Followups: Apple’s Chinese Wall of Worry, App Store Impunity, and Vertical Foreclosure

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Annotote TLDR

28 min readDec 12, 2018

The following highlights provided by Annotote: Don’t waste time and attention, get straight to the point. All signal. No noise.

Antitrust Is Tech’s Endgame

by Annotote TLDR 2017.05.01

The real story about Apple and the Paradise Papers (Parts I-III)

by Annotote TLDR 2017.11.07

Facebook, Cambridge Analytica, and Other Weakest Links: The many failures by many players throughout the app ecosystem

by Adventures in Consumer Technology 2018.03.26

The Power of the Narrative

by Annotote TLDR 2018.07.03

Of Chinese Walls and Tech’s Principal-Agent Problem: When Platforms Exploit Platform Risk

by Adventures in Consumer Technology 2018.09.25

Tim Cook’s Magnum Opus: Four Essential Rights (and Wrongs)

by The Startup 2018.10.30

Award-winning Infinity Blade game pulled from the App Store because unsustainable

by toucharcade 2018.12.10

[The game’s publisher] Epic is on top of the world right now, and it being “increasingly difficult” to support likely has everything to do with the dismal state of premium games on the App Store in 2018…
The game company that has the biggest hit in the world, [Fortnite,] and is raking in so much cash… can’t make sense out of continuing to maintain their mobile games. Their mobile games which have been extensively featured by Apple at every possible opportunity and were effectively platform-defining when they were released are now increasingly difficult to support.
What in the hell.
For real, what the hell.

Discord’s gaming store offers developers 90/10 revenue split because “it doesn’t cost 30% to distribute games in 2018”

by PC Games N 2018.12.14

App stores’ taxes increase end-consumer prices

by engadget 2019.07.09

Facebook is testing even more ways to let creators make money directly from their hardcore fans. Facebook Stars was originally designed for the gaming community on Live, but the company is now going to allow a small set of video creators outside of that to receive one-time support from people. To give you some context, fans can buy packs of as little as 100 Stars for $1.40, and creators will get one cent per Star — Facebook charges more per pack on mobile, but that’s to compensate for the the 30 percent charge for in-app purchases from Apple and Google.

Meta is passing-on Apple’s newest Apple tax to advertisers

by The Verge 2024.02.15

[Facebook’s Family of Apps] will start charging a 30% fee when advertisers pay to boost the visibility of their posts in Facebook’s and Instagram’s iOS apps. The change, which goes into effect later this month, stems from a 2022 App Store update where Apple extended its typical 30% cut of digital purchases to boosted posts, which are essentially ads. The change particularly targeted Meta and other social apps that let people pay in app to increase the reach of their content…
Meta says people can still purchase boosts from Instagram’s and Facebook’s websites on desktop or mobile to get around the Apple fee that is being passed on to iOS users. “We are required to either comply with Apple’s guidelines, or remove boosted posts from our apps,” the company says. “We do not want to remove the ability to boost posts, as this would hurt small businesses by making the feature less discoverable and potentially deprive them of a valuable way to promote their business.”

Netflix eliminates option for new users to purchase subscriptions via App Store’s in-app option, redirecting to website instead on iOS Devices

by MacRumors/VentureBeat 2018.12.28

“Apple Tax” reform is being triggered by Netflix, Spotify, and other participants in the App Store

by RBC Capital/Business Insider 2019.01.03

How Big Tech is Breaking Antitrust Laws

by Sally Hubbard/CNN 2019.01.02 (critiqued here)

Google, Amazon and Facebook are following the same playbook [as Microsoft did when it lost its antitrust case with Internet Explorer vs Netscape]. The tech giants have “platform privilege” — the incentive and ability to prioritize their own goods and services over those of competitors that depend on their platforms. By doing so, they contend they are improving their products and benefiting customers. An entrepreneur can create a superior product or service and still get crushed because Big Tech is controlling the game and playing it, too.

Supreme Court rules in favor of Pepper: Not only may the plaintiffs (consumers) proceed with their antitrust case against Apple, but App Store developers may too

by CNBC 2019.05.13

The Supreme Court, ruling 5-4, allows iPhone users to pursue their antitrust lawsuit against Apple in a case involving its [App Store]…
The iPhone users argued that Apple’s 30% commission on sales through the App Store was passed along to consumers, an unfair use of monopoly power. Apple argued that only app developers, and not users, should be able to bring such a lawsuit [per its “Illinois Brick” defense].
“Apple’s line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits,” [Justice] Kavanaugh wrote.

