Apple-Shazam Deal May Hurt Competition in Europe, EU Says

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Apple Inc.’s takeover of music-identification service Shazam may threaten competition and should be reviewed by the European Commission, the regulator said.

Apple will be told to file the transaction to the Brussels-based antitrust authority, who will take over the merger review from Austria, where it was originally declared.

Big technology mergers involving startups with insignificant revenue usually fall through the EU’s usual net for checking whether deals harm competition across the bloc. However, alarmed that it nearly missed Facebook Inc.’s takeover of messaging service WhatsApp, the EU is seeking to change its rules to allow it to take charge of acquisitions where a target company makes no money but holds valuable technology or intellectual property.

Apple announced its purchase of the U.K.-based app in December, for a reported $400 million, according to people familiar with the transaction, which would make it one of Apple’s largest acquisitions. The Shazam app uses the microphone on a smartphone or computer to identify almost any song playing nearby, then points users to places they can listen to it, such as Apple Music or Spotify Ltd.

The acquisition would help Apple embed that capability more deeply into its music offerings. The company’s digital assistant Siri was integrated with Shazam in 2014, so users could ask it what song is playing in the background.

The EU may be worried that once Shazam is under Apple’s control, the iPhone maker could choose to make Apple Music the only option for listening to tracks. That could divert some of the referrals from Shazam that currently go to London-based Spotify. The acquisition also gives Apple access to a large user data base of people’s musical interests.

Apple hasn’t indicated that it plans to make Shazam an exclusive for Apple Music, but in the past the company has sometimes made acquired features compatible only with its products. It also has sometimes kept support for properties it’s bought, for example, when Cupertino, California-based Apple acquired Beats Music to develop Apple Music, Apple released an Android version of the program.

Apple said it would work with the EU on the matter, but declined to provide further detail. The EU took up the review after Austria, Iceland, Italy, France, Norway, Spain and Sweden all asked it to do so.

The EU reviewed and approved the Facebook-WhatsApp deal after several European authorities asked the commission to step in. Facebook was later fined for misleading the EU during the merger probe. It had told the regulators it couldn’t combine WhatsApp data with its other services but moved to do so shortly after the deal was finalized.

— With assistance by Mark Gurman



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