Apple’s Takeover of Shazam Is Cleared by European Regulators

Posted September 6, 2018 11:58 a.m. EDT
Updated September 6, 2018 12:02 p.m. EDT

LONDON — European authorities Thursday cleared Apple’s acquisition of popular song-recognition app Shazam after months of study into whether the deal would give the iPhone maker an unfair advantage over rival streaming music services like Spotify.

Apple said in December that it had agreed to buy Shazam, prompting European regulators to scrutinize the proposed takeover as part of a broader effort to examine the value of data when evaluating mergers.

In the case of Apple’s deal for Shazam, regulators questioned whether the app held important information on Apple competitors. The focus on data transfer is a departure from typical antitrust enforcement, which tends to zero in on how a deal may affect customers in terms of a product’s cost.

“Data is key in the digital economy,” Margrethe Vestager, the top antitrust enforcer at the European Commission, the European Union’s executive arm, said in a statement. “We must therefore carefully review transactions which lead to the acquisition of important sets of data, including potentially commercially sensitive ones, to ensure they do not restrict competition.”

The Apple deal, Vestager said, would not impede competition.

The case was a rare instance in which European antitrust authorities have passed on an opportunity to act against a U.S. technology giant. The region has gained a reputation as the world’s strictest overseer of the technology industry.

In 2016, Ireland was ordered to recoup 13 billion euros, or about $15.1 billion, in back taxes from Apple, a decision both the company and the Irish government are appealing. Amazon, Facebook, Google and U.S. chipmaker Qualcomm have also been fined in recent years. This year, European authorities saw through the most stringent data protection rules in the world, as well, raising the prospect of further penalties.

When starting their investigation of the Apple-Shazam deal in February, regulators said they were concerned that Apple would block Shazam from referring customers to rival services, or that it would use the app to poach customers.

On Thursday, the European Commission said that after a six-month review, it had concluded that the app did not give Apple an unfair advantage that merited government intervention.

“Access to Shazam’s data would not materially increase Apple’s ability to target music enthusiasts and any conduct aimed at making customers switch would only have a negligible impact,” the commission said in a statement.

Spotify, a major rival to Apple’s own music-streaming service, declined to comment.

Shazam was an early hit in Apple’s App Store thanks to its novel ability to quickly identify a track after using a smartphone’s microphone to “listen” for only a few seconds. The two companies established closer ties in 2014, when Shazam was integrated into Apple’s voice-powered digital assistant Siri, allowing users to ask, “Hey Siri, what song is playing?”

The app mainly makes money by selling advertisements and collecting fees when it refers users to a music service like Apple and Spotify. Shazam is also a valuable source of data, giving music companies insight into what songs and artists are performing well, and in which regions.

Apple’s deal for Shazam has been seen as a possible test case for Vestager, who has said antitrust enforcement must evolve to consider the value of data.

Vestager has said that with free services, customers effectively pay with their data, and that they are not always getting a fair deal.

Broadening the interpretation of antitrust law would have consequences for future acquisitions. But whether such an argument would hold up in a courtroom has not yet been well established, making it harder for authorities to step in.

Working in Apple’s favor was the fact the European Commission had previously approved acquisitions between several data-rich companies, including Facebook’s deals for WhatsApp and Instagram, as well as Microsoft’s acquisition of LinkedIn.