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How Apple is making the antitrust case against it stronger

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How Apple is making the antitrust case against it stronger

Illustration by Alex Castro / The Verge

I.

Say your company makes a new email platform. In 2020, that means building not just a website but also an app — several of them, actually. You’ll probably want clients for Mac and Windows, iOS and Android, the open web, and — if you’re showing off — Linux. In some of these places, like the web, there is no cost for operating this service beyond building and hosting it. And in others, such as the Mac and iOS app stores, there is a significant cost: 30 percent of revenue generated from within the app. This is true even though Apple runs its own email platform, which is free but charges for extra storage, and gets to keep all that revenue for itself.

The above is the situation now unfolding for Hey, a clever and genuinely original email platform released on Monday by the makers of Basecamp. (I wrote about it at some length for The Verge on Monday, because for me trying new productivity apps is a form of self-care.) Hey costs $99 a year, and you can only sign up and pay on its website. It managed to get its iOS app into the App Store. But then it tried to submit some bug fixes, and Apple informed the company that it had to begin taking signups on iOS — and give Apple a 30 percent cut of that revenue — or get kicked out of the store.

The reason, writes David Pierce at Protocol, is “rule 3.1.1 of Apple’s guidelines for app developers, which says in essence that if you want people to be able to buy stuff in your app, you need to do it using Apple’s payments system.” The rule is not uniformly applied. If you make a music app, like Spotify, or a video app, like Netflix, you can force people to sign up on the web and Apple won’t take a cut. And if you make certain other email apps, such as Superhuman or Newton (no relation to the author), you can put your app in the App Store even though you don’t let people pay with an in-app purchase.

On its face, Apple’s policy enforcement here feels arbitrary and capricious — and, I suspect, it may become part of the antitrust investigations now underway against the company. Apple has a duopoly in the smartphone market with Google, and charges developers 30 percent of their revenue to compete with it in certain categories, such as email. I’m no lawyer, but that certainly sounds like a formidable barrier to entry — and one erected by a company that has $192.8 billion in cash it has no clear use for, to boot.

Apple declined to comment on the decision, but told Pierce its mistake was in ever permitting Hey into the App Store to begin with. Still, you could imagine the company saying, look, if you don’t want to pay the rent, just don’t make an iOS app. But that’s not feasible, says David Heinemeier Hansson, the co-founder of Basecamp, in a Twitter message. “That’s exactly what monopolists always say! Take it or leave it! Because they KNOW you can’t leave it.”

He went on:

They can get to essentially extract any cut they want. They’re under no market pressure to be competitive. This is Monopoly Squeezing 101.

As I said in my testimony before congress, why is it that credit card processing fees hover in the 1.8-2.8% range, while Apple’s App Store have sat steady at 30% on the high end? Because there’s no competition! And they have a monopoly grip!

There’s zero impetus on Apple to lower prices, stop being abusive, or even enforce their own policies with any sense of consistency or justice.

I was glad Heinemeier Hansson brought up justice, since it’s at the heart of every content moderation decision — and whether an app gets to be in the App Store is a content moderation decision like any other. Often in this column I’ll write about a controversial post on Facebook, or a controversial video on YouTube, and what makes people so mad is that they fundamentally have no recourse against the platform, even though for many of those people it has become their livelihood. It might be legal, but it doesn’t feel just.

The thing about anti-competitive behavior, though, is that it may be illegal.

II.

Spotify has at least one advantage over Hey, in that it can exist in the App Store even though it doesn’t sell subscriptions there. Instead, if you want to subscribe to Spotify’s premium service, you have to go to its website — a fact that, per App Store guidelines, the company is not allowed to advertise. Meanwhile, Apple offers a mediocre Spotify alternative, Apple Music, which it advertises throughout the operating system. (I’ve received several push notification advertisements inviting me to subscribe).

Last May, Spotify filed a formal complaint against Apple with the European Union, alleging that Apple is harming consumers and stifling innovation via the 30 percent tax and other policies that raise barriers to competition. Competition is particularly difficult in the music industry, given that the lion’s share of all revenue that they generate goes to the record labels that own the music. For Spotify, Apple’s businesses could represent an existential threat. (Among other things, it has pushed Spotify to buy up the crown jewels of American podcasting, to reduce its head-to-head competition with Apple over music streaming.)

In any case, on Tuesday the European Union heeded Spotify’s call — and opened an antitrust investigation into Apple. Here’s Tom Warren at The Verge:

The first investigation will probe whether Apple has broken EU competition rules with its App Store policies, following complaints by Spotify and Rakuten over Apple’s 30 percent cut on subscriptions and sales of ebooks through its App Store.

