AliveCor's patent litigation against Apple is on wrong track regardless of President Biden's decision not to veto ITC's hypothetical U.S. import ban--Apple Watch not affected, but antitrust case remains interesting

E-health device maker AliveCor yesterday announced that the company has been informed of the White House not having vetoed a hypothetical U.S. import ban on the Apple Watch. Apple sought a presidential override of the U.S. trade agency's patent infringement ruling on public-interest grounds.

AliveCor is rather unlikely to get leverage over Apple from its patents, but its story makes Apple look bad in other ways as I'll explain further below. At this point, the noise that AliveCor is making about the White House decision looks like it's just an attempt to pressure Apple into some kind of settlement based on the hypothetical possibility of an import ban entering into force further down the road.

The United States International Trade Commission (USITC, or just ITC) has quasi-judicial powers. It can impose what is called a limited exclusion order and amounts to a U.S. import ban on "unfair imports", with the (alleged) unfairness most of the time consisting in (alleged) patent infringements. The Apple Watch is not affected for now, and may never be. The ITC's notice of final determination (PDF) (i.e., summary of final--though appealable--ruling) clearly states the following:

"The enforcement of these orders, including the bond provision, is suspended pending final resolution of the U.S. Patent and Trademark Office, Patent Trial and Appeal Board’s (“PTAB”) Final Written Decisions finding the asserted patent claims unpatentable."

An infringement of an invalid patent is an infringement only in an academic sense, but has no practical implications. There's no liability. And for now, the relevant patent claims are deemed invalid, meaning the United States Patent and Trademark Office (USPTO) itself has concluded that those patents should never have been granted in the first place. The two relevant patents on heart-rate measuring techniques are close related, which is why the prior art references cited by Apple's (thus far successful) validity challenges partly overlap: U.S. Patent No, 10,595,731 on "methods and systems for arrhythmia tracking and scoring" and U.S. Patent No. 10,638,941 on "discordance monitoring".

On December 6, 2022, the same panel of Patent Trial and Appeal Board (PTAB) judges declared either patent invalid (case nos. IPR2021-00971 and IPR2021-00972). There are two prior art references that are key to either decision. One of them is a Patent Cooperation Treaty (PCT) patent application from 2012: WO 2012/140559 A1 on "pulse oximetry measurement triggering ecg measurement" by inventors Ram Shmueli and Nimrod Sandlerman. In the PTAB decisions, that one is briefly referred to as Shmueli. The other is U.S. Patent Application No. 2014/0275840 on a "pathological state detection using dynamically determined body data variability range values" by inventor Ivan Osorio. That one is briefly referred to as Osorio. Most of the PTAB's invalidity holdings are based on combinations of Shmueli and Osorio, potentially with some other prior art.

So what is required before AliveCor will actually gain leverage over Apple?

AliveCor appealed the two PTAB rulings to the Federal Circuit, raising a multitude of questions. While it cannot be ruled out that one or more patent claims might ultimately be deemed valid, the much more likely scenario is that the PTAB is affirmed, either 100% or to an extent that the net effect won't be different from the current situation. And at the same time, Apple can try to get the ITC's infringement decisions overturned.

AliveCor, which even used a Wall Street Journal op-ed to urge President Biden not to veto the ITC ruling, looks a little bit desperate. It may also have a resource problem as the small company is trying to assert its rights against the world's richest corporation, but that David-versus-Goliath situation doesn't make those patents any more valid.

In retrospect, AliveCor should probably have focused on enforcing some European patents in Germany, where obviousness (as opposed to anticipation) arguments often don't dissuade courts from entering an injunction under the country's bifurcation regime (i.e., validity determinations are made in separate proceedings). In the U.S., it is a bit odd that AliveCor first filed lawsuits in the Western District of Texas--a venue that was extremely popular at the time for patent damages claims--in late 2020, and then brought its ITC complaint a few months later. Normally, litigants file ITC complaints and federal companion complaints at the same time.

The history of interactions between AliveCor and Apple is, hoever, interesting. Here are some passages from the ITC complaint:

"35. After AliveCor presented KardiaBand publicly, its founder Dr. Albert was invited to Apple's campus by Dr. Michael O'Reilly, Apple's Vice President of Medical Technology, to present to Apple on KardiaBand. Dr. Albert demonstrated KardiaBand's operation to Apple engineers and Apple's COO, Jeff Williams. Mr. Williams told Dr. Albert that Apple wanted to figure out how to work with AliveCor.

