Shares in Apple, which have climbed more than 30% in 2019 to date, slipped nearly 2% $208 on Monday after a Financial Times report over the weekend said the tech giant faces an investigation into its App Store fees.
According to the news outlet, a probe could start in the coming weeks. Rivals such as Spotify have long complained about what they call the “Apple Tax,” a fee of 30% that is assessed to apps in the App Store. They say it limits their flexibility and ability to appeal to consumers.
Apple and Spotify both declined to comment to the FT.
In addition to the report of regulatory scrutiny, Apple stock also declined due to saber-rattling by President Donald Trump, who has vowed to escalate a trade war with China.
Service fees are integral to Apple’s recent strategic shift. As the company has seen sales of hardware staples like the iPhone start to decline, with the realm of manufacturing introducing considerable liability into the balance sheet, it has begun to emphasize its Services segment. Music, payments, apps and the soon-to-launch Apple TV Plus all contribute revenue through the charging of services fees, without requiring the same capital investment as hardware manufacturing.
Spotify earlier this year filed a complaint with the Euopean Commission, arguing that Apple’s 30% “tax” on Spotify streams represents an “unfair advantage” that hinders competition. Companies are forced to raise prices in order to remain viable, the complaint alleges.
Apple countered by saying the move by Spotify “wraps its financial motivations in misleading rhetoric about who we are, what we’ve built and what we do to support independent developers, musicians, songwriters and creators of all stripes.”
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