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Last week, Apple was fined for privacy violations in France, making it clearer than ever--if any more clarity had been needed--that App Tracking Transparency (ATT) is nothing but an abusive money and power grab by an aftermarket monopolist. The macroeconomic damage is huge, and entire product categories such as hypercasual games are on the verge of extinction as a result of Apple's actions and the impact on the Android ecosystem.

I'm no fan of cartels as I've made abundantly clear in the Licensing Negotiation Group (LNG) and Journalism Competition and Preservation Act (JCPA) contexts. However, it's a question that must be answered case by case, and on Friday the European Commission was notified of a proposed joint venture between four major European mobile carriers that I believe should be cleared because its procompetitive effects will benefit the EU economy and European consumers.

Deutsche Telekom, Orange, Telefónica, and Vodafone have told the European Commission's Directorate General for Competition (DG COMP) that they "plan to create a jointly controlled [with each party owning an equal share], full-function joint venture [...] via their respective subsidiaries [...] [which] will offer a privacy-led, digital identification solution to support the digital marketing and advertising activities of brands and publishers" (PDF). This is how it will work:

• User consent must be provided to a brand or publisher (opt-in),and can be revoked via "a user-friendly privacy portal".

• The new network then generates " secure, pseudonymized token derived from a hashed/encrypted pseudonymous internal identity linked to a user’s network subscription which will be provided by participating network operators." The network operators can do this without needing anything from Apple. They don't have to run their apps by Apple's arbitrary, self-serving, and inconsistent app review. They simply have this information by virtue of providing the expensive infrastructure without which Apple's gadgets would be as useless on the road as a piece of scrap metal. And with the token that the networks generate, targeted ads can be served, which would revive in-app advertising on iOS after Apple killed it.

• There are some ways in which the Evil Empire could theoretically strike back:

  1. It could threaten the network operators with not letting them resell iPhones and potentially even with disabling the use of those networks with iPhones. In the U.S. I believe Apple's market power would make that kind of foreclosure illegal. In Europe, Apple's market share is lower, but given high switching costs and low switching rates, the threat would hurt. A joint venture of multiple major network operators, however, would be in a structurally better position to discourage such blackmail in the first place--and if Apple engaged in such conduct anyway, its market power (because of customer lock-in) would be shown more clearly than if it acted like this against a single carrier.

  2. Apple could block apps (also including updates to existing apps, of course) that use the new advertising network. But that would raise antitrust issues for sure (as Apple wouldn't even have a privacy pretext)--and once the EU's Digital Markets Act (DMA) really requires Apple to allow alternative app stores, such stores could then distribute apps that would make use of the new network.

  3. In theory, Apple could also block communications with the new ad network, but that would be so crazy that I don't even want to discuss its implications. Suffice it to say it wouldn't be a good idea for Apple to do that.

The only thing I'd like the Commission to ensure is that other network operators will also have a chance to join that network on fair terms. Other than that, I'm all for this initiative. The EU should let those carriers join forces against abusive platform makers.

Yesterday it became known that on December 29 a panel of the Commission nationale de l'informatique et des libertés (CNIL; National Commission on Informatics and Liberty)--which is tasked with the enforcement of the EU's General Data Privacy Regulation in France--"imposed an administrative fine of 8 million euros" on an Ireland-based Apple subsidiary for failing to obtain the consent of French iPhone users (specifically, users of version 14.6 of the operating system) "before depositing and/or writing identifiers used for advertising purposes on their terminals."

The same CNIL actually played a very regrettable role--which calls into question whether the ones running that agency really understand how mobile ecosystems work--when it effectively prevented French antitrust watchdog Autorité de la concurrence (Adcl; Competition Authority) from ordering interim measures against Apple's introduction of App Tracking Transparency (ATT). The economic fallout from ATT is disastrous, and a narrow-minded government agency that obstructs through government-internal lobbying--whether it's for dogmatic reasons, institutional influence, or someone's ego--the enforcement of competition law against such a massive abuse fails its country's companies and consumers alike.

I actually remember the CNIL's rapporteur on this Apple case, Professor François Pellegrini (now a vice president of the agency), from the days of the EU legislative process on the patentability of computer-implemented inventions (aka "software patents directive"). Back in the day we fundamentally disagreed on strategy, and we haven't been in contact in well over a decade. I don't know whether he was in any way responsible for the CNIL's misguided opposition to antitrust enforcement against ATT.

Presumably, the French digital economy--represented by the France Digitale industry association--was no less disappointed in the CNIL's irresponsible support of Apple's abusive scheme than I was. Regardless, France Digitale brought a complaint with the CNIL over Apple's self-preferencing: they just asked that Apple be held to the GDPR standard, and the CNIL found that Apple was out of compliance at least with respect to iOS 14.6.

Apple made a jurisdictional argument according to which only Ireland's data protection agency would be able to enforce the GDPR against Apple, and EU politicians have criticized Ireland for treating its largest tax payers and key foreign investors with kid gloves. Apple portrayed the way in which end users' actions on the App Store (viewing, downloading, and purchasing apps) were tracked as just a natural extension of an authentication method that would be necessary at any rate.

The €8M amount is not even chump change for Apple, but there are reasons for which Apple--in a statement first published by San Francisco-based Financial Times correspondent Patrick McGee--declared itself "disappointed with this decision" and vowed to appeal.

I've read the French decision (PDF) in full. In para. 92, the order notes that Professor Pellegrini established three criteria for the conformity of the mechanism by which iOS obtains user consent to targeted advertising based on a set of IDs (device ID, device pack ID etc.):

1. The relevant window must be in French.

2. Apple can't just broadly claim that it does not track user activities.

3. No identifier may be used for (targeted) advertising purposes prior to obtaining, through a valid mechanism, the user's consent to such use of their data.

Apple then said (according to para. 93) that it had meanwhile translated the relevant on-screen messages to French, and that no identifier would be stored on the end-user device or read for advertising purposes ahead of the user's consent. And in March 2023 (at the latest), Apple said it would also change the text from "Apple does not track your activities" to "Apple does not track your activities in third-party apps and on third-party websites."

Whether those changes will satisfactorily alleviate all concerns is unclear at this stage, but let's assume for now that the €8M fine is indeed just a penalty for past conduct and Apple does not have to make changes beyond what it said would be the state of affairs in March 2023 (if not sooner). In that case, Apple's Search Ads business would probably thrive in France just like before. ATT kneecapped all advertising networks on iOS. End users are mostly going to grant Apple the requested consent unless Apple would have to display the same "alarmist" warning that end users see when a third-party app requests such consent. Instead, Apple focuses on user benefits (more relevant ads) when its own business is concerned, and emphasizes fear, uncertainty, and doubt (FUD) when it's about third-party apps.

So, if the fine doesn't hurt, and if the CNIL itself is not in a position to fully address Apple's self-preferencing, why does the decision (provided that Apple's appeal fails) still matter?

• The most important effect would be if the CNIL stopped supporting Apple with respect to ATT. Maybe the CNIL has started to realize that it made a mistake last time, such as when it became known that Apple was bullying Meta/Facebook and, when it didn't get the revenue share it wanted, put ATT in place. If the CNIL could at least stay neutral with respect to antitrust enforcement against ATT, that would be great, but I don't know whether that's the case. Hopefully Apple has lost that governmental ally.

• Where I have no doubt about a positive effect is the investigation of the German Bundeskartellamt (Federal Cartel Office) into self-preferencing with respect to ATT, but also more generally the anticompetitive effects of that money and power grab (see also the FCO's English-language press release). So far the Federal Cartel Office has been a dog that barks but doesn't really bite Big Tech (a topic I'll address in another post when I find the time for it). Anyway, the fact that a French government agency has already found Apple to engage in self-preferencing that apart from antitrust considerations even violates the GDPR is a silver bullet for political and psychological reasons.

• There is a French App Store case in which the Paris Commercial Court rendered a decision last month, and which is about the app tax as opposed to ATT. Apple's two key pretexts for its App Store monopoly abuse are privacy and security. Apple's credibility on privacy has taken a hit now.