"36. A few months later, Dr. Albert and AliveCor's then-CEO met with Phil Schiller, Apple's SVP of Worldwide Marketing, in order to further demonstrate the KardiaBand product. Unbeknownst to AliveCor, however, Apple was using these meetings to gather information on the operation of KardiaBand. Apple recognized the value in the combination of AliveCor's KardiaBand and SmartRhythm products and wanted to take those ideas as their own and eliminate AliveCor and everyone else as competition.

"37. In fact, after seeing the utility of KardiaBand and SmartRhythm, Apple decided to copy these features and introduce a version of an Apple Watch with its own ECG and AFib analysis and reporting functionality. In late 2018, Apple announced that it was introducing its own ECG app and irregular heart rhythm notification feature as part of an update to the Operating System for the Apple Watch Series 4."

Now, the above sounds like Apple stealing IP--but if AliveCor's patents are invalid, then there was no actual IP, and what Apple did may have been a way of taking advantage of AliveCor's interest in discussing a business relationship, but wasn't illegal.

It's possible that after the initial discussions with AliveCor, Apple performed a check on what IP AliveCor actually owned, and concluded that any issued patents or pending patent applications belonging to AliveCor and relevant to what Apple wanted to do were weak.

But now comes the part that I find more interesting than AliveCor's patent infringement assertions:

"38. After Apple introduced its KardiaBand and SmartRhythm competitor products, it decided to eliminate AliveCor as a competitor. Specifically, with the Apple Watch series 4, Apple updated the watch operating systems from OS4 to OS5. This operating system update included changes to the algorithm the Watch OS used to report heart rates in specific ways that made it impossible for KardiaBand and SmartRhythm (as well as other third party heartrate analysis app providers) [emphasis added] to identify and predict unexpected heartrates and arrhythmias and suggest users record an ECG for confirming potentially [sic] occurrences of AFib.

"39. Ultimately, the changes Apple made to its operating system in OS5 and the introduction of Apple's copycat ECG watches compelled AliveCor to pull the KardiaBand product and SmartRhythm from the market in 2018. [...]"

That, however, is just stated in the complaint to make Apple look bad and not the basis on which AliveCor wanted an ITC exclusion order. AliveCor is, however, pursuing antitrust claims against Apple in the Northern District of California. In an October 2022 post on an antitrust litigation in the same district brought by credit card issuers against Applem I quoted from Judge Jeffrey S. White's March 21, 2022 order that granted in part--but also denied in part--Apple's motion to dismiss AliveCor's original complaint. The most important part was that Judge White held "AliveCor has plausibly alleged an aftermarket for watchOS apps"--i.e., the court may ultimately find that there is a single-brand market under Kodak/Newcal.

Apple filed a motion to dismiss AliveCor's first amended complaint. A hearing that had been postponed to January 27, 2023 was vacated. The court "will issue a written decision on the papers." That case continues to be interesting, but it could be that AliveCor will somehow have to settle because it might otherwise run out of cash. The antitrust case is another potential risk for Apple, but if Epic Games prevails on a single-brand market definition, AliveCor's case is going to be considered a small problem.

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Apple reiterates demand that Brazilian regulator's App Store antitrust investigation be shelved immediately and gets UK appellate hearing on March 10 (CMA market investigation)

Here's a couple of App Store antitrust updates related to investigations pending in Brazil and the United Kingdom (click here to go straight to the UK part).

In mid-January, Brazil's competition authority--Conselho Administrativo de Defesa Econômica (CADE), which translates as Administrative Council for Economic Defense--opened a full-blown investigation into Apple's App Store terms and practices further to complaints by Latin America's largest e-commerce company, Mercado Libre (in Brazil: Mercado Livre), and another regional player, Clique. A complaint by Mercado Libre is also pending in Mexico.

A week ago, Apple filed an answer to CADE's question concerning investigations in other jurisdictions that was, quite naturally, designed to understate the extent to which the App Store is the subject of antitrust inquiries around the globe.

Yesterday, Apple responded to another CADE request and provided a copy of its App Store Review Guidelines as well as a Portuguese translation of that document.