The Supreme Court’s opinion explicitly rejected the argument that Illinois Brick’s precedent meant that only one constituent along the supply chain could sue (e.g. only developers). Rather, the Court held that Apple was in the middle of a relationship between developers and consumers, with both having a direct relationship with Apple, and therefore, both may sue:

It is true that Apple’s alleged anticompetitive conduct may leave Apple subject to multiple suits by different plaintiffs. But Illinois Brick did not purport to bar multiple liability that is unrelated to passing an overcharge down a chain of distribution. Basic antitrust law tells us that the “mere fact that an antitrust violation produces two different classes of victims hardly entails that their injuries are duplicative of one another.” 2A Areeda & Hovenkamp ¶339d, at 136. Multiple suits are not atypical when the intermediary in a distribution chain is a bottleneck monopolist or monopsonist (or both) between the manufacturer on the one end and the consumer on the other end. A retailer who is both a monopolist and a monopsonist may be liable to different classes of plaintiffs — both to downstream consumers and to upstream suppliers — when the retailer’s unlawful conduct affects both the downstream and upstream markets.
Here, some downstream iPhone consumers have sued Apple on a monopoly theory. And it could be that some upstream app developers will also sue Apple on a monopsony theory. In this instance, the two suits would rely on fundamentally different theories of harm and would not assert dueling claims to a “common fund,” as that term was used in Illinois Brick . The consumers seek damages based on the difference between the price they paid and the competitive price. The app developers would seek lost profits that they could have earned in a competitive retail market. Illinois Brick does not bar either category of suit.

Inside the Apple Team That Decides Which Apps Get on iPhones: The former head of App Store reviews discusses why apps get rejected and competition between Apple/developers

by Bloomberg 2019.05.28

Regarding Apple’s prohibition on users setting up 3rd party apps as iPhone defaults (which sounds anticompetitive to me)…

Mark Gurman: Google Voice, 10 years later, this is Google’s calling service, but Google wanted to launch Google Voice for iPhones — this was in the early days of the App Store — but there is a whole backstory there. Talk us through it.
Phillip Shoemaker: Well actually, Google Voice online for the web came out long before they tried to push through Google Voice for the iPhone, and a 3rd-party developer was the first one on-board…it was G-Voice, and I had weekly calls with him. He and I had many conversations and it lasted 11 months probably, me saying you’re not going to get in the Store…and let’s take a look at why.
What is Google Voice? Well, it replaces the telephone features of your iPhone. That was kind of strike number one. Apple says, ‘We don’t want Google to take over the phone’, we don’t want there to be a Gmail client, a browser, a phone-calling, contact, etc., because then it will become the G-Phone, was the fear, just like they were afraid of the Facebook-phone.
MG: So there was an actual fear inside of Apple in the early days of the App Store that if they allowed these different Google services on the phone, the phone could actually become a Google phone, that was a real thing?
PS: That was a real thing. The fear that somebody would come along — a Facebook or Google, or whoever — and wipe-off and remove all of [Apple’s] items, the dialing, the contacts, and replace that Facebook or Google variations of it. That was the number one fear, because suddenly, you’re losing the caché of the phone, you’re losing that people think more about Apple — once they start using these other apps, they’d be thinking more about Google.
MG: Now is that a reason why still to this day…you cannot set other 3rd-party apps for defaults for main functions?
PS: Yes. I would say that’s absolutely the reason.

US regulators DOJ and FTC launch investigations into Big Tech

by Reuters 2019.06.03

The U.S. Justice Department has jurisdiction for a potential probe of Apple Inc as part of a broader review of whether technology giants are using their size to act in an anti-competitive manner, two sources told Reuters.
The Justice Department’s Antitrust Division and the Federal Trade Commission (FTC) met in recent weeks and agreed to give the Justice Department the jurisdiction to undertake potential antitrust probes of Apple and Google, owned by Alphabet Inc, the sources said. The FTC was given jurisdiction to look at Amazon.com Inc and Facebook Inc, the sources said.

The EC launches a formal antitrust investigation into possible anti-competitive conduct by Amazon in its dual role as marketplace and retailer

by The European Commission 2019.07.16

Commissioner Margarethe Vestager [said]: “E-commerce has boosted retail competition and brought more choice and better prices. We need to ensure that large online platforms don’t eliminate these benefits through anti-competitive behaviour. I have therefore decided to take a very close look at Amazon’s business practices…”
Amazon has a dual role as a platform: (i) it sells products on its website as a retailer; and (ii) it provides a marketplace where independent sellers can sell products directly to consumers.

