Big tech companies like Facebook, Apple, Amazon, Netflix, and Google have been buffeted in recent years by regulators and Congress for a variety of sins, both real and imagined. The Biden Administration has appeared especially keen to rein them in and has made threats--both explicit and implicit--to attempt to break them up.
While much of this appears to be regulatory overreach, amounting to little more than a chapter from FTC Chair Lina Khan’s graduate school thesis, there happen to be a few genuine instances of a big tech titan manipulating the regulatory efforts of the government to hamper their competitors.
For instance, Apple has co-opted the privacy-above-all-else agenda to obtain an unfair advantage over its competitors that runs counter to the antitrust agenda pursued by the same advocates for enhanced consumer protection.
Apple’s latest software, iOS 18, to be released next week, adds multiple layers of opt-ins for users to share contact data with non-Apple apps. Apple describes the introduction of Apple Intelligence as “built with privacy from the ground up,” and the company avers that its privacy-first policy “puts users in control by letting them choose to share only specific contacts with an app.”
However, Apple Intelligence actually provides Apple with an enormous competitive edge against its competitors by maintaining total access to user data for Apple’s apps while cutting it off to its competitors, whose customers will need to explicitly permit the app to obtain the same user data as Apple. Many will reflexively refuse.
These changes will effectively slow the growth and impinge the functionality of all apps that facilitate peer-to-peer activity such as Venmo, PayPal, and Signal, and give Apple a massive edge in these markets as a result. These companies use contact data for anti-spam measures in app messages as well as verifying users’ identity to prevent fraud with banking and financial apps. If people fail to opt-in and permit these apps to have access to their data, their functionality will be degraded.
Governments across the globe have taken notice of Apple’s maneuvers. Earlier this year the U.S. Justice Department filed an antitrust case targeting Apple’s app store, alleging that the iPhone cuts off competition and innovation. In another case, a federal judge grilled an Apple executive at a May hearing to determine whether Apple is funneling users to its app payment system in violation of a court order aimed at promoting more consumer choice and lowering prices. The head of Apple’s iPhone app store admitted the company had only approved applications to display links to alternative payment systems for 38 of the approximately two million iPhone apps available in the U.S.
The antitrust authorities of several other countries are investigating Apple’s App Tracking Transparency policy, which Apple introduced with iOS 14.5 in April 2021. With iOS 18, the default setting will prompt users to select individual contacts to share with third-party apps.
Apple’s App Tracking Transparency policy constrains its competitors, imposing clear financial costs. It lowered the share of trackable Apple traffic in the United States by 55 percent, from 73 percent to 18 percent. That decline resulted in a 21 percent fall in ad revenue from Apple users for publishers and app developers.
What’s more egregious is that it appears that Apple is not applying the same standards to itself as to third parties, which is a common last ditch effort for a monopolist trying to stave off competition a bit further. For instance, when the courts forced phone company monopolist AT&T to allow customers to buy phones made by manufacturers other than AT&T in the 1970s, the company staved off competition in this market for years by insisting that rival phones did not pass its safety requirements. The ruse ended when a clever judge submitted an AT&T phone to those same safety tests and it failed.
The U.K. Competition & Markets Authority found that forcing third parties to seek an opt in from Apple’s anti-tracking prompt from users for personalized advertising may harm competition and consumers by unfairly advantaging Apple’s own advertising services and increasing the prices or reducing the quality and variety of apps available.
Scholars have noted the tension between data protection and antitrust concerns with Apple’s anti-tracking policy. Guiseppe Colangelo, a fellow at Stanford Law School, observed in a recent study that “Privacy may be weaponized as a business justification for potential anticompetitive conduct and data protection requirements may be leveraged to distort competition.”
Virtually no one opposes good faith efforts by companies to strengthen data protections and enhance privacy for users. But Apple cannot answer a simple question: if this policy is so great, why only force its rivals to follow it? Allowing all developers that are able to meet its own data protection standards the same privileges to access data should be the default policy. Without demonstrating a compelling need for differentiating between native apps and all others, it is hard to conclude anything other than the privacy justification is a pretext for hindering competition.