“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books,” says Margrethe Vestager, the head of the EU’s antitrust division. “I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”

Vestager opened a concurrent second investigation against the company related to Apple Pay, over fears that the company’s policies around which merchants are allowed to use phone payments are similarly anticompetitive.

For its part, Apple was rather hilariously dismissive of the whole affair.

“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else,” says an Apple spokesperson in a statement to The Verge. “We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.”

The truth is that many, many developers complain about these policies — but precisely because they are so dependent on Apple, very few are willing to do so publicly. As for whether there is a level playing field, the idea that Apple charges people a 30 percent tax to compete with it in some categories but not others seems laughable on its face.

III.

By now we are more or less used to the European Union taking the lead in regulating the big tech companies. But since Democrats retook the House of Representatives in 2018, the United States has also shown a belated interest in competition, and some of those efforts are accelerating.

One of the most significant developments on that front to date took place over the weekend, when Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai told the House Judiciary Committee they are open to testifying about competition. Amazon CEO Jeff Bezos has said he will testify as well. The apparent deal is that the CEOs will show up and testify as long as all of the other guys, do, too, so they can distribute the pain equally. (This will help ensure that the coverage is nicely generic — “Congress yells at Big Tech” — and not “Congress yells at Jeff Bezos for some frankly pretty valid and specific reasons.)

But one CEO has yet to confirm his attendance, and if you’ve read this far you can probably guess who. Here’s Tony Romm in the Washington Post:

Apple, meanwhile, told the committee that it would send a senior executive yet did not clearly commit its leader, Tim Cook, to appearing before lawmakers, according to one of the people with knowledge of the matter. That approach could ratchet up tensions between the iPhone giant and lawmakers in Washington.

If nothing else, agreeing to go before Congress indicates that three of the four Big Tech CEOs feel comfortable defending themselves against charges of anticompetitive behavior. Given everything unfolding at the moment in Apple’s domain, then, it is perhaps unsurprising that Tim Cook has been less willing to participate.

The Ratio

Today in news that could affect public perception of the big tech platforms.

Trending sideways: Google banned far-right websites ZeroHedge and The Federalist from its ad platform over racist comments posted on the sites. But then it reversed its decision on The Federalist and undermined its own PR people in the process. (Adi Robertson / The Verge)

Trending sideways: Facebook rejected a proposal to share ad revenue with news organizations, saying there would “not be significant” impacts on its business if it stopped sharing news altogether. The news came in response to the Australian Competition and Consumer Commission which is trying to find ways to level the playing field between social platforms and news outlets. (Naaman Zhou and Amanda Meade / The Guardian)

⬇️ Trending down: Two black former policy executives at Pinterest revealed a history of racist discrimination at the company. Ifeoma Ozoma, who pushed Pinterest to enact industry-leading guidelines to remove misinformation about vaccines, wrote a Twitter thread about pay discrimination, harassment, and more. (Cat Zakrzewski / The Washington Post)

Governing

Researchers discovered a Russian misinformation campaign that used forged documents and a network of burner accounts to spread rumors across Facebook and Reddit. Content centered around themes that aligned with Russian interests, like the unreliability of Ukraine and hostility to NATO interventions. Here’s Russell Brandom at The Verge:

Dubbed “Secondary Infektion,” the campaign spanned a number of online platforms, beginning on the Russia-based LiveJournal in 2014, and moving to Twitter and YouTube later that year. In the years that followed, the campaign shifted to Reddit, Medium, and even the user-generated portion of BuzzFeed. All told, the report spans more than 2,500 pieces of content, posted across seven languages and more than 300 different forums, websites, and social networks.

“By April 21, 2020, Graphika had identified some 250 images that the operation had planted in its articles, almost all of them suspected forgeries,” the report states. “We expect that more remain to be found.”