Breaking Up Amazon: Platforms, Private Labels and Entry

by Truth on the Market 2019.07.17

Amazon sells goods directly as a first party but also operates a platform on which it hosts goods sold by third parties (resellers) and those goods sometimes compete. And, next step, Amazon is said to choose which markets to enter as a private-label seller at least in part by utilizing information it gleans from the third-party sales it hosts…
A broad regulation that barred Amazon from being simultaneously a seller of first-party inventory and of third-party inventory presumably would lead to a dissolution of the company into separate companies in each of those businesses. A different remedy — a classic that goes back at least as far in the United States as the 1887 Commerce Act — would be to impose some sort of nondiscrimination obligation on Amazon and perhaps to couple that with some sort of business-line restriction — a quarantine — that would bar Amazon from entering markets though private labels…

Separation without a breakup

by Truth on the Market 2019.07.22

A masthead image and allusions to Chinese Walls — is there an echo…?

Amazon tweeted in response to [Elizabeth] Warren: “We don’t use individual sellers’ data to launch private label products.” However, an Amazon spokeswoman would not answer questions about whether it uses aggregated non-public data about sellers, or data from buyers; and whether any formal firewall prevents Amazon’s retail operation from accessing Marketplace data.
If the problem is solely that Amazon’s own retail operation can access data from the Marketplace, structurally breaking up the company and forbidding it and other platforms from participating on those platforms may be a far more extensive intervention than is needed. A targeted response such as a firewall could remedy the specific competitive harm.
[The Federal Cartel Office] claimed that this kind of remedy gets to “the core of the problem”: big internet companies being able to out-compete new entrants, because the former can obtain and process data even beyond what they collected on a single service that has attracted a large number of users… Keeping the data apart is a way to “break up this market power” without literally breaking up the corporation, and the first step to an “internal divestiture”…
Rather than a human monitor installed in a company to guard against firewall breaches… software installed on employee computers and email systems might detect data flows between business units that should be walled off from each other. Breakups and firewalls are both longstanding remedies, but the latter may be more amenable to the kind of solutions that “big tech” itself has provided.

Apple’s proprietary apps rank first in most App Store searches, giving it an unfair advantage over competitors

by The Wall Street Journal 2019.07.23

The company’s apps ranked first in more than 60% of basic searches, such as for “maps”… Apple apps that generate revenue through subscriptions or sales, like Music or Books, showed up first in 95% of searches related to those apps…
Podcasts had a 1.7-star rating before its reviews were removed but now ranks #1 in US.

Followups:

Apple’s paternalism, integration, and monopoly

by Ben Thompson (Stratechery) 2019.11.19

iOS is a platform, not an Aggregator, and arguably the most important platform in the world at that. The key factor regarding platforms is that they are essential: if users wants access to the platform’s developers, they must be on the platform, and vice-versa. Aggregators, on the other hand, are entirely optional: users are free to use other search engines, and suppliers are free to court users directly, or be found via other means. This does not mean that Aggregators are any less powerful, to be clear, but the lock-in is comparatively miniscule.
To me this matters a great deal: users can always not use Google, and OTAs like Booking can always figure out ways to get users to come to them organically, but developers and users on iOS have no choice in the matter. If they wish to have an app on the iPhone, they must abide by Apple’s rules and pay Apple’s tax, even if Apple is competing with them directly…
[O]nly Siri can be the default voice assistant; does Apple automatically get a massive advantage in the world of voice assistants simply because it is allowed to control the defaults for the next paradigm? Indeed, perhaps the strongest possible condemnation of Siri’s relative quality is that Apple has been unable to leverage such a huge advantage into any sort of presence outside of the iPhone. The same concern applies to NFC[.]

A Framework for Regulating Competition on the Internet: Platforms vs Aggregators; antitrust/anticompetitive implications; and the applied theory of regulatory solutions

