Apple, Shazam deal heralds heightened EU scrutiny, but data power might be limited

10 May 2018 9:31am

24 April 2018. By Andrew Boyce and Lewis Crofts

EU scrutiny of Apple’s plan to buy music-identification app Shazam sends a familiar message: The European Commission is paying ever-closer attention to the power of data and its risks to competition.

Yesterday, the commission opened an in-depth investigation into the takeover, warning that Apple could obtain commercially sensitive data on the customers of its rivals — and use it to attract them to its own streaming service.

The commission also voiced concerns that Apple could harm competitors such as Spotify and Deezer by discontinuing referrals from the Shazam app to them.

Scrutiny of Big Data has become a hot topic on the EU conference circuit, and it has featured in some prominent merger reviews in recent years. Think Microsoft’s 2016 takeover of professional social network LinkedIn, or Facebook’s 2014 purchase of messaging service WhatsApp.

And EU officials have frequently indicated that they are on the lookout for a Big Data case to explore how holding data could be anticompetitive. But the Shazam deal might not be the right candidate to make sweeping points. The fickle way Shazam users deploy the app — resulting in data that differ from, say, LinkedIn — could mean this isn’t the one.

— Luring Spotify users —

The commission’s statement highlighted two key concerns: First, could Apple use the data on its streaming competitors that it gains from Shazam to “directly target” their users and “encourage them to switch to Apple Music”?

Second, while the commission said there was no evidence Shazam was a “key entry point” for music-streaming services, could rivals be put at a disadvantage should Apple potentially stop referring users to them from the Shazam app?

Otherwise, Apple and Shazam are “two significant and well-known players in the digital music industry” that are “mainly active in complementary business areas,” the commission said in its statement.

Apple operates a music download store — iTunes — as well as its Apple Music streaming service. Shazam allows users to identify music, and then refers them to streaming services on which they can listen to it.

While Shazam is a popular app on phones, the way it is used is a world away from streaming services or social networks where people spend hours a week accessing content.

Rather, Shazam users often switch on the app briefly to identify a song, then switch it off again. What’s more, many users are anonymous, meaning this isn’t the large-scale data gathering of a Facebook or a LinkedIn.

If Apple wanted to obtain such data to target Spotify users, it could just as well do it over another platform such as Facebook or Google.

And the acknowledgement that Shazam isn’t a “key entry point” for music streaming services already hints that while it might be useful in guiding users to Spotify or elsewhere, it is hardly the only way.

— Data trends —

As consumers’ sensitivity to data grows in the wake of the Facebook-Cambridge Analytica scandal, it is perhaps not surprising that EU officials are paying close attention to the information gathered over popular apps.

And the idea that one company accesses data through an acquisition that could give it a leg up over rivals isn’t new either.

In the LinkedIn review, for example, EU officials investigated whether Microsoft could have potentially shut out rivals by denying them access to LinkedIn’s data on its users.

And in its review of the WhatsApp deal, the commission assessed whether Facebook could have used WhatsApp’s data to improve adverts targeted at its own users.

Data was also a key topic in the commission’s 2011 review of Microsoft's purchase of Skype. Data was also a factor in a 2016 review of a joint venture between Google and French drugmaker Sanofi.

But none of those deals faced an in-depth review. That’s what makes yesterday’s decision stand out.

If officials did follow through on their concerns, Apple could face limits on accessing and using Shazam’s data.

The commission has until Sept. 4 to decide on the deal, but the review can be extended by up to 35 working days.

The commission’s case file number is M.8788.

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