The Commission concluded that the combination of Apple and Beats, both of which sell headphones in the European Economic Area (EAA), does not represent a threat to competition because their combined market share is low, and the unified company would still face a large number of global competitors like Sennheiser, Sony, and Bose. The Commission also concluded that Apple and Beats are not considered close competitors because the types of headphones they sell differ so greatly.
Apple put up its proposal to purchase Beats Electronics lock, stock, and barrel at the end of May this year, representing a massive buy-out for $2.6 billion in cash, and $400 million in shares. The acquisition of Beats, famously founded by rapper and producer Dr. Dre and music mogul Jimmy Iovine, was part of a strategic effort for Apple to not only improve the audio quality of its maligned headphone line, but also to bolster its street cred with the popular brand, which adds a new element of style to its products.
In addition to the popular, if not critically underwhelming Beats product arsenal, Apple is acquiring a growing music streaming service in Beats Music, which started pushing against the likes of Pandora and Spotify after its highly-publicized launch last year. The European Commission found no issue with Apple’s control of the streaming service either, concluding that it has a small space of the streaming marketplace at present, and does not give Apple “the ability and incentive to shut out competing streaming services from access to iOS.” Beats Music also does not currently operate in the EAA, available only in the U.S. and Australia.
Apple is still awaiting regulatory approval in other areas of the global marketplace, including the U.S. According to CNet, the company is hoping to lock down approval in order to complete the deal by September. Apple is not expected to have any significant regulatory opposition to its proposal going forward. However, it might see trouble from other sources. As the deal looms, Beats Electronics has recently been named in a lawsuit by Bose for patent infringement over noise canceling technologies. It is not yet known exactly what kind of damages Bose is seeking.
Still, with pockets as deep as Apple’s, a victory in court for Bose would likely be a mere bump in the road as the tech giant looks to exploit its new properties. We’ll keep an eye on the Apple/Beats saga as it develops, so stay with us.
