While the shift in public opinion about the tech industry in recent years has been stunning by any measure, the change in the perception of Apple may be the most improbable. When Gutierrez started accusing the company of anticompetitive behavior in 2016, many public officials had already begun to look with suspicion at
Gutierrez has been instrumental in chipping away at that admiration. His criticism of Apple starts with its mobile App Store, a business it invented and still dominates. App developers such as Spotify and
Gutierrez says he doesn’t think Apple has helped itself with a defense based on rejecting criticism outright, a stance that reminds him of Microsoft’s early response to its antitrust troubles. A growing number of governments, other tech companies, and regulators have become receptive to Gutierrez’s arguments. In June 2020, the European Commission responded to Spotify’s complaints about Apple by
On July 7 dozens of U.S. state attorneys general
Apple says the App Store has helped Spotify become the largest music subscription service in the world, that most users of Spotify’s app use the free version and so pay nothing to either company, and that Spotify now pays a commission of only 15% on those subscriptions that did come through Apple devices. “They want all the benefits of the App Store but don’t think they should have to pay anything for that,” an Apple spokesperson said in a statement. Google declined to comment.
Gutierrez, one of the most powerful attorneys of Hispanic descent working in U.S. corporate law, was born and raised in Venezuela. He joined Microsoft in 1998 after graduating from the University of Miami’s law school—it was his fourth law degree—and started off as its lead counsel for Latin America and the Caribbean. He impressed his bosses enough to get dispatched to Europe to serve as the top lawyer defending Microsoft before the European Commission, which had accused the company of anticompetitive behavior for integrating its Internet Explorer browser with its Windows operating system, making it harder for competing browsers.
“We were there in the darkest hour for Microsoft in Brussels,” says John Kelly, who at the time oversaw Microsoft’s corporate affairs in Europe. “We were the symbol for many people of the big arrogant monopolists.” Although Microsoft would lose the case, Gutierrez gained an understanding of antitrust law in Europe, honed his strategic thinking, and cultivated relationships with some of its top lawmakers.
Spotify hired Gutierrez away from Microsoft in 2016. The idea wasn’t specifically to go after Apple, says
Subscriptions account for about 90% of Spotify’s sales, and it wasn’t even close to turning a profit, even without Apple taking that cut. But if Spotify didn’t allow in-app payments, Apple’s rules forbade Spotify from asking its customers inside the app to sign up through its website, where the company wouldn’t have to pay Apple a commission.
In 2015, Apple unveiled Apple Music, a direct competitor to Spotify that came at the same price. Apple didn’t have to worry about the cost of App Store commissions.
By this time, Gutierrez knew most of the major lawyers in Silicon Valley. Soon after taking the Spotify job, he flew to Cupertino, Calif., to meet with Apple’s general counsel,
With the blessing of CEO
Apple insisted that Spotify was asking for new rules. But Gutierrez argued that Apple had only tightened the screws when it started dominating the market. Spotify shared confidential financial information with officials to show how Apple’s policies affected its profitability and the rate of subscription growth.
Gutierrez bided his time until he thought European officials would be receptive. In 2019 he filed a complaint, and the European Commission responded by opening an antitrust investigation. In April the commission sent Apple a statement of objections, laying out evidence of what it saw as the company’s abuse of power, a signal it’s likely to take action against the company. “The Commission’s argument on Spotify’s behalf is the opposite of fair competition,” said the Apple spokesperson in a statement.
As confident as Gutierrez feels about Spotify’s own litigation, he now says the best chance for reforming the tech industry is through new laws. To push for policy changes, Spotify has rallied other developers into a group called the Coalition for App Fairness, which includes dating-app developer
Gutierrez is careful to distance himself from Epic’s litigation, because he sees the coalition as an advocacy group rather than a legal defense fund, but he says he’s unconvinced by Apple’s claims that it doesn’t know how much money the App Store generates. “This is not like the budget for printer toner,” he says. “This is a multibillion-dollar business.”
The chances of new regulations or laws in the U.S. look better than ever. In April, Gutierrez appeared before a Senate panel to
The landscape looks a lot different than it did when Gutierrez first began talking about Apple. His actions “have spawned a lot of the other Apple-related activity across the globe,” says
(Updates sixth paragraph with additional comment from Apple. A previous version of this story corrected the description of Spotify’s use of Apple’s in-app purchasing system.)
To contact the author of this story:
To contact the editor responsible for this story:
© 2022 Bloomberg L.P. All rights reserved. Used with permission.