by Ben Thompson (Stratechery) 2019.11.09

The most important place to start is by pointing out [that the original Aggregation Theory definition] makes what I now believe is a critical mistake: it conflates platforms and Aggregators. In fact, I believe platforms and Aggregators are fundamentally different entities, and understanding how and why they are different is the single most important task facing would-be regulators…
Here is a way to visualize the difference:
• Platforms facilitate a relationship between users and 3rd-party developers…
• Aggregators intermediate the relationship between users and 3rd-party developers…
The potential impacts on competition by Platforms and Aggregators are broadly similar, differing mostly by degree…
• Vertical foreclosure…
• Rent-Seeking…
• Tying/Bundling…
• Self-Dealing…
This is where the distinction between platforms and Aggregators is critical. Platforms are the most powerful economic and innovation engines in technology: they create the possibility for products that never existed previously, and are the foundation for huge amounts of innovation. It is in the interest of society that there be more and larger platforms, not fewer and smaller. At the same time, the danger of platform abuse is significantly greater, because users and 3rd-party developers have no other alternative. That means that not only are anticompetitive actions unfair to products that already exist, they also foreclose the creation of an untold number of new products. To that end, regulators should simultaneously encourage the formation of new platforms while ensure those platforms do not abuse their position. From a practical standpoint, this means that platforms should have significant latitude in mergers and acquisitions, but significant scrutiny in terms of vertical disclosure, rent-seeking, bundling, and self-dealing. Apple [and its iPhone econsystem] is the pre-eminent example here… the combination of Apple’s total control over 3rd-party app installation and rent-seeking on in-app payments has, in my estimation, stunted innovation and opportunity in the app ecosystem.
Aggregators are different [because] the incentives are warped from the beginning: 3rd-parties are not actually incentivized to serve users well, but rather to make the Aggregator happy. The implication from a societal perspective is that the economic impact of an Aggregator is much more self-contained than a platform, which means there is correspondingly less of a concern about limiting Aggregator growth. For the same reason… [t]hird parties can — and should! — go around Aggregators to connect to consumers directly; the presence of an Aggregator is just as likely to spur innovation on the part of a third party in an attempt to attract consumers without having to pay an Aggregator for access… It follows, then, that regulatory priorities should be the opposite of platforms: given that Aggregator power comes from controlling demand, regulators should look at the acquisition of other potential Aggregators with extreme skepticism. At the same time, whatever an Aggregator chooses to do on its own site or app is less important, because users and third parties can always go elsewhere, and if they don’t, that is because they are satisfied…
[T]he three regulatory issues that I implicitly suggested deserve more attention in this piece: Apple’s App Store policies, Facebook’s acquisitions, and Google’s third-party advertising offerings. None of them fit under a popular conception of a monopoly… That doesn’t mean harms don’t exist, though[.]

YouTube TV Will End Support for Apple’s App Store Subscriptions in March 2020

by MacRumors 2020.02.13

YouTube today sent out emails to customers who are subscribed to its YouTube TV service through Apple’s App Store, letting them know that ‌App Store‌ subscriptions are going to be discontinued in March… The YouTube TV app will need to remove all references to subscribing and signing up from its app when in-app purchases disappear, as Apple does not allow apps to link out to third-party subscription purchase options…
Apple does take a cut of all subscription purchases, so avoiding in-app purchases will allow YouTube to skirt that fee.

Amazon Prime Video now lets users buy TV shows and movies in the app, seemingly struck special deal with Apple

by 9to5Mac 2020.04.01

In a statement, Apple told 9to5Mac that it has an “established program for premium subscription video entertainment providers” and qualifying apps like Prime Video can offer customers the option to buy or rent movies and TV… [using] a built-in content store. This means users can now buy or rent TV shows and movies directly inside the app on Apple platforms…
For the longest time, Amazon did not support this because of Apple’s App Store rules which require the developer to use Apple’s In-App purchase system for digital content and give 30% of the revenue to Apple. The app now seems to use Amazon payment method if you have a card on file, otherwise it uses Apple In-App Purchase…
[A]s of today [this] would violate App Store rules as written. Clause 3.1.3 of App Store Review Guidelines says:
“Apps that operate across multiple platforms may allow users to access content, subscriptions, or features they have acquired in your app on other platforms or your web site, including consumable items in multiplatform games, provided those items are also available as in-app purchases within the app. You must not directly or indirectly target iOS users to use a purchasing method other than in-app purchase, and your general communications about other purchasing methods must not discourage use of in-app purchase.”
[…by which rule] the Amazon Prime Video app should not be allowed to use its own payment system and skirt sharing 30% of the revenues with Apple at all.
It seems that Apple and Amazon have agreed a special deal, something that is currently not offered to all developers. Apple has even granted the app a special entitlement that lets it generate custom in-app purchase metadata — like showing an age rating in the in-app purchase sheet.

Is this the last trickle that broke the dam? the last straw that broke the camel’s back?