• Last year, Apple CEO Tim Cook got a lukewarm reception at a gathering of privacy activists. Any decision that calls into question Apple's actual commitment to privacy will further reduce the willingness of that crowd to support Apple's commercial interests in continued monopoly abuse. Of course, Apple can still buy goodwill from privacy as well as security "experts" and "activists"--and Apple engages in astroturfing anyway, no matter the context.

• In all App Store cases worldwide, the privacy pretext plays a role, and any credible decision that holds Apple in violation of data privacy laws, especially when there is a close connection with tracking user activities on the App Store, is somewhat relevant. However, Epic Games v. Apple is now at the appellate stage, and Epic rightly argued at the appellate hearing that only procompetitive justifications count (which was the key issue in NCAA v. Alston). So the question of how much substance there is to Apple's privacy pretext wouldn't even matter in that scenario. And at the hearing, the key judge--Ninth Circuit Judge Milan D. Smith--very much emphasized market definition, where the concern is a potential failure of proof. I continue to hope that Judge Smith will arrive at the conclusion that the district judge made enough mistakes in the market definition context to warrant a remand, and in that case I hope he will get the support of at least one other member of the panel. In a retrial, privacy could again become a topic of discussion unless the appeals court makes it clear that only procompetitive justifications matter.

• Ultimately, I don't think the ATT problem can be solved through the enforcement of privacy rules, and even if self-preferencing came to an end, Apple would benefit from it (as app makers would still have to rely on non-ad revenues, some of which Apple can tax). The only solution is the availability of third-party app stores that enable developers to reach iOS users without having to submit their apps to Apple's app review. Apple could then try to use its control over iOS in other ways, but there are various technical ways in which users and devices can be identified even if Apple tries to complicate it (even fingerprints).

All in all, I think the CNIL decision (again, provided that it isn't overturned) has the potential to come back to haunt Apple in a number of contexts--and around the globe. And let me quote the assessment of the CNIL decision by French antitrust lawyer (and Adlc adviser) Fayrouze Masmi-Dazi, who advises various clients with respect to Apple's App Store abuse:

"It is a very important decision and another step towards sanctioning illicit practices - the Paris commercial court also sanctioned Apple for the significant imbalance of several contractual provisions of its developer[] license agreement."

In my recent analysis of the rule-of-reason balancing question in Epic Games v. Apple, I devoted a section to the correct definition of the term "pretext." Here's a paragraph from that section:

Of course, the most extreme case of a pretext--based on the example I gave--is indeed that it may be totally fictitious. But that's hard to come by in an antitrust context. Normally, it's just that the positive aspects of something are blown out of proportion and the downside is grossly understated, which distorts the ratio between good and bad.

When Apple claims that its tyrannical and extortionate strangehold on app developers is ultimately a good thing because of the overarching goals of privacy and security, and wants Epic's antitrust lawsuit thrown out and the Open App Markets Act (OAMA) not to be passed into law by United States Congress, there are different bases on which one can beg to disagree with Apple's position even if one doesn't doubt that certain rules are conducive to privacy and security:

1. Balancing: The narrowest kind of disagreement is to accept Apple's privacy and security claims as true (and as relevant), but to conclude that the downside of restricting competition in mobile app distribution outweighs the upside.

2. Competition is healthy: The balancing result in favor of open app markets may, in particular, be based on the conviction that at the end of the day, competition among app stores will incentivize improvements to the benefit of consumers (as Judge Gonzalez Rogers appeared to recognize during last year's trial), implicitly or explicitly rejecting Apple's paternalistic position that no one other than Apple--not even a company like Microsoft, which stands ready to compete and whose entry would be viewed favorably even by the King of Apple Bloggers, John Gruber--can take good care of consumers, and consumers are so stupid compared to Apple that only Apple's infinite wisdom can save them from the perils of the world.

3. Irrelevance: One doesn't have to take any position on Apple's privacy and security claims if one simply determines that those attempted justifications are not procompetitive justifications (i.e., arguments that restrictions of competition in one area will lead to more competition in another). That angle was the one Epic's counsel emphasized at last week's appellate hearing ("you don't get to squash competition in order to differentiate your product"). He argued that Apple could still offer consumers a walled garden if those consumers elect to use only Apple's App Store and only Apple's in-app payments system.

   The illogicality of Apple's and some of its die-hard fans' arguments is that they believe Apple's restriction of choice means more choice, just like you could check in your human rights at an entrance and the fact that you can do so means more consumer choice. Apple and its fans argue that if Apple had to allow alternative app stores and direct installs (which it will have to--the question is just when it will happen in a given jurisdiction), some app developers would then choose distribution methods that do not subject them to Apple's rules. But that is competition, and if Apple could convince enough consumers to decline to use apps that are not made available on the App Store subject to Apple's rules, then the market itself would force app makers to meet those standards (if all else fails, by offering a second version of each app that conforms to Apple's rules, which is by the way a compromise I've advocated before).

   I continue to believe that the very best next step for Epic v. Apple is a remand to get the market definition right. Apple wants the district court's judgment affirmed, and Epic wants an entry of liability without a remand on the merits. I can see why either party wants what it wants, but still think the district court made its worst--and really inexcusable--mistakes in connection with market definition, which Circuit Judge Milan D. Smith, Jr. appears to have clearly identified as a fundamental problem.

4. Self-preferencing and hypocrisy: This is the "rules for thee, not for me" issue. Apple subjects app developers to certain rules such as App Tracking Transparency (ATT), but applies double standards. And in this regard, Apple is losing a lot of credibility...

I've been following Apple closely for about 12 years now, and in my observation 2022 is by far the worst year in history for Apple's credibility. The eviction of Fortnite from the App Store in 2020 triggered some debate, and some of what came out as a result of the Epic v. Apple trial in 2021 was unfavorable, but this year--2022--is the one in which Apple has been exposed as exceedingly hypocritical.

It is not "par for the course" in lobbying, but an utter disgrace that Apple pays some lobbyists to falsely claim to represent the interests of small app developers while actually just echoing Apple's talking points, including the ones on privacy and security. That revelation may be the beginning of the end of ACT | The App(le) Association. Maybe that organization will silently shut down in the not too distant future. No policy maker will take ACT seriously anymore, and no litigant will find it difficult to get an amicus brief by ACT thrown out.

The Heritage Foundation also feels that enough is enough, and published a report last month on Big Tech's National Security Red Herring:

"Policymakers should reject specious Big Tech–funded national security appeals and instead consider antirust reforms on their merits."

To be fair, Apple is not alone in that: Google and Amazon are also called out.

Then, Kosta Eleftheriou, an indie app developer from California, has repeatedly exposed scam apps that passed Apple's App Store review. He continues to do so despite a recent settlement of his own case against Apple.

And now a Canadian-German development team named Mysk--Tommy Mysk and Talal Haj Bakry--has done more than anyone else to expose Apple's privacy pretext.

Mysk's Twitter account has become a "must follow" for anyone interested in mobile app store regulatory issues.

In October, @mysk__co showed that iOS 16 does communicate with Apple services outside an active Virtual Private Network (VPN) tunnel:

We confirm that iOS 16 does communicate with Apple services outside an active VPN tunnel. Worse, it leaks DNS requests. #Apple services that escape the VPN connection include Health, Maps, Wallet.
We used @ProtonVPN and #Wireshark. Details in the video:#CyberSecurity #Privacy pic.twitter.com/ReUmfa67ln

— Mysk 🇨🇦🇩🇪 (@mysk_co) October 12, 2022

On November 4, @mysk_co provided strong indications that the App Store app on iOS 14.6 sends every tap that a user makes to Apple:

🧵
1/5
The recent changes that Apple has made to App Store ads should raise many #privacy concerns. It seems that the #AppStore app on iOS 14.6 sends every tap you make in the app to Apple.👇This data is sent in one request: (data usage & personalized ads are off)#CyberSecurity pic.twitter.com/1pYqdagi4e

— Mysk 🇨🇦🇩🇪 (@mysk_co) November 3, 2022

Four days later, Gizmodo picked up this story, as did other websites thereafter.

