Music Publishers File FTC Complaint Against Spotify for 'Fraudulent Business Practices' (2024)

The National Music Publishers Association (NMPA) has filed a complaint with the Federal Trade Commission against Spotify over the streaming giant’s controversial audiobook bundle offering. The premium subscription tier bundle has led to decreased royalties for songwriters, with the trade group calling the strategy “a scheme to increase profits by deceiving consumers and cheating the music royalty system.”

NMPA CEO David Israelite revealed the FTC complaint — reviewed by Rolling Stone — during his speech for the trade group’s annual meeting in New York on Wednesday afternoon, over what he called “Spotify’s unfair, deceptive, and fraudulent business practices.”

“Spotify has declared war on songwriters,” Israelite said Wednesday.“Our response shall be all-encompassing.”

The NMPA’s dispute with Spotify began several months ago, when Spotify added audiobooks to its premium subscription tier offering, which bundles music and books together. That move carries significant weight in the complex world of music publishing royalties.

The rates on certain types of royalties songwriters get from streams — called mechanical royalties — aren’t determined solely by the rights holders or streaming services, but by the Copyright Royalty Board (CRB), a three-judge panel housed within the Library of Congress.The CRB statute states that bundled offerings could call for lower royalty rates since music is only part of a subscription package.As such, Spotify purports to be able to pay songwriters less; the NMPA claims it’ll cost writers and publishers $150 million over the next year.

The move has been predictably unpopular among songwriter groups, who’ve said Spotify is acting in bad faith from negotiations they previously set with the publishers in the CRB hearings. The Mechanical Licensing Collective, the organization responsible for collecting mechanical royalties for songwriters since the Music Modernization Act passed in 2018, sued Spotify over the bundle in May.

While the NMPA advocates on behalf of music publishers, given the FTC’s role as a consumer protection agency, the group’s complaint focused on the bundle’s alleged impact on Spotify customers. The group alleged that Spotify violated the Restore Online Shoppers’ Confidence Act because the streaming service converted its premium users to the bundle without their consent and failed to offer a music-only option for those who wanted to opt out.

“This bait-and-switch subscription scheme is ‘saddling shoppers with recurring payments for products and services they did not intend to purchase or did not want to continue to purchase,'” the NMPA alleged. The NMPA further alleged that the strategy gives Spotify “an unfair competitive advantage because it can now offer the same content as its competitors at a fraction of the cost.”

A spokesperson for Spotify said that “Spotify’s approach to expanding its offering and raising prices is industry standard.”

“We notify users a month in advance of any price increases and offer easy cancellations as well as multiple plans for users to consider,” the spokesperson said. “In short, we categorically reject the NMPA’s baseless accusations and will continue to provide consumers incredible value and a best in class experience.”

The complaint is just the latest move in the NMPA’s aggressive approach against Spotify over the bundle. Last month, the group hit Spotify with a cease-and-desist over allegations that the streaming giant is infringing on their members’ musical works through lyrics, music videos, and podcasts on the platform. Spotify called that move “a press stunt filled with false and misleading claims” and “an attempt to deflect from the deal that the NMPA agreed toand celebratedback in 2022.”

Weeks after the cease-and-desist, the NMPA wrote a letter to Congress calling for changes that would allow publishers to opt out of the blanket licensing rate set by the CRB and allow them to negotiate on their own.

Aside from the FTC complaint, the NMPA also sent letters to 10 state attorneys general — including New York, California, and Tennessee — encouraging their offices to investigate as well. The NMPA has also been in touch with several consumer advocacy groups, including the National Consumers League, the Consumer Federation of America, and Public Citizen.

“For anyone who thinks that this is overkill, welcome to our version of a bundle,” Israelite said in his speech Wednesday. “Spotify does have an exit ramp; they can reverse course. Based on the past I have no expectation that will happen. But it is not too late for them to do the right thing.”