Amazon and Apple’s new App Store Tax Treaty is a big deal: The quid-pro-quo

by John Gruber (Daring Fireball) 2020.04.02

I’ve been digging into this since the news broke, and I think it’s even more significant than [the press release] suggests. It’s not about whether Amazon has a credit card on file for your account — it’s about whether you’re already a Prime subscriber…
What Apple is saying here is that for a video subscription service — pardon me, a premium video subscription service — to qualify for this program, the service has to support all of Apple’s features for video content apps… Supporting all of these features is a lot of work, and Amazon has done it all.
So the deal seems to be this:
• The Prime Video app supports every feature that makes a third-party subscription video service a first-class citizen in Apple’s multi-device TV ecosystem.
• For users with existing Prime subscriptions, or new subscriptions made on Amazon’s website, Amazon now gets to bill them directly for movie rentals and purchases made in the app, giving Apple no cut of the transactions.
• Users can subscribe to Prime Video in-app using an iTunes subscription, giving Apple a recurring cut, and leaving subscription management in Apple’s hands.
• For users without a Prime subscription, or with a Prime subscription made through the app, Amazon now bills them for purchases and rentals through Apple’s In-App Purchase mechanism, giving Apple a cut.
Why would Apple agree to this? […] Prior to this deal, Apple made nothing from Prime Video — it was a free app with no in-app purchases, and there was no way to subscribe to Prime Video through iTunes.
Why would Amazon agree to this? […] But even if Amazon is getting the standard 70/30-then-85/15 terms — I doubt that, but let’s just say even if they are — I can see why they’d agree to it if they think they’ve already saturated the potential market for Prime subscribers they can get on their own.

Nine companies team-up to form the lobbying group App Coalition, touting independence from Apple and Google

by Bloomberg 2020.04.29

The App Coalition [is] a new trade group to weigh in on the nation’s most controversial tech policy issues, banding together to assert their independence from Apple [and] Google…
The first priority of the coalition is making sure that [even venture-backed] apps… have access to… the Paycheck Protection Program, which was a response to the spread of Covid-19… [then focus on] privacy and content moderation…
Blix Inc., a founding member of the coalition, has alleged in a lawsuit that Apple copied patented technology from its BlueMail app, then removed it from the App Store to stifle competition in violation of antitrust law…
The coalition also includes “Booking Holdings’ Priceline, OpenTable, and Kayak, along with Perry Street Software, [and others].”

Were any developer to make progress against iOS’s App Store, then ‘Verizon v Trinko’ lay waiting on the other side of the ‘Apple v Pepper’ Supreme Court precedent

by Ben Thompson (Stratechery) 2020.06.22

[If Basecamp’s Hey email client] were to overcome Apple v. Pepper, the controlling precedent would probably be Verizon v. Trinko. There the question would probably not be the relevant market; Kodak v. Image Technical Services established that the market for copy machine repair parts was distinct from the copy machine market as a whole, a distinction that would likely apply to the iOS App Store versus smartphones. Rather, the question would be whether or not Apple is applying its rules equitably.
Aspen Skiing v. Aspen Highlands Skiing said that a monopolist couldn’t withhold services from a competitor selectively, but Verizon v. Trinko limited Aspen’s scope significantly, while strongly reaffirming that private companies, with very limited exceptions, have no duty to deal with other companies. In other words, as a general rule, Apple has no duty to offer App Store access to anyone, but it does have to be consistent in its denial of said access. That noted, this would be a very tough case to make, particularly since Apple does appear to be cracking down broadly.
In short, if you think that platforms should have to allow any app, particularly in the United States, then the solution is clear: pass a new law.

Facebook is preparing an antitrust lawsuit against Apple for forcing developers to abide by App Store rules that Apple’s own apps don’t have to follow