The two Apple entities who made the filing are both U.S. corporations: Apple Inc. (the parent company in Cupertino) and Apple Services LatAm LLC, a Delaware corporation. Apple insisted early on that Apple Computer Brasil be dismissed as a respondent because it sells only hardware and is not involved with the operation of the App Store according to Apple. I'm not sure that Apple's Brazilian subsidiary has no hand in this (the abuse in question occurs in the aftermarket, but hardware is a foremarket). Be that as it may, the App Store Review Guidelines were provided to CADE by those two U.S. entities.

The letter to which Apple's Brazilian counsel from the firm of Barbosa Müssnich Aragão attached the two versions of the App Store Review Guidelines comes with a ceterum censeo. Here's my translation of that second paragraph:

"Furthermore, Apple reiterates its legal and factual arguments raised on January 6, 2023, and its request for the immediate shelving of the present administrative inquiry, reserving the right to present other objections and evidence to underpin its arguments and to exercise its rights of defense."

Those legal and factual arguments were, however, considered by CADE. I discussed some of them in my commentary on the notice of the formal investigation: the usual arguments about privacy and so forth.

In light of Apple's latest filing, and just for the sake of reasonably comprehensive coverage, I should add that Apple also raised procedural objections, such as claiming that key passages of Mercado Libre's filings with CADE had not been disclosed to Apple. As a result of the launch of a formal investigation, Apple's lawyers now appear to have access to the case file, so there may be no more lack of visibility of what they need to know to properly represent their client.

For now I believe Apple's lawyers are just preserving their rights, especially with a view to an appeal of a final CADE decision, and doubt that there has been--much less continues to be--any violation of Apple's rights as a respondent to a CADE investigation.

UK Competition Appeal Tribunal schedules full-day Apple v. CMA hearing for March 10, 2023

This is a follow-up to my January 22, 2023 post, Apple apparently argues 'shall' means 'must' in appeal of UK antitrust authority CMA's decision to investigate mobile browsers and cloud gaming based on allegedly elapsed deadlines. The CMA's long-form name is Competition & Markets Authority. It's an increasingly important competition agency that some analysts believe will effectively decide whether Microsoft gets to consummate its purchase of Activision Blizzard. The CMA's provisional findings in that merger case are widely expected to be rendered this week. First there were reports that Microsoft expected the CMA to take a negative view of the transaction, but yesterday I saw a tweet that contradicted that view. Let's see. As an app developer who complained about Apple and Google, I just hope the CMA will recognize the ways in which Microsoft's acquisition of key mobile games such as Candy Crush can enable it to compete with the duopolists (in jurisdictions where the App Store is demonopolized, but the EU has enacted such rules and the UK legislature is working on them). After that little disgression into the CMA's presently biggest case, back to the Apple-CMA appeal before the CAT:

Unless I missed something because it was hidden somewhere behind a paywall, only this blog and the reporters who referenced it (thanks to Apple Insider and 9to5Mac!) informed their readers of what Apple's appeal turns on (the mandatoriness of the word "shall").

When I reported on this before, a case management conference was scheduled for January 24. That one was subsequently vacated. Instead, the latest from the CAT is that "[t]he hearing of the application has been listed on 10 March 2023 (with a time estimate of one day)." They will start at 10:30 AM UK time (click on the image to enlarge):

I hope the CMA will prevail over Apple on this one because its market investigation into mobile browser and cloud gaming would have major potential, but Apple has raised a reasonable question of legal interpretation in that appeal.

Two days before that appellate hearing, Geradin Partners will host a London conference to discuss the competition aspects of cloud gaming, with a CMA official (Alison Gold) being one of the panelists.

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Credit card issuers' Apple Pay antitrust complaint at risk of dismissal in Northern District of California over market definition, but appeal could succeed if Epic Games prevails on market definition

The class-action antitrust lawsuit in the Northern District of California over Apple Pay was amended in October (which I also considered advisable, if not necessary, based on Apple's first motion to dismiss). Then Apple brought another motion to dismiss, and a few hours ago filed its reply in support of that motion:

Affinity Credit Union et al. v. Apple (case no. 4:22-cv-4174-JSW, N.D. Cal.), February 6, 2023: Defendant Apple Inc.'s Reply in Support of Motion to Dismiss Plaintiffs' Amended Class Action Complaint

The hearing will be held in two weeks, and given the current situation in the Northern District of California, there is a fairly high probability of Apple's motion succeeding. A dismissal by Judge White is fairly possible, even with prejudice, but if it happened, it wouldn't necessarily be the final outcome.