Another two days later, a class action lawsuit over privacy violations, specifically citing Gizmodo's coverage of Mysk's research, was filed against Apple in the Northern District of California as TechCrunch, Gizmodo, and others reported (this post continues below the document):

[フレーム]

Case 5:22-cv-07069 by TechCrunch

Now @mysk_co has doubled down on this issue with new--potentially really damning--revelations, according to which Apple's analytics date come with an ID that uniquely identifies an iCloud account, which means Apple's analytics can personally identify users:

🚨 New Findings:
🧵 1/6
Apple’s analytics data include an ID called “dsId”. We were able to verify that “dsId” is the “Directory Services Identifier”, an ID that uniquely identifies an iCloud account. Meaning, Apple’s analytics can personally identify you 👇 pic.twitter.com/3DSUFwX3nV

— Mysk 🇨🇦🇩🇪 (@mysk_co) November 21, 2022

Here are some articles that covered Mysk's latest strike against hypocrisy--tracking users even when their privacy settings supposedly prevent it from happening--and I wonder how long it will take before the existing privacy lawsuit against Apple will be amended on this basis or one or more new cases brought):

• Gizmodo: Apple Says Your iPhone's Usage Data is Anonymous, but New Tests Say That's Not True

  "Your iPhone's analytics data includes an ID number tied to your name, email, and phone number, say researchers who uncovered other holes in Apple' promises."

• 9to5Mac: iOS privacy concerns deepen as Apple’s promises on analytics anonymity appear to be false

  "The same researchers have now demonstrated that Apple can – despite assurances to the contrary – link this data back to individual users, as the same ID is used as that for iCloud accounts …"

• The Verge: iOS developers say Apple’s App Store analytics aren’t anonymous

  "The finding exposes the difference between the privacy policy you may think you’re covered under and the privacy policy that’s actually being applied."

As various commentators have said, the problem is exacerbated by Apple advertising privacy ("Privacy. It's Apple."), to lull users into believing that if they just rely on Apple, their privacy is ensured.

One can reasonably advocate the OAMA, and the Ninth Circuit could decide Epic's case against Apple, even without doubting Apple's privacy and security claims. But it's becoming increasingly difficult not to doubt Apple's claims in the first place.

On Friday, Meta (Facebook) published a detailed news item after identifying "more than 400 malicious Android and iOS apps this year that target people across the internet to steal their Facebook login information." Fewer than 50 of those are iOS apps, just like a recent report by security researchers identified only 10 iOS apps engaging in ad fraud vs. 75 such apps on Google Play.

Those numbers are almost reversely proportional to the headcount of the two companies' app review departments (Google employs about four times as many reviewers as Apple). One possible explanation is that Apple's App Review didn't actually do a better job at detecting fraudulent activities, but fraudsters typically create apps that "impersonate" other apps or otherwise merely pretend to be useful--and such duplicative and useless apps face a higher rejection rate from Apple. That's because Apple more aggressively rejects apps that appear to add no particular value to the App Store catalog. The downside, however, has also been reported by app developers (such as on Twitter): there often are cases in which apps are rejected as allegedly duplicative or low-value that actually do have intriguing functionalities. App Review is a tyranny: while there is an "appeal" process, those kinds of rejections are inherently subjective and often unfair, and may sometimes even be motivated by a strategic desire to limit choice in some areas (such as keyboard apps).

Arguably, any given number of fraud apps for iOS may be similarly bad as a several times larger number of such apps o Android as Apple lulls users into a false sense of security.

Every single fraudulent app is one too many, and apps that steal Facebook login data are not just a security but also a privacy issue. Security and privacy are Apple's pet pretexts for its multifaceted App Store monopoly abuse, from the infamous app tax to App Tracking Transparency to the Apple Pay aftermarket monopoly (see the previous post).

The Epic Games v. Apple appellate hearing--October 21--is approaching fast. The district court's judgment raises serious issues, and I just can't see how it could reasonably be affirmed in that form. One critical area is the absence of a proper rule-of-reason balancing--and that's exactly where security and privacy come into play.

Let's correctly define "pretext"

It's not that the word "pretext" always means something that is entirely made up, like declining an invitation to a party based on some other--but non-existent--commitment. Dictionary definitions of that term overwhelmingly focus on a pretext being an excuse or evasion for the purpose of hiding or concealing the real reason or true purpose of something.

Of course, the most extreme case of a pretext--based on the example I gave--is indeed that it may be totally fictitious. But that's hard to come by in an antitrust context. Normally, it's just that the positive aspects of something are blown out of proportion and the downside is grossly understated, which distorts the ratio between good and bad.

For instance, when Apple argues that human app review is better than a purely automated review (or even no review at all), it's undeniable that at some point a human reviewer will identify something that would otherwise go undetected. Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California made it sound in her judgment as if Epic could only have debunked Apple's security pretext if it had proved the complete uselessness of human app review. That is the wrong standard.

What renders Apple's security argument pretextual is not that there are zero security benefits from certain architectual and commercial decisions. It takes a holistic view:

1. Is some incremental security actually capable of justifying a complete monopoly with all the problems (and, ultimately, consumer harm) it entails?

2. To what extent could the positive effects be achieved without the adverse effects, such as by notarizing apps and/or by operating system-level measures?

3. Wouldn't even security ultimately benefit from competition?

The sad thing is that Judge YGR actually had #2 and #3 all figured out. Her judgment did acknowledge that an App Store monopoly is not the only way to achieve a certain level of security. And during the trial she did raise the important question of whether competition between app stores wouldn't also force each app store to strive for maximum security.

She could have analyzed more fully the different aspects of "security" (though I cannot rule out--as I didn't follow the entire trial--that maybe the smokescreens put up by Apple were just too effective). Certain kinds of security are achieved through sandboxing, which doesn't even require notarization. Then there are security issues that involve user behavior such as "phishing" attacks, and it's simply not feasible to prevent all of that through human app review. Case in point, Epic's "hotfix" also passed app review.

What is, however, inexcusable and does constitute clear legal error is that she didn't really weigh the upside against the downside. But that's the only way to protect the competitive process and take care of consumer welfare when the case cannot be resolved at an earlier stage of the analysis.

Overview of issues on appeal

Before I talk about rule-of-reason balancing, I'd like to put it into the context of the various questions to be addressed on appeal. Using chess terminology, the adjudication of an antitrust claim has an opening, a middlegame, and an endgame.

• Opening

  • Market definition: The district judge got the foremarket part of Epic's single-brand marekt definition wrong to a partly even absurd extent. Epic also has very strong aftermarket arguments.

  • On the applicability of Sherman Act Section 1 vs. Section 2, I'm torn. Philosophically, I'm sympathetic to the approach by the district court and Apple as well as some of its amici that unilaterally dictated agreements should be dealt with under Section 2 and Section 1 should be reserved for cases in which two players having a horizontal or vertical relationship voluntarily disable market forces, but I also see that tying is a Section 1 issue (that part is even undisputed).

• Middlegame: The key issue here is the standard for tying. One part of that overlaps with a question relevant to market definition: whether there can be a market for something Apple doesn't sell separately. (That's also an issue in the Apple Pay case I mentioned further above.)

  While I have a firm opinion that Apple engages in tying, I have yet to analyze that part more fully in order to elaborate on it, which I intend to do before the Ninth Circuit hearing.

• Endgame: rule-of-reason balancing.

Why Epic is right on rule-of-reason balancing

I've read all the arguments in the case, and numerous decisions referenced therein. It's actually not all that complicated:

The first step is for a plaintiff to prove anticompetitive harm. A complaint may fail at that hurdle (example: Amex).

The second step is--if there is no per se violation (see my latest post on Epic v. Google)--for the defendant to come up with procompetitive justifications. The analysis can end there if those procompetitive justifications are totally ridiculous, but as I said further above, totally fictitious excuses are unlikely. What's more likely to happen--and should have happened in Epic v. Apple--is that some justifications are simply noncompetitive (example: NCAA v. Alston, where the Supreme Court saw that the NCAA pays millions to coaches but exploits players, and its so-called justifications were related to other considerations than competition).