by The Information 2021.01.28

Apple, Its Control Over the iPhone, The Internet, And The Metaverse

by Matthew Ball 2021.02.02

There is no open web on the iPhone… only the “iPhone web.” Five years after the launch of the iPhone, Apple revised its App Store policy to allow for third party browsers such as Google’s Chrome and Mozilla Firefox. But this was only a surface level compromise: Apple does not truly allow for alternative browsers… the iOS version of Chrome “does not use the Chrome rendering or JavaScript engines — the App Store rules forbid that. It’s the iOS system version of [Safari] WebKit wrapped in Google’s own browser UI.” In other words, Chrome on iOS is simply a variant of iOS Safari that syncs to a user’s Google/non-iOS Chrome accounts and usage. And notably, Apple forces third party browsers to use older, and thus slower and less capable, versions of WebKit than iOS Safari…
Today, the iPhone has 66% market share in the United States, 75% of U.S. App Store revenues, and over 80% of time spent on the mobile internet (iOS’s share of physical e-commerce transactions is likely somewhere in the middle of this range). And this dominance is also growing. Eighty percent of U.S. teenagers have iPhones and the device held 90% of smartphone activations in the week after Christmas 2020… Part of the problem here is how, exactly, a competing smartphone can successfully differentiate from the iPhone given its lucrative customer base. For example, Android or a third mobile OS could try to attract mobile developers through better policies and permissions. But there are almost no companies on earth that could leave iOS outright as this would mean leaving behind two thirds of their users and 75% of revenues…
[Apple’s] position is a kind of circuitous monopoly logic. The only way developers are better off developing only for Apple is if Apple’s OS runs all relevant devices, its standards power all experiences, and the company successfully develops the devices or services for every possible category. [For example,] the mobile gaming ecosystem on iOS is massively bigger because developers use Unity, even when iOS drives the majority of their revenues. This is because Unity, as a cross-platform engine, allows a developer to easily reach the entire global market with their game, rather than just iOS users. With more users comes more revenues and a better game, which in turn benefits both App Store revenues and iOS users. And because Unity and Unreal are focused on being the best possible cross-platform game engines and in turn, benefit from a wide range of customer innovations, the entire game industry benefits from lower prices and better capabilities [that] connect players across every device, rather than just the devices Apple makes.
The success of cross-platform tools and experiences may suggest Apple’s control isn’t a problem. But this assessment ignores Apple’s attempt to ban Unreal, its success stymying web-based rendering engines and cloud games, the fact no one knows if Roblox is actually allowed on iOS or just a grandfathered accident, and how Apple’s commissions constrain platform-like apps such as Roblox and Snapchat (which doesn’t offer its own “in-app app store” for this very reason — even though this model is incredibly popular and lucrative in Asia).
In effect, the only way a Roblox developer could collect a substantially greater share of their game revenues would be if (1) Apple built its own Roblox-like platform; (2) all eligible users had and only wanted to use their iOS devices to play Appleblox; and (3) Apple operated Appleblox at break-even (which the App Store was intended to do but doesn’t) or didn’t pay fees to the Apple App Store (which all Apple services do)…
Apple has the right to run its own store, offer its own standards, and develop services that are exclusive to its hardware. The problems arise from Apple’s forced bundling of hardware, an operating system, distribution system, payment solution and services. As a result, there is a straightforward remedy — forcing Apple into competition in app distribution and payments. Specifically, regulators should require Apple to:
1. Allow iOS users to download apps from any source (as they do on Windows and Mac computers), including direct from the software maker
2. Allow iOS users to use third-party app stores on iOS devices
3. Allow developers to use payment solutions other than those of Apple’s App Store, whenever they choose and even when distributed via Apple’s App Store
This partial unbundling would benefit even those who continued to download their apps exclusively from Apple, and pay for them via Apple’s billing system whenever possible. This is because the App Store would need to compete directly for the business of every app user and app developer, rather than win this business via its iOS devices and then control it via iOS policies.

US Senate subcommittee hearing: “Antitrust Applied: Examining Competition in App Stores”

by TechCrunch 2021.04.21

During his questioning, [Democratic Senator from Connecticut, Richard] Blumenthal asked Apple and Google’s representatives at the hearing… if they employed any sort of “firewall” in between their app stores and their business strategy… Blumenthal then clarified what he meant by “firewall.” He explained that it doesn’t mean whether or not there are separate teams in place, but whether there’s an internal prohibition on sharing data between the App Store and the people who run Apple’s other businesses…
Blumenthal said he interpreted [Apple Chief Compliance Officer’s] response as to whether Apple has a “data firewall” as a “no”…
“We have a prohibition against using our third-party services to compete directly with our first-party services,” [said Google’s Director of Public Policy and Government Relations], adding that Google has “internal policies that govern that.”

App Stores in Congress

by Ben Thompson (Stratechery) 2021.04.22

The EU’s European Commission charged Apple with antitrust violations, alleging it squeezed rival music streaming apps by requiring them to use Apple’s in-app payments (IAP) system

by The Wall Street Journal (WSJ) 2021.04.30

If found guilty, Apple could face a fine of up to 10% of its annual revenue and be forced to adjust its business practices, though it can also appeal any decision in court.

