NEW YORK (TheStreet) -- Spotify says Apple (AAPL) - Get Report rejected it's updated iPhone app because it wants to limit competition with Apple Music, CNBC's Josh Lipton reported on "Closing Bell" Thursday.

Spotify has sent a letter to Apple's top lawyer claiming the company is harming Spotify and its customers, Lipton said, citing a report from Recode.

Spotify says Apple is blocking a new version of the app for the iPhone and demanding that Spotify use its billing system in the app store.

Apple charges a monthly fee of up to 30% for using its billing services, which Spotify passed on in order to continue charging customers $10 a month instead of $13, he added.

"We cannot stand by as Apple uses the app store approval process as a weapon to harm competitors," Lipton said, citing Spotify's lawyer.

Spotify is arguing that Apple is using the app store approval process as an excuse to remove competition, Lipton added.

Spotify began offering subscribers a deal in which they would receive Spotify's premium service for 99 cents for 3 months, if they signed up for it via Spotify's website. Spotify said Apple threatened to remove the app from the app store unless they stopped telling subscribers about the deal, Lipton explained, again citing Recode.

Apple knows that Spotify needs the iPhone to reach subscribers, but if Apple takes advantage of that it could anger Spotify users and give them a reason to switch to an iPhone competitor such as Andriod, or even get themselves on the wrong side of regulators, MIDiA Research Analyst Mark Mulligan told CNBC.

"It's really a question of leverage," Mulligan said.

Spotify reported that it had 30 million paying subscribers in March, while Apple reported having 15 million.

Shares of Apple closed higher by 1.27% to $95.60 on Thursday. 

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