The third step is an analysis of less restrictive alternatives. Epic argues that it actually has shown enough of them (and I tend to agree) that it's entitled to a favorable judgment on the merits.

Now, what about a potential fourth step?

If a court finds that the plaintiff has shown anticompetitive harm, the defendant has put forward some procompetitive justifications, but the less restrictive alternatives outlined by the plaintiff aren't good enough, the final part is all about weighing the upside (procompetitive justifications) against the downside (anticompetitive harm).

Apple disputes that this is required under the law--and says Judge YGR performed that balancing anyway.

I've read the Epic v. Apple decision in full detail several times (among other things, I documented 271 typos and similar errors in it). There is no balancing in the sense of a passage that would say procompetitive benefits X and Y outweigh the anticompetitive effects A, B, and C. If she had said that a supracompetitive app tax and an inherently subjective app review are justified by a security benefit that goes beyond the security gain that competition between app stores would bring, one could talk about it. However, there's nothing like it in the decision.

There's a lot of trees in that ruling, but the forest is missing. Apple's lawyers may just be betting on the appeals court getting confused by the sheer length of the decision below.

As for whether there is a legal requirement, both parties and various of their amici point to different authorities. The two key questions in the end are the following:

1. What has the Supreme Court recently decided?

2. What does Professor Herbert Hovenkamp say?

One doesn't have to look far to answer the second question. Herbert Hovenkamp, "the dean of American antitrust law" according to the New York Times and America's leading antitrust scholar even according to Apple's own amici, signed an amicus brief in support of Epic Games. And that brief also explains that under the relevant circumstances, balancing is required.

The Apple camp argues that the Supreme Court discussed only a three-step test in Amex and NCAA v. Alston, the last two major antitrust opinions handed down by the top U.S. court. And a balancing between a company's product design decisions and competitive effects would be "unadministrable," Apple says.

As Epic explains in its reply brief, and the DOJ already explained in its amicus brief months earlier, the Supreme Court never specifically abolished the balancing step. In Amex and NCAA v. Alston, the fourth step just wasn't reached because the cases were resolved at an earlier stage.

In those recent rulings, the Supreme Court cited to earlier decisions, at least some of which do also mention the fourth step (balancing).

It strikes me as very compelling that the Supreme Court doesn't overrule its earlier decisions without explicitly saying so. In case of doubt, an earlier decision should still be presumed to be good law.

There's another argument Apple makes in the balancing context: an answer that Epic's counsel gave Judge YGR and which--taken out of context--suggested that the third step (less restrictive alternatives) and the fourth (balancing) are practically the same. Epic explains in its reply brief why it never actually said that balancing wasn't required in a scenario in which the court wouldn't deem Epic's less restrictive alternatives satisfactory.

I'm very optimistic that the district court's rule-of-reason decision won't stand. A remand seems more likely than direct entry of liability, but even the latter is yet more probable than affirmance.

The Wall Street Journal's Salvador Rodriguez has scored an incredible scoop by reporting on revenue-sharing negotiations between Apple and Facebook of a few years back--before the former decided to introduce "App Tracking Transparency" (ATT)--that make Cupertino look really bad. 9to5Mac has published a short (non-paywalled) summary.

The key thing is that Apple wanted a bigger piece of Facebook's cake. It sought to extend its 30% app tax to Facebook's iOS revenues, such as by having Facebook offer an ad-free subscription service via Apple's In-App Payment (IAP) system, through which even payments for promoted posts (which is just a form of advertising on social media) should be paid. The talks unsurprisingly failed, and meanwhile Apple has not only kneecapped Facebook and numerous other app developers (such as makers of hypercasual mobile games, but also done enormous harm to countless companies depending on cost-effective customer acquisition. A venture investor says this could be a key factor leading to a recession. On Tuesday, the Financial Times' Patrick McGee reported on small businesses now "finding it prohibitely expensive to target likely consumers as they once did," and some small companies are really suffering.

Hausfeld partner and competition law professor Thomas Hoppner ("Höppner" in German) rightly described ATT as "Privacy by Default, Abuse by Design" in an academic paper he published last year.

M. G. Siegler, a journalist-turned-venture-investor, also sums up nicely how Apple was trying Facebook--based on today's WSJ story--to pressure into a deal that would have given Cupertino a substantial chunk of Facebook's revenues:

“You’ve got a nice social network here. It would be a shame if something happened to it…” https://t.co/lqHcNhMGR3

— M.G. Siegler (@mgsiegler) August 12, 2022

Dare Obasanjo, whom I hold in the highest regard as the thought leader on product management and adjacent industry topics, pointed out in light of today's WSJ article that there are very popular advertising-financed apps like TikTok, Google, YouTube (which belongs to Google), and Facebook's Instagram on which Apple makes no money, while Apple can and does tax IAP-centric apps like Tinder, Bumble, Candy Crush, and Roblox.

With the WSJ and the FT, the world's two leading financial papers have shed light on ATT this week--a harsh light for Apple.

In the ATT context, Apple has so far benefited from being viewed by many people as the lesser evil than Facebook, sort of the synonym for surveillance-based advertising and user engagement. Apple claimed to stand on higher ground--think about it, privacy!--and capitalized on Facebook's popularity problems.

Here's my perspective on Meta/Facebook: while I can relate to some of the criticsm leveled at it, and while I never thought it was a good idea that antitrust enforcers allowed them to acquire WhatsApp and Instagram (instead of forcing them to compete with those nascent competitors), I think the public perception is unfairly negative. I actually find many of the positions that Mark Zuckerberg has taken on critical industry issues--such as the need to regulate major platforms, but also on free speech issues--totally reasonable. It also says something that Senator Ted Cruz (R-Tex.) considers Mr. Zuckerberg more receptive to his concerns than some other tech leaders. I hardly use Facebook anymore--somewhere between once a month and once a quarter, but I do use WhatsApp every day (though I slightly prefer Signal). So I'm not a hardcore Facebook fan. But I think that company has been unfairly vilified and demonized.

That made Apple's ATT scheme easier to implement. Now, with what the WSJ's Salvador Rodriguez has just reported, and with the impact on innocent small businesses and the economy and society at large becoming clearer (not only--but also--thanks to the FT's Patrick McGee's article I mentioned), more and more people--especially those who make important decisions, such as at regulatory agencies--will understand the grand evil scheme centered around ATT.

I expect more public enforcement and more private litigation against ATT, and those WSJ and FT articles may serve as Exhibits 1 and 2. Two major enforcement activities are already ongoing:

• This month, a group of French publishers represented by Hagens Berman brought a class action lawsuit in the Northern District of California. They're tackling the app tax as well as ATT, and it's important to understand that the two are a lot more closely related than some might have thought so far.

• The Bundeskartellamt (Federal Cartel Office), which is Germany's competition authority, is investigating ATT as a potential abuse of market power. It is the most interesting antitrust investigation in Germany in a long time, though many felt at the time that the FCO's action against Facebook based on "combining user data from different sources" was its most significant tech-related initiative.

In the N.D. Cal. litigation, Hagens Berman will appreciate the WSJ article as a treasure trove in terms of starting point for discovery requests, interrogatories, and questions to ask witnesses. The German FCO may also have some questions for both Apple and Meta/Facebook.

No one should make the mistake of cutting off one's nose to spite one's face. If there are respects in which Meta/Facebook can, should, or needs to improve, bring them up. Talk to Meta, as there really are indications (such as what Senator Cruz said) that Mark Zuckerberg is constructive. But don't let Apple get away with a scheme that has a devastating impact on many companies large and (especially) small.

Privacy is largely a pretext. If it was about privacy, Apple wouldn't display a "salesman's" message that strongly encourages authorizing the use of data for advertising purposes when its own interests are at stake while scaring users away from the same kind of authorization when it's requested by third-party apps.

In recent weeks, it became known--based on Apple's job ads--that they're building a demand-side platform (DSP), which means Cupertino wants to scale up its Search Ads business. The DIGIDAY article I just linked to explains DSP as "a core part of an ad tech stack for any company with designs on winning more media dollars" and explains that it "lets a marketer advertise with the help of automation," meaning that "marketers can set up campaigns and manage them with relative ease"--and as a result, advertisers are "likely to spend more."