US House of Representatives propose 4 new antitrust bills for legislation

by Ben Thompson (Stratechery) 2021.06.15

The “American Innovation and Choice Online Act”:

This bill, sponsored by Cicilline (D-RI) and co-sponsored by Lance Gooden (R-TX), bans covered platforms from giving an advantage to their own products, services, and lines of business over competitors; disadvantaging competing products, services, and lines of business; or discriminating between similarly situated business users. It further:
• Bars any restrictions on interoperability that do not similarly apply to the platform owner
• Explicitly bans tying (i.e. conditioning the use of one product on use of another)
• Bans the use of data about the activities of third-party businesses to improve the platform’s own product
• Forbids the platform from restricting the right of third-party businesses to use their own data generated on the platform
• Requires platform owners to allow users to uninstall pre-installed applications and change defaults
• Bans anti-steering provisions (i.e. Spotify being able to tell iOS users to subscribe online or link to the web)
• Restricts the platform owner from treating the platform’s own products differently in search or rankings
• Restricts the platform owner from controlling a business user’s pricing
• Restricts the platform owner from limiting a business user’s interoperability
• Bans retaliation by the platform owner against any business user that raises concerns with regulators
The bill does provide a privacy exception: actions that violate the above provisions can be legal if the platform owner can prove they were necessary to preserve user privacy while being narrowly tailored, non-discriminatory, and nonpretextual.
The bill also allows regulators to force the divesture of lines of business if it determines that said line of business presents a conflict of interest that leads to violation of this act.

The “Ending Platform Monopolies Act”:

This bill, sponsored by Pramila Jayapal (D-WA) and co-sponsored by Lance Gooden (R-TX), is in many respects a repeat of the American Innovation and Choice Online Act, but instead of banning discriminatory behavior it simply bans platforms from owning any product or service that rest on top of its platform and compete with 3rd-parties in any way. The provision is as broad as it sounds, which is interesting to think about in a historical context: operating systems used to sell the networking stack separately — would it be illegal now for iOS to include TCP/IP? That’s just one obvious example of how this bill would quickly devolve into product design by the judiciary.

The “Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act”:

This bill, sponsored by Mary Gay Scanlon (D-PA) and co-sponsored by Burgess Owens (R-UT), mandates API-driven data portability and interoperability, subject to “privacy and security standards for access by competing businesses or potential competing businesses to the extent reasonably necessary to address a threat to the covered platform or user data.” Platforms will have to petition the Federal Trade Commission (FTC) to make any changes to their interoperability interface. The FTC, meanwhile, will establish technical committees to enforce the measure with a clear charge to reduce network effects while establishing data security and privacy protections.
I am encouraged that this bill, unlike the GDPR, does not explicitly limit the sharing of information like a user’s contacts; at the same time, it doesn’t explicitly allow it either. This is the most important issue in terms of The Web’s Missing Interoperability: photos from five years ago aren’t what is keeping people on a particularly platform; their relationships are, and true portability and interoperability mean the social graph.

Apple settles with developers: $100M settlement on top of allowing apps to email users about discounts and alternative payment options

by Ben Thompson (Stratechery) 2021.08.30

Apple has agreed to revise its App Store Guidelines to permit developers of all app categories to communicate with consenting customers outside their app, including via email and other communication services, about purchasing methods other than in-app purchase. Under the App’s Store [pre]existing Guidelines, developers may not use contact information (emails, phone numbers, etc.) obtained within an app to contact their user base outside the app. As a practical matter, this prevents developers from alerting their customers to alternative payment options. The proposed Settlement lifts this restriction [which previously saw many “shadow banned” from iOS], and it does so for all app categories.
The new policy ensures Apple won’t ban developers for these communications. It doesn’t, however, let developers advertise outside pricing or payment methods within the apps themselves… [Apple] is “clarifying that developers can use communications, such as email, to share information about payment methods outside of their iOS app”…
[Previously, Apple] was actually seeking to extend its control to communications outside of the App Store.

After settlement with Japan, Apple’s App Store will start allowing media “reader” apps to link-out to their own websites for alternative payment options globally

by The Wall Street Journal (WSJ) 2021.09.01

Apple Inc. said it would allow media apps to create in-app links to sign-up pages on those companies’ websites, allowing the likes of Spotify Technology and Netflix Inc. to bypass the iPhone maker’s cut of subscriptions. [Apple] previously prohibited Spotify and others from directing their users to sign-up options outside the App Store.
Apple [said] it was among adjustments made to close an investigation by the Japan Fair Trade Commission and will apply globally to so-called reader apps available through Apple’s App Store. The changes go into effect early next year, Apple said, as governments have questioned the power the company holds over third-party software developers that distribute their digital goods and services through the iPhone and iPad tablet.

