Tech ETFs slumped on Monday as European regulators launched an in-depth investigation of Apple’s (AAPL) planned $400 million purchase of Shazam, the music recognition app developed in the UK. Under the deal, there is concern that it could reduce choice of music-streaming services.
The European Commission said an initial probe found Apple may encourage Shazam users to switch to its own music streaming service. Shazam already presents users with links to Apple’s iTunes download store to buy songs where links to the iPhone maker’s music download service generates revenue for Shazam.
Although Shazam isn’t considered a “key entry point” for music streaming services, the Commission will consider whether Apple Music’s competitors would be harmed if Apple discontinued referrals from the Shazam app.
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What About Spotify?
According to The Verge, “The primary worry appears to be that Spotify (SPOT) and Apple currently gain 1 million clicks per day through the Shazam app. While Shazam is still live, if Apple were to shut it down or only direct referrals to its own music service, Spotify could lose a significant amount of traffic. Additionally, officials point out that Apple could use Shazam’s data to unfairly target its rivals’ users and “encourage them to switch to Apple Music.”
Apple Music currently has about half as many paid subscribers as Spotify, the world’s biggest streaming platform. Data and large sets of personal information play an increasingly important role in the EU’s antitrust and merger reviews as companies holding large amounts of data can exclude new competitors from markets.