ATT is a power and money grab. It's not unstoppable. Regulation and litigation--and, if necessary, legislation--can address the problem.

This here is a FOSS Patents exclusive because no one else appears to have noticed the following:

Well-hidden in a new 90-page U.S. antitrust complaint against Apple (even 251 pages with the exhibits (PDF)), filed on Monday in the Northern District of California, is a challenge to one of the most devious and ruthless schemes Cupertino has ever devised: App Tracking Transparency (ATT).

This is precisely what Meta (Facebook) would love to do, but it hasn't gone to court (at least not yet) and is, instead, contenting itself with drawing public attention to the issue.

Under the pretext of "privacy," App Tracking scares iPhone and iPad users away from granting even the most innocuous apps permission to share with advertising networks non-sensitive information that has nothing to do with spying on users, but is simply necessary in order to avoid that the same user will see irrelevant ads--ad even the same irrelevant ads over and over again. As a result, ATT

• has wrought havoc on iOS app makers' revenue opportunity from the sale of their in-app advertising inventory,

• has massively increased user acquisition (UA) costs (also referred to as customer acquisition costs (CAC)) (even on Android due to budgets shifting to that platform),

• with the resulting squeeze (revenue reduction and cost increase)--in the opinion of a venture investor--even having the potential to contribute to a recession, and

• not only gives the fruity Big Brother greater control over how users discover apps (which facilitates Sherlocking), but also enables Apple to grow its own Search Ads business at the expense of competitor networks and of app developers, such as by soon selling ads even on individual apps' App Store pages, which will force many developers to buy Search Ads just to prevent rivals from diverting user traffic.

The issue of Search Ads being an extension of Apple's app tax came up, but didn't take center stage, in last year's Epic Games v. Apple trial. Judge Yvonne Gonzalez Rogers, to whom the new complaint by those French publishers is likely to be assigned, made terrible mistakes. Yesterday I published a 33-page PDF that details 271 (yes, two-hundred seventy-one!) typos, punctuation errors, inconsistencies, and similar mistakes, which is embarrassing for the (otherwise world-class!) United States District Court for the Northern District of California. And I've previously shown that in the single most critical part of the decision (market definition), Judge YGR was wrong on the law, wrong on the economics, and wrong on the technology. But she did get some things right (as I also clarified in my previous post), and this includes the finding that Search Ads aren't necessarily a blessing for app developers:

Footnote 498:

"[...] Developers must pay for these search ads and competitors may use them to artificially drive traffic, which decreases overall app discoverability. [...] Thus, the search ads are, at best, a mixed blessing for poor overall matchmaking."

At first sight, Société du Figaro et al. v. Apple is just an extension of other U.S. class actions that app developers have previously brought against Apple in the Northern District of California over the 30% app tax. One might be led to think that the only difference is that previous cases--which merely led to a sham settlement the only major beneficiaries of which were Apple and both sides' lawyers--pursued claims on behalf of U.S.-based app developers, and the Figaro case is now seeking redress on behalf of French legal entities under U.S. federal and California state law because the App Store is a global operation.

The headline of the press release with which the Hagens Berman firm announced the new complaint mentions only "Apple's App Store Fees." The firm's name partner Steve Berman then says:

"Our firm is happy to see iOS developers from other countries seeking the same justice we were able to achieve for U.S. developers. We believe they too have been wrongfully subjected to the stifling policies of Apple’s App Store, and we intend to hold Apple to the law." (emphasis added)

The first-named plaintiff's famous newspaper Le Figaro published an article yesterday that says the damages and interests sought from Apple could exceed US1ドル billion. And this group of plaintiffs is not going to be as easily persuaded to agree to a sham settlement: they aren't little guys, but powerful and deep-pocketed publishers.

The emphasis remains on the infamous app tax where Hagens Berman's press release describes the issues raised in the complaint: "France-based iOS developers [...] were subjected to Apple’s high commissions, fees and other policies." The term I just emphasized--"other policies"--does, however, include ATT. The prayers for relief include a request for "injunctive relief requiring that Apple cease the abusive, unlawful, and anticompetitive practices described [t]herein." And Apple's ATT program is addressed by paragraphs 187 et seq.:

b. Apple’s ATT program

187. Another situation that Apple has devised and then exploited for yet more profits is that involving recent implementation of its App Tracking Transparency (ATT) program. Ostensibly, this program is good for end-user consumers because it gives them more choice as to third-party tracking of personal data.

188. However, large and small iOS developers claim that it is implemented in such a way that they are unfairly robbed of their ability to monetize their work by fair use of consumer data for targeted advertising. These developers, which include plaintiffs Individual Developers, as well as associational plaintiff le GESTE, allege that Apple’s ATT program will mean less free-to-get apps; developers will forgo creating them, or will begin to charge fees for heretofore free-to-get apps, because they will be unable to make a living by means of advertising.

189. Moreover, they claim that Apple is advantaging itself by the way in which it presents consumers with the option to opt-out of certain third-party tracking, versus other means that would more fairly present the choice.179 They also claim that Apple advantages itself by offering a Personalized Ads architecture for its own apps that is not parallel to the way it presents the ATT opt-out choice; instead, as the U.K.’s CMA has written, it “employs a different choice architecture compared to the ATT prompt.”180 Thus, Apple, which already holds stores of first-party data, and whose advertising services can “use the Apple Ads Attribution API while third parties must use SKAdNetwork [which may be more limited and immature],” is and will be further advantaged vis-à-vis other entities that participate in digital marketing or product development. And so will other large gatekeepers such as Google, which itself holds enormous stores of first-party data gathered by way of its many properties.

190. By monopolizing the relevant market, Apple affords iOS developers who do not wish to participate in ATT, especially as implemented, nowhere to go. Again, Apple presents ATT as a take-it-or-leave-it proposition, if iOS developers wish to sell their iOS apps and in-app products. If there were competition, iOS developers such as Individual Plaintiffs could choose other distribution avenues, or they could more effectively press Apple to change some of its policies and practices around ATT. As to the latter—changing policies and practices—Apple might be persuaded to change the ways in which it presents the opt-out screen to consumers. Or it might be persuaded to allow developers to tell end-users in a fair manner, when the ATT opt-out screen is presented, that if they opt-in, they will receive remuneration or free or discounted digital products, for example. But instead, affected iOS developers are offered no real choices. On the other hand, in typical Apple fashion, it benefits from ATT monetarily. Apple’s App Store Search Ads, which iOS developers that can afford them buy in order to help to alleviate the discoverability issue, are reportedly up in volume sold and more expensive following the introduction of ATT. Because they are auction-based, the more developers that bid on them, the higher the prices go. And in fact there are more bidders, as iOS developers shift more of their own app-related advertising dollars to Apple, given ATT’s negative effect on the quality of certain other places where they might have advertised previously. Once again, iOS developers are squeezed, as Apple’s App Store-related profits increase yet again. Apple harms iOS developers—consumers of its iOS app-distribution and IAP services—by way of supracompetitive pricing and retail pricing mandates.

Given that the app developers here are actually publishers, ATT and its impact on advertising revenues as well as user acquisition costs is going to play a major role in this litigation. And so are subscriptions as opposed to an exclusive focus on one-off in-app purchasing (IAP) transactions.

There are three original plaintiff entities:

• Société du Figaro, SAS (famous for the namesake newspaper),

• L'Équipe 24/24 SAS, publisher of the namesake sports paper and related streaming app, and

• le GESTE, an industry association of French publishers whose membership includes 140 online publishers, two of which are the previously named plaiintiffs. Le GESTE brings the class action on behalf of all of its members. But the class is open to opt-in by other French entities.

The issues in the case are obviously not limited to French publishers. There's no reason why, say, British or German publishers couldn't pursue the same types of claims. And with respect to in-app subscriptions and App Tracking, a victory by those French plaintiffs would immediately lead to additional cases being brought by U.S. plaintiffs. This is a scalable business for Hagens Berman and other firms active in that space, but that's OK as long as their next cases--unlike the case involving small U.S. app developers--truly bring about change.