From Ben Thompson (Stratechery):

“Reader” apps are defined by the App Store Guidelines as apps that “allow a user to access previously purchased content or content subscriptions (specifically: magazines, newspapers, books, audio, music, and video)”. Given that definition, there are three categories of developers, broadly speaking, that might have gripes:
• First are cross-platform services that don’t fall under the “Reader App” distinction; the canonical example here is Hey.com, which was at the center of 2020’s big App Store controversy. These companies sometimes compete with Apple’s built-in offerings (like Mail.app), and certainly bear the burden of supporting multiple payment offerings across multiple platforms.
• Second are platform-specific productivity apps
• Third are games, including Epic’s Fortnite
My position is that Apple ought to only enforce its own in-app purchasing for games; I see that category as having the lowest deadweight loss from Apple’s approach, which is more than balanced out by the potential for abuse and fraud
Cross-platform services, meanwhile, are to my mind clearly limited by Apple’s policies, which is not only a problem for the companies affected, but also a drag on innovation. That’s a big problem!
I can accept a world where Apple decides that any app uniquely enabled and consumed on their devices — not just games but also other types of apps [like productivity — ought to fall under their in-app purchase regime; I [just] would like a tad bit more to cover cross-platform services (including platforms like Twitter [and Fanhouse] that are building their own platforms for creators).

From the Japan Fair Trade Commission (JFTC):

App Store is the only place where iPhone users are able to download native apps. Apple has published the Guideline with which apps in the App Store are to comply and reviews these apps based on the guideline. In the process of the review, when Apple finds that the app does not comply with the Guideline, the app may not be allowed to be distributed via App Store (hereinafter Apple’s judgement that the app does not comply with the Guideline referred to as “rejection”).
Apple, based on the Guideline, requires developers to use the means of payment which Apple specifies (hereinafter referred to as “IAP”) for sales of digital contents, etc. within the apps, and charge developers with fee, amounts to 15 or 30 percent of sales through IAP…
In the sectors of music streaming, e-books, video streaming service for smartphone (hereinafter referred to as “music streaming service, etc.”), developers have difficulty to cut further costs in general, because of their heavy burden such as copyright fee for contents holders.
Some developers of music streaming service, etc. distribute apps which are used not to sell their digital contents but mainly to listen, read, watch the digital contents (hereinafter referred to as “reader apps”) which users bought through websites, etc. Some of these developers sell their digital contents, etc. only through websites.
Apple distributes its own apps of music streaming service, etc. and sells digital contents, etc. as well…
The Guideline stipulates that developers are required to use IAP for sales of digital contents, etc., and prohibits from including external links or buttons within the app to induce consumers into purchase other than using IAP.

Federal judge denies most of Epic’s antitrust case against Apple, but grants Fortnite and others a huge victory, ruling that the App Store must allow links and buttons for alternative payment methods

by The Associated Press (AP) 2021.09.10

The ruling issued Friday decides an antirust case brought by Epic Games, best known as the maker of Fortnite… The legal battle targeted commissions of up to 30% [App Store tax] that Apple charges on digital transactions within apps… [Judge] Gonzalez Rogers is ordering Apple to go even further by allowing links and buttons for non-Apple [IAP/in-app purchase] payment options directly within apps, something Apple has steadfastly resisted…
[The Judge] also dealt Epic a blow by ruling that the game maker breached its contract with Apple when Fortnite added a non-Apple payment system to its app. That defiance prompted Apple to oust Fortnite from its app store 13 months ago, triggering Epic’s lawsuit. She ordered Epic to pay Apple nearly $3.7 million, or 30% of the revenue it collected while violating Apple’s commission. [She also upheld Apple’s] right to block other stores from offering apps for its iPhone. She sided with Apple on every other key point of the case, and in particularly didn’t find the company is operating an illegal monopoly as Epic had charged.
[Apple] didn’t say whether it would appeal the injunction requiring that iPhone app developers be allowed to offer other payment options.

Apple updates App Store guidelines, allowing game emulators for the first time globally, and letting music streaming apps in the EU link to external websites

by 9to5Mac (2024.04.05)

After the EU commission fined Apple $2 billion and announced that it’s not satisfied with the changes the company made to comply with the Digital Markets Act (DMA), Apple on Friday updated the App Store guidelines again…
Apple has confirmed the introduction of new “Music Streaming Services Entitlements” for apps distributed in the European Union… music streaming apps “in specific regions” can now include a link (such as a “buy” button) to an external website [and] invite users to provide their email address to receive a link to buy digital music or services via the developer’s website.

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