House Speaker Nancy Pelosi urged advertisers to use their “tremendous leverage” to push social media platforms to crack down on disinformation. The remarks came during an online forum about COVID-19 and social media disinformation. Pelosi spent $200,000 on Facebook ads this week. (Lauren Feiner and Megan Graham / CNBC)

In a series of new reports from Gallup and the Knight Foundation, 77 percent of Americans say big tech companies like Facebook, Google, Amazon and Apple have too much power. The reports also have interesting findings about peoples’ feelings on Section 230. Evelyn Douek has a perfect tweet about this report. (Knight Foundation)

Private Facebook groups are using the name “Justice for George Floyd” to hide racist behavior. Inside the group, they’re posting hateful memes and misinformation, while commenters share support for neo-Nazis. (Dara Kerr and Shara Tibken / CNET)

Wikipedia editors are questioning what it means to be a platform committed to “neutrality.” This debate played out in the decision to rename the page on George Floyd’s murder from “Death of George Floyd” to “Killing of George Floyd.” (Stephen Harrison / Slate)

Smartphone location data can be used to identify people attending protests, and even link them to the places they work. This article, part of the New York Times Privacy Project, shows how easy it is to de-anonymize datasets of location pings. (Charlie Warzel and Stuart A. Thompson / The New York Times)

Lawmakers in New York proposed a new law that would prohibit police from using geofence warrants as protests continue to grow. These warrants compel companies like Google to give up reams of data on who was in a certain location at a certain time. (Issie Lapowsky / Protocol)

New York Attorney General Letitia James is urging Google and Apple to vet third-party contact tracing apps and ensure they aren’t capable of collecting sensitive health information. The companies have been having a hard time regulating all the third-party COVID-19 contact tracing apps that popped up on their app stores recently. (Mariella Moon / Engadget)

Germany launched its coronavirus tracing app. The system relies on low-energy Bluetooth technology that scans the user’s surroundings and records which other smartphones with the app are nearby and for how long. (Frank Jordans / Associated Press)

Employees at GitHub, a Microsoft-owned company, are pushing leadership to cut ties with US Immigration and Customs Enforcement (ICE). The company said that while it stands with the Black Lives Matter movement, it’s not reconsidering government contracts. (Suhauna Hussain and Johana Bhuiyan / Los Angeles Times)

The 2020 election can be saved, if we prepare for it like a natural disaster, this piece argues. Solutions would involve getting as many Americans to vote by mail as possible, and ensuring physical polling places adhere to social distancing. (Nathaniel Persily / The Wall Street Journal)

Industry

Amazon released a new AI tool called “distance assistant” to notify warehouse workers if they get too close. It combines a TV screen, depth sensors, and AI-enabled camera to track employees’ movements and give them feedback in real time. James Vincent at The Verge explains:

Although these solutions will be necessary for workers to return to busy facilities like warehouses, many privacy experts worry their introduction will normalize greater levels of surveillance. Many of these solutions will produce detailed data of workers’ movements throughout the day, allowing managers to hound employees in the name of productivity. Workers will also have no choice but to be tracked in this way if they want to keep their job.

Amazon’s involvement in this sort of technology will raise suspicions as the company is often criticized for the grueling working conditions in its facilities. In 2018, it even patented a wristband that would track workers’ movements in real time, directing not just which task they should do next, but if their hands are moving towards the wrong shelf or bin.

Instagram is set to overtake Twitter as the most popular news source, according to the 2020 Reuters Institute Digital News report. The trend is strongest among young people — nearly a quarter of 18-24-year-olds in the UK use Instagram as a source of news about coronavirus. It has definitely felt way more like a news app to me than ever before since Black Lives Matter protests took over the stories feed this month. (BBC)

High school students are using social media to call out their peers for racism. They’ve repurposed meme accounts, set up Google Docs and anonymous pages on Instagram, Snapchat and Twitter, and wielded their personal followings to hold friends and classmates accountable. (Taylor Lorenz and Katherine Rosman / The New York Times)

Facebook, Google and Snap have introduced features to make it easier for people to find polling places and urge friends to vote. But so far, there is little evidence it has led to higher voter turnout. (Cory Weinberg / The Information)

WhatsApp finally launched its payments app, starting in Brazil. The app is free for consumers (the company doesn’t currently take a commission fee on transactions). (Manish Singh and Ingrid Lunden / TechCrunch)

Since the pandemic, a five-time US chess champion has channeled his success into a full-time gig streaming and commentating on chess on Twitch. (Cecilia D’Anastasio / Wired)

Yelp now lets businesses list the COVID-19 safety measures they’re taking as many begin to reopen. (Taylor Lyles / The Verge)

Things to do

Stuff to occupy you online during the quarantine.

Watch Sundar Pichai’s commencement address to the class of 2020. The comments are turned off so as not to distract you from the core message!

Play a new free game from Nintendo that uses a pair of Joy-Cons to jump a virtual rope. It’s called Jump Rope Challenge.

See what your apartment would look like with new art on the walls, using a new augmented reality feature from Etsy. Users can pull up any painting, photograph, or print that’s available on Etsy and project it wherever they want through augmented reality.

Those good tweets

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