as reported by Bloomberg. Sweeney claimed that Google attempted to sway Epic into releasing Fortnite through the Play Store by presenting a set of financial incentives during a meeting at the California office in 2018. Epic, however, rejected these offers, as stated by AP.

During his testimony, Sweeney expressed his perception of the situation, stating, "It seemed like a crooked arrangement... Google was proposing a series of side deals, which seemed designed to convince Epic not to compete against them."

Does Google Favor Big Tech Companies with Lower Commission Fees?

Google's revelation of a unique payment arrangement with Spotify has shed light on the company's practice of selectively negotiating lower commission fees with certain developers. While Google justifies these deals by emphasizing the investments developers make in the Android ecosystem, critics argue that they create an unfair playing field and disadvantage smaller developers.

The Spotify deal is particularly controversial given that the company is a member of the Coalition for App Fairness, which is advocating for stricter antitrust regulations against Apple and Google. Spotify's willingness to engage in a secret deal with Google suggests that the company may be more interested in protecting its interests than promoting fairness in the app market.

The Epic lawsuit against Google is likely to continue, and the revelations about the Spotify deal could give Epic more ammunition to argue that Google is abusing its monopoly power. It remains to be seen whether Google will be forced to change its policies and allow all developers to pay lower commission fees.