Consumer class actions against Apple are pending in the United States, Australia, the United Kingdom, the Netherlands (where one of the two class actions invites all EU-based consumers to join, not just Dutch ones), and--most recently--Portugal. In my post on the Portuguese action you can find a structured list of those consumer cases.

But there's also a growing diversity of corporate class actions. The same firm that is representing the French publishers brought a case against Apple--over Apple Pay and restrictions on the access to the iPhone's NFC functionality--on behalf of credit card issuers last month.

Hagens Berman (in the U.S.) and Hausfeld (in a variety of jurisdictions) are presently the two most active firms pursuing class actions against Apple (with parallel cases often targeting Google, but Apple's conduct raises far more issues).

It's worth noting that there also is an effort underway in France. The equivalent of a preliminary injunction against ATT was denied last year, but that case is still ongoing. In the French case, various publishers are being represented by Fayrouze Masmi-Dazi, who also cooperates with Hagens Berman on the case in the Northern District of California.

As I've said on other occasions, Apple used to be about creative destruction, but by now is mostly about the non-creative destruction of business models through its abuse of market power. On Thursday, Alex Gurevich--the managing director of early-stage fund Javelin Venture Partners--raised a fundamental concern in a Twitter thread that deserves a closer look. Mr. Gurevich noted the "massive adverse effects" that small and medium-sized businesses (SMBs) as well as "innovative companies everywhere" suffer from Apple's app tracking rules, which "might bear as much blame for a recession as inflation":

1) I'm still surprised by the lack of public discourse around the impacts of @apple's iOS 14 changes - all in the name of privacy - that are leading to massive adverse effects to SMBs and innovative companies everywhere. They might bear as much blame for a recession as inflation.

— Alex Gurevich (@alex_gurevich) July 21, 2022

Mr. Gurevich then explains that "[o]nline brands, small merchants, local SMBS, and the like have been able to leverage [Facebook]'s micro targeting to compete and acquire customers in a capital efficient way." But as a result of Apple's changed policies, customer acquisition costs (CACs) "have doubled across the board, leading to massive drops (sometimes as much as 60%) in revenue for SMBs. In this context, Mr. Gurevich points to a Meta (Facebook) webpage on the impact of Apple's privacy update on small businesses, but later he also references a Harvard Business Review article.

The fourth part of the thread puts this into a wider economic context:

4) This has massive adverse effects on the economy as a whole. SMB's are 44% of GDP and 64% rely on online targeting. A 50-60% revenue drop is massive for such a large swath of the economy. Could be leading to as much recessionary pressure as inflation and other macro factors.

— Alex Gurevich (@alex_gurevich) July 21, 2022

My initial assessment is that Mr. Gurevich is indeed onto something, and I absolutely agree that it is in the interest of the economy at large not to let Apple get away with this. However, there is one sentence in the tweet I just quoted that I consider an overstatement:

"A 50-60% revenue drop is massive for such a large swath of the economy."

"A 50-60% revenue drop is massive" for everyone, not just SMBs. But the "large swath of the economy" that he refers to (SMBs, which account for 44% of GDP) doesn't experience that drop across the board. It's not an average, or a median. It's unclear how many companies are hit to that extent.

That inaccurate wording (which is attributable to Twitter-style brevity) changes nothing about the facts that

• companies of all sizes are impacted,

• the SMB sector is usually a growth and job engine,

• many SMBs are affected, some of them even to the extent of a 50-60% revenue drop, and

• there are companies that are forced out of business by such dynamics, and other must give up their independence (see this example or another Twitter user's observation of educational technology companies becoming unsustainable).

I'd like to add that many online companies--including app makers--are experiencing a terrible squeeze as their user acquisition costs go up while their revenues from selling their so-called ad inventory go down.

It's definitely not a stretch to express major macroeconomic concerns over all of that.

One common misconception is that the impact of Apple's app tracking policy is limited by the fact that there are even more Android devices in use. This here is a particularly good response I found on Twitter:

How they are unaffected if budgets switch to compensate it! Ads there are getting more expensive too.

— Borat Zimmerman (@mesak1) July 22, 2022

It's not just that Android ads are "getting more expensive." There was an immediate meteoric impact on Android ads when Apple's ATT rules took effect. On some ad networks it was even impossible for a few weeks to start new campaigns because there was so much demand.

Also, let's never forget that the average spending power per iOS user is far greater.

Then there are some Apple apologists who argue that it's a good thing if consumers buy only what they really need, and that product makers should simply adjust to the situation and/or make better products. The best response to that one that I've seen so far is this:

Not a lot of marketers in this thread I see…those saying that products should just be better are naive& obv. don’t understand the landscape. A great product can be buried by the sheer mass of the internet. Even the most innovative need an efficient CAC.

— pt (@ltltrb) July 22, 2022

It's simply not realistic to assume that the world of commerce is totally meritocratic and the best products will get all the word of mouth they need.

Some harp on the theme of Meta/Facebook being no better than Apple--just another monopolist that SMBs would depend on. But it doesn't make sense to assume that each Big Tech player uses its market power in equally problematic ways. Apple is the most arrogant and aggressive abuser of its power, followed by Google. There are reasons to assume that Facebook is fundamentally more benevolent. I remember an interview in which even Senator Ted Cruz (R-Tex.) was talking about his experience in discussing tech policy issues with Big Tech CEOs and gave Mark Zuckerberg credit for being receptive to certain concerns--and constructive.

From a competition policy point of view, I'm one of many people who think--and I already thought so at the time those deals were announced--that Facebook shouldn't have been allowed to acquire Instagram and WhatsApp. But that's water under the bridge, and didn't really hurt SMBs. So I also concur with the following tweet by Mr. Gurevich:

7) .@Meta is no saint of a company, but we need to acknowledge the positives the micro targeting model has had for the SMB and innovation economy over the past decade plus.

— Alex Gurevich (@alex_gurevich) July 21, 2022

Some people may gloat over how Meta/Facebook was impacted by this. But that's a case of cutting one's nose to spite one's face. In the end, the economy at large depends on innovation, fair competition, and healthy SMBs. I don't care how many or how few Hawaiian islands Mr. Zuckerberg can afford--but I do care about Facebook's ability to serve companies of all sizes, especially SMBs.

On Thursday, Snap Inc. (Snapchat) announced its Q2 figures, and its Investor Letter accurately notes that "[p]latform policy changes have upended more than a decade of advertising industry standards."

In a way, Snapchat "deserved" it as its CEO attempted to help Apple on the last day (apart from closing argument) of last year's Epic Games v. Apple antitrust trial. But again, I refuse to cut my nose to spite my face.

This tweet promotes a free 14-day trial to access an expert Q&A platform, but I'll share it nevertheless because the highlighted part is really instructive:

First-hand example of how Apple’s privacy changes drastically impacted advertising tracking for $SNAP $META TikTok, etc.

Free 14 Day Trial (no credit card required) to access Stream’s 17,000+ expert interviews on 3,000+ companieshttps://t.co/HsVL3wnfYx pic.twitter.com/u1OPnkYOGc

— Austin Lieberman (@LiebermanAustin) July 22, 2022

The first highlighted answer says:

"[App tracking has] wrecked the whole ecosystem, not just Facebook. Facebook, TikTok, Google, everybody has felt it. I've seen businesses go out of business. I've seen multiple companies go under. I've seen agencies go under jsut because it was such a bold move on Apple's side, and it's fake. All they're doing is keeping the data for themselves to release what it is that they're going to release. It's not about privacy. There's no privacy."

Now, some Apple apologists say that one shouldn't complain about Apple's rules but convince users to allow app tracking. But that's unrealistic as Apple simply doesn't allow it on iOS. Users are systematically scared away from granting that permission to third-party apps, but it sounds rather different when Apple itself requests access to user data:

Apple going full Russell Conjugation here

I personalize, you track across apps, they invade your privacy. https://t.co/w55sVWEb2q

— tobi lutke (@tobi) June 3, 2022

That tweet by Shopify founder Tobi Lutke is spot-on. It's a Russell conjugation type of hypocrisy. Shopify is an excellent example of a big company that's affected by those rules in a way that hurts many small companies: SMBs relying on Shopify to sell products online. The alternative to Shopify or its competitors would basically just be Amazon...

