Europe Challenges Apple's Deal for Shazam Apple's Deal for Shazam Faces Test In Europe -- WSJ

By Natalia Drozdiak

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 24, 2018).

BRUSSELS -- European Union antitrust authorities on Monday opened a full-blown probe into Apple Inc.'s proposed acquisition of song-recognition app Shazam Entertainment Ltd. on concerns it would reduce choice for users of music-streaming services.

The deal would give Apple ownership of a popular app that helps users identify songs, before directing them to Apple Music or Spotify to listen to and potentially buy or stream the music. It also would give Apple access to extensive information on consumers' musical interests. Financial terms of the deal, announced in December, weren't disclosed.

The European Commission, the bloc's antitrust authority, said it was concerned Apple would gain access to data that would allow the iPhone maker to directly target its rivals' customers and encourage them to switch to its music-subscription service, Apple Music. EU investigators said they would also probe whether competitors could be harmed if Apple were to discontinue referrals to their services from the Shazam app.

"Our investigation aims to ensure that music fans will continue to enjoy attractive music streaming offers and won't face less choice as a result of this proposed merger," EU antitrust chief Margrethe Vestager said on Monday.

The EU could block the deal or extract concessions from the companies in exchange for clearance.

Apple didn't comment. London-based Shazam said, "We respect the European Commission's process and look forward to having the acquisition closed," adding "we can't imagine a better home for Shazam."

Control of data and large sets of personal information is playing an increasingly important role in the EU's antitrust and merger reviews. The bloc's regulators are scrutinizing whether companies holding large amounts of data can use it to cut costs or gain customers in a way that thwarts new competitors.

The EU is also considering changing its merger review rules to include a wider swath of technology deals not typically within its purview, such as the acquisition of a company that generates relatively little revenue but holds commercially valuable data.

Referrals from Shazam could help Apple raise the number of subscribers to its streaming-music service to better compete with competitors. They include Spotify AB, which went public on the New York Stock Exchange in early April and Tencent Music Entertainment Group, China's largest music-streaming company, which is preparing what would be one of the biggest technology IPOs ever, say people familiar with the matter.

Apple initially registered the Shazam deal with regulators in Austria, but authorities there, along with those in France, Italy, Sweden and several other EU countries, asked Brussels to review the deal instead. The national authorities were concerned the deal could harm competition across the European market as well as within their borders.

The European Commission said in February it would take over the review of the merger from Austria. Then on Monday, the EU said it would undertake a full-blown review given lingering concerns. Such a process allows companies several more months to suggest steps, such as selling assets, to win over regulators.

The EU has jurisdiction over a merger if the companies have combined annual world-wide revenue of EUR5 billion ($6.1 billion) and each has EUR250 million in revenue within the EU as a whole. Apple's acquisition of Shazam doesn't meet those revenue thresholds; the app in 2016 posted revenue of about GBP40 million ($56.2 million). But national regulators or companies are allowed to ask the commission to make an exception

The EU said it was giving itself until Sept. 4 to decide on the deal, though the deadline could still be extended.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

April 24, 2018 02:47 ET (06:47 GMT)

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