I noted last year that Apple's privacy hypocrisy is also evidenced by the fact that it asks for location data to sell music (even in the Android version of Shazam, an app it once acquired) while Apple didn't let governments use voluntarily-provided location data for COVID tracking purposes.

This tweet correctly explains how Apple leveraged "privacy" for the purpose of monopolization:

Because Apple led with a privacy PR campaign to woo the media with an obscure privacy mantra, then proceeded with its plan to eliminate competition, wall-in users, and enjoy an effective monopoly.

— Annalisa Fernandez (@BecauseCulture) July 22, 2022

Apple's app tracking rules are structurally similar to its long-standing practice of "Sherlocking."

There was an early attempt in France to thwart Apple's plan. But what happened is that the French antitrust authority (Autorité de la concurrence, Adlc) couldn't order interim measures because the country's privacy watchdog effectively vetoed it. That case hasn't been definitively decided yet, and meanwhile Germany's Federal Cartel Office is looking into abusive self-preferencing in connection with app tracking.

Let's come full circle back to the question of whether Apple's ATT rules "bear as much blame for a recession as inflation." There can be no doubt that the economy at large is increasingly suffering from Apple's abuse of market power. Lawmakers, regulators, and the courts of law must combat this problem. Privacy activists and watchdogs must be educated that it's largely a pretext in Apple's case. And it would be good if a renowned economic research institute could undertake to quantify the impact of ATT on the wider economy as well as, more specifically, on SMBs and on certain categories of startups.

Apple has the resources to defend itself against ever more antitrust investigations around the globe, but at some point it's simply going to run out of management bandwidth and, even prior to that, of political capital. Apple is increasingly seen as an unrepentant and reckless violator of competition laws. Apple's arguments boil down to a mix of pretexts and hypocrisy. But for the time being that's still a profitable game for Apple to play, as justice delayed is justice denied. While Apple continues to harm wide swaths of the digital economy through non-creative destruction, policy makers and regulators are usually too slow and timid to effectively combat Apple's abusive practices.

But if there are enough initiatives in different jurisdictions targeting different aspects of Apple's abuse of its market power, we will see significant improvements, though nothing would be even remotely as impactful as a successful appeal by Epic Games leading to a single-brand market definition. The United States Court of Appeals for the Ninth Circuit has granted Apple an extension until July 15 for its final brief, which in formal terms is only supposed to reinforce Apple's appeal of Epic's consolation prize from the district court (an injunction under California Unfair Competition Law) but which Apple will try to use in order to make some final points even on the more important issues in the case.

There are two reasons for which Epic lost (apart from the aforementioned consolation prize) in the district court: the state of affairs of U.S. antitrust law after an extended period during which the courts--mostly conservative judges--essentially gutted the Sherman Act (though the tide has turned and even conservatives have enough of certain Big Tech companies' behavior), and the misconceptions that resulted in incorrect findings and holdings by the Epic v. Apple judge (a Democrat; it's not just a matter of opinion or preference but simply a demonstrable fact that she got the law, the economics, and the technology wrong).

Meanwhile, there are interesting developments in two jurisdictions that face far lower hurdles than U.S. antitrust plaintiffs as they seek to restore competition. Toward the end of a recent post I already mentioned the UK Competition & Markets Authority's market investigation concerning mobile browsers and cloud gaming (the combination is key). From what I heard, Geradin Partners--an antitrust boutique that started in Brussels but has recently expanded to London, where it brought in two former CMA directors--has advised and continues to represent a number of clients with respect to CMA complaints over Apple's conduct.

I'll talk about that market investigation some more on another occasion. For now, it's important to bear in mind that a market investigation gives the CMA fundamentally more wiggle room than a unilateral-conduct investigation. Simply put, the CMA doesn't have to establish wrongdoing. It can simply take action to fix a market failure.

Another jurisdiction that I've repeatedly said Apple's rivals should have prioritized even earlier is Germany. The German legislature amended the country's competition law (GWB, Act Against Restraints of Competition) with special rules addressing gatekeepers (Section 19a) entering into force at the beginning of last year. The Bundeskartellamt (Federal Cartel Office) strives to apply those rules, which clearly enhance its ability to address anticompetitive conduct by gatekeepers like Apple, prudently and judiciously. But now the Section 19a hammer may finally be coming down on Apple with full force as the FCO announced a review of "Apple's tracking rules for third-party apps."

I found out on LinkedIn that Hausfeld Germany is advising many complaints. They're really doing tremendous work against Big Tech. I don't think any other German law firm is even half as relevant at this stage when it comes to antitrust complaints over Apple and Google. Some great firms couldn't do it as they count Apple among their clients, but that serves to explain Hausfeld's amazing track record only in part.

Apple's app tracking rules are simply a money and power grab, and the BKartA (FCO) has it all figured out--and is now looking into the matter from the angle of self-preferencing, as Apple applies different rules to its own apps:

Apple going full Russel Conjugation here

I personalize, you track across apps, they invade your privacy. https://t.co/w55sVWEb2q

— tobi lutke (@tobi) June 3, 2022

The problems were foreseeable. Already last year, organizations advised by Geradin Partners complained to French competition authority Autorité de la concurrence (Adlc) about it, and sought interim measures (like a preliminary injunction, but by a regulator as opposed to a court). At the time, the Adlc wasn't able to take such action against Apple, and from what I heard, the problem was primarily that the French government's privacy watchdogs sided with Apple. In my opinion, privacy activists and watchdogs all too often become useful idiots for Apple's purposes. The lukewarm reception Tim Cook got at a recent meeting of privacy activists suggests that this is increasingly understood, with more and more people refusing to be fooled into thinking that Apple is truly their ally. Apple is just about Apple.

This leads to the second unique aspect of the German FCO investigation (the first one was the gatekeeper statute): that country is known for a very strong data privacy movement.

When the French Adlc declined to order interim measures against Apple, it was too early to demonstrate Apple's self-preferencing. That's not an issue now, and the German FCO has raised the issue. We may see some really interesting Franco-German dynamics in this context.

Dutch case isn't done and over yet

I continue to believe that the Dutch Autoriteit Consument & Markt (ACM; Authority for Consumers & Markets) was wrong to predict benefits to consumers and developers from changes Apple made to its rules--only with respect to the use of dating apps by customers based in the Netherlands--in response to an ACM decision. Consumer benefits are the first and foremost objective for competition watchdogs to pursue. That's why credibility is key, and for the reasons I explained in the post I just linked to, nothing is going to improve at this stage as a result of the action the ACM has taken as a result of a Match Group (Tinder) complaint.

However, the good news--and depending on how it goes, potentially even excellent news--is that there's more to the ACM's original decision than meets the eye. This is another example of how antitrust enforcement differs from country to country. The legal framework in the Netherlands is such that the target of an ACM decision can block the agency not only from enforcing but additionally from publishing parts of a ruling until a final court ruling on the respondent's appeal. The complainant(s) may know what's in the ruling, but wouldn't be allowed to talk about it. Politico Pro has now revealed that the presently unenforceable and sealed part of the ACM order relates to the commission Apple imposes on developers--aka as "the app tax":

The Dutch regulator is weighing a new order on the second part of the investigation, pending a ruling expected “in the second part of the year,” Snoep said. The other part of the probe targets Apple’s 30 percent fee for app developers, said two people familiar. (2/2)

— Simon Van Dorpe (@simonvandorpe) June 14, 2022

The present set of rules for dating apps in the Dutch market won't have pro-competitive benefits because Apple still imposes the same monopoly tax--it charges the same amount as its regular commission, minus 3%, a differential that is actually less than developers will often pay third-party payment processors, at least when the amount of a given payment is small (due to minimum transaction fees). If Apple not only had to allow third-party payment systems but was also barred from taxing the app economy (on Twitter, Elon Musk has more than once called it a tax on the Internet), meaning that it would at most be able to collect a fair royalty for its related intellectual property (which shouldn't be a higher percentage of revenues than whats Apple pays to owners of cellular standard-essential patents), consumers would indeed benefit.

Both the Dutch ACM and Apple are trying to win all the way. It could be that when all is said and done (i.e., all appeals have been exhausted, and this case could easily reach the European Court of Justice), Apple will be allowed to undo its rule change for Dutch dating apps--but it could also be that the full ACM decision will be released and enforced. In the latter scenario, the next step would then be to apply it to all apps, and for other jurisdictions to follow suit, including the Netherlands' neighbor to the East, Germany. The FCO is well aware of the Dutch dating app case, and in all likelihood will sooner or later take action as well.

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This post is about a simple--though immensely important--question. It's a question that Apple should think about again. Let me quote JFK on this occasion:

"Change is the law of life. And those who look only to the past or present are certain to miss the future."

Is Apple making a mistake in that regard? Is it missing an opportunity?

Apple has a glorious past and an even more glorious present. And it's not going to get into serious trouble in the foreseeable future--looking at that mountain of cash and customer loyalty. Still, it may be missing an opportunity for a better future because it focuses--almost myopically--on the nearest term.

Change is not just the law of life as JFK put it, but change is coming to iOS. Apple's leadership may view it otherwise, but neither is it acceptable for a mobile OS duopoly to tax almost the entire software industry nor is it practical for a single company to be the censorship rulemaker and Judge Dredd (judge and executioner) of app reviews. If an app doesn't violate a country's laws, it must be available on iOS, "sí o sí" to put it in Spanish.

The Dark Age for ISVs (independent software developers, i.e., the ones who depend on platforms) is coming to an end. There is light at the end of the tunnel in the form of the Open App Markets Act (OAMA) in the U.S. and/or the Digital Markets Act (DMA) in the EU. And Apple largely owes it to a district judge who erred to an unbelievable extent on the law, the economics, and the technology that it didn't lose the first round against Epic Games.

I'm neither an Apple "fanboi"--I remigrated to Android last year though it cost me a weekend (as I more or less expected)--nor an Apple hater. In my previous post I explained that I'm closer to Apple's views on Section 1 of the Sherman Act. I may have been the only independent commentator out there to give Apple more than just the benefit of the doubt with respect to the enforcement of that Dutch antitrust ruling. And I've been insulted by a number of people for explaining the narrow scope of the consolation-prize injunction Epic won under California Unfair Competition Law (and for predicting that Apple would get that one stayed). Of course, I don't have a patent or other kind of monopoly on balance. I wish to particularly highlight that John Gruber of Daring Fireball, while generally very sympathetic to Apple, doesn't unconditionally defend each and every App Store policy or related decision. John probably surprised some people, and I admit that would include me.

From my vantage point (as an Apple critic and anti-App-Store complainant who is nevertheless trying to stay rational), the developments around mobile app distribution have reached a point at which Apple needs to think it over, needs to reprioritize. We could have reached that point sooner, and after the Epic Games v. Apple trial I thought we were getting there sooner. Be that as it may, recent developments suggest that now--at long last--a certain tipping point has been, or is about to be, reached.

If Apple doesn't alter course now, it may find it much harder or even impossible later to play a more constructive role and shape the regulatory future.

About a week ago, a deeply entrenched Tim Cook delivered what was rhetorically and strategically the perfect speech. Speaking at a meeting of the International Association of Privacy Professionals, he stressed why for the sake of privacy--and, which is obviously related, security--the App Store monopoly should not be broken. It's fairly possible that no tech industry executive ever performed like this as a salesman and as a politician at the same time. It was like he was a frontrunner for the presidency. But it's not simply about whether he does things right. It's mostly about whether he does the right thing going forward from here on out.

The reactions to that speech--not in that conference room but beyond--must give Apple pause. Apple should recognize that the solution is not to defend the status quo, which is unsustainable, and to try to defang procompetitive measures, which merely delays the inevitable. Instead, Apple should open up and take the lead in defining a future in which privacy and security will not be--as they never have been--antithetical to competition in software distribution.

By coincidence, all three "de" words match the following pattern: def?n?.

Apple, you know that you are on the wrong track when your CEO gives his very best, but a journalist (the Intercept's Sam Biddle) sardonically dismisses your argument:

I too believe anything that will cost me money is a dire national security threat https://t.co/2SW4Ou4b1N

— Sam Biddle (@samfbiddle) April 12, 2022

Just one journalist? I saw more such tweets, also from app developers, but what's even more important is how the powers that be reacted. Newsmax quotes a joint statement by Senators Richard Blumenthal (D-Conn.) and Marsha Blackburn (R-Tenn.):

"Tim Cook seems terrified of increased competition, and Apple does not want Americans to have the option to circumvent their App Store monopoly.

"We fully agree with the need for comprehensive privacy legislation and have been actively discussing this with our colleagues on both sides of the aisle. However, it misses the mark to say we can't have both consumer privacy and competition in the app marketplace.

"As passed by the Senate Judiciary Committee, the Open App Markets Act acknowledges this balance. Suggesting otherwise is a scare tactic to justify closing markets off to competition."

Contrary to what Apple has been claiming so far, there are ways to reconcile competition in app distribution with security and privacy concerns. Describing security and privacy as mutually exclusive with open app markets cannot be in Apple's long-term interest. It will still want to emphasize privacy (and security) even after the change that is coming. Why dig an ever deeper hole that just becomes harder to get out of?

No matter how harshly I've criticized and how vigorously I've defended Apple on different occasions, I've always been consistent in recognizing Apple's desire to be different. To think different. To be unique. That includes IPR enforcement (though it doesn't mean I necessarily supported overreaching remedies such as a disgorgement of total profits over a rounder-corners-and-bezel type of design patent).

I even respect that uniqueness and consider it a good thing for competition and innovation when it involves issues I personally don't rate all that highly. For example, when I installed a new HP Notebook with Windows 11 last week, I was prompted to decide whether I'd let advertising networks identify me across apps. Without hesitation, I gave that permission. That's not because of solidarity with others who need to advertise or sell advertising inventory in apps (I've done both), but simply because--as that Windows prompt accurately explained--I'll get to see more relevant ads. Now, there are many people who'd rather see totally irrelevant ads than allow the smallest amount of tracking, and I respect that view. There's this famous quote, falsely attributed to Voltaire instead of biographer Evelyn Beatrice Hall: "I disagree with what you say, but I will defend to the death your right to say it." I'm not going to die for this principle, but those who have such strong views on privacy should be able to get what they want.

I outlined a licensing policy last year that would reconcile Apple's privacy philosophy with competition in app distribution. I'm sure that many of those who want to open up mobile app markets wouldn't like my idea. They'd argue that this would still give Apple too much power, that it would make it too hard for third-party app stores to compete with Apple. I have no problem with not finding anyone who agrees with that idea (without Apple it wouldn't fly anyway). It's just one example of what could be done to give customers the best of both worlds.

Instead of opening up, Apple doubles down on a strategy that clearly fails to persuade. It should be beneath Apple to engage in astroturfing, whether it's about standard-essential patents or about app stores. But the latest is that some notorious "Apploturfers" claim that opening up app distribution would be a boon to Facebook, a bogeyman that Apple probably views as its archenemy in the "data-industrial complex" Tim Cook was talking about. President Eisenhower warned against the "military-industrial complex" in his farewell address. Tim Cook still has miles to go, and I wish his legacy would include a solution that squares Apple's privacy philosophy with open app markets.

If done right, that would create and not destroy shareholder value. The risk Apple is taking with its current all-or-nothing approach is to lose control it won't be able to regain anytime soon. Microsoft avoided that risk by being cooperative at just the right moment. And Microsoft itself might never have become what it is if another company--IBM--hadn't allowed third-party PCs based on its architecture because of its history of antitrust problems with its mainframe. Apple uniquely appears to remain defiant forever and isn't convincing anyone anymore, not even with world-class campaign speeches--other than a judge who thinks there are multiple "operating systems" for the App Store and that mobile game transactions aren't necessarily digital...

A year ago, I thought that maybe Apple had no other choice for shareholder value reasons but to defend its monopoly. With all that has happened since, I view it differently.

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