If we look at the issue in practical terms, there obviously are many and--as compared to the average citizen--rather affluent people who want to use their iPhones for convenient and contactless mobile payments. They could pay cash, but that wouldn't be contactless. If they use contactless cards that come with NFC or RFID chips, they will sometimes be prompted to enter a PIN for security reasons, such as when payments exceed a certain amount. Also, it's easier to lose (and not notice the loss of) a credit card than of one's phone. Customers could buy a second smartphone--an Android phone--and use it for payments, but they're not going to spend that money, much less will they want to carry a second phone with them just to have more choice among contactless mobile payment systems. Therefore, the best practical choice they have is Apple Pay, but it is not because Apple did a better job: it's because Apple makes Apple Pay the only game in town by not allowing other apps to make use of the iPhone's NFC chip for mobile payment purposes. An aftermarket monopoly: Apple's iOS competes with Android, but once customers have chosen one system or the other, competition between Apple and Google (and their respective ecosystems) ends.

It is a reality that not every iPhone user actually uses Apple Pay: only about half of them do, but the other half also has to make payments. Apple points to that indisputable fact as evidence that the area of effective competition is necessarily wider than "Tap-and-Pay iOS Mobile Wallets"--the market proposed by the credit card issuers.

Apple argues that one must focus on the "basic task": to make payments. At least "physical tap-and-pay cards are alternatives" and "the most obvious substitute to Apple Pay" according to Apple.

Apple essentially argues that a market cannot be delineated based on characteristics (such as more/less security or convenience) as long as products are "by definition interchangeable." In the alternative, "single-brand markets would be the rule rather than the exception, as one could always point to differences between products used for the same function to claim that they somehow do not compete."

That is a reductio ad absurdum, but then one could also argue that Apple's proposed focus on just the basic function of making payments would always lead to ridiculously overbroad market definitions.

That's why it's a highly case-specific determination: some characteristics are considered to be part of the definition of the relevant function, while others are just typical of a differentiated product market in which competition may actually be healthy.

In FTC v. Meta (a case in the same district over Meta's Within acquisition), Judge Davila rejected Meta's overbroad market definition that came down to all workout options being interchangeable and adopted the FTC's proposed market definition of "VR dedicated fitness apps" in terms of VR apps that are "designed so users can exercise through a structured physical workout in a virtual setting anywhere they choose to use their highly portable VR headset." But in Pistacchio v. Apple, a market for iOS subscription-based game services was rejected, and I had my doubts about that one, too, just like I now disagree with the FTC's market definitions in the Microsoft-ActivisionBlizzard context.

The class-action lawyers want to have it both ways. They make a Kodak/Newcal single-brand market argument, but they also argue that their market definition is "brand-neutral." There would be multiple market actors if Apple was forced to allow third-party digital wallet apps to use the iPhone's NFC chip in the same ways as Apple Pay uses it (just like Google allows alternative payment apps on Android; I recently configured Google Pay, but there are alternatives). But that doesn't make it brand-neutral. A market definition that includes iOS is a single-brand market, plain and simple. Replace "iOS" with "mobile" and it's truly brand-neutral.

Without a doubt, the plaintiffs' lawyers are aware of the case law in the Northern District. Apple's argument for dismissal points to Judge Chen's January 2022 dismissal of Reilly v. Apple, a case that an app developer brought over the removal of his app (named Konverti) from the App Store. What's really crazy about that case is that the developer says he spent about $150K developing his app (and he couldn't afford a major law firm), but Apple was represented by Gibson Dunn and even Mark Perry (now with Weil), the same lawyer who is Apple's lead counsel on appeal in the Epic case. It almost certainly cost more to just have Gibson Dunn read the complaint and form an initial opinion on it than the plaintiff had spent developing his app. But I can see that Apple did not want to take any chances when there was a risk of a single-brand market definition being adopted.

One aspect of the Affinity Apple Pay case that I haven't formed a definitive opinion on is whether the proper approach would be to argue that Android and iOS compete in the foremarket, and the first-degree aftermarket is then app distribution, given that Apple relies on its App Store monopoly to maintain its Apple Pay monopoly. The "Tap-and-Pay iOS Mobile Wallets" market would then be a second-degree aftermarket, which is comparable to in-app payment services in Epic's case.

I have previously stated my belief that the key to solving all those Apple problems (even App Tracking Transparency) is to tackle the App Store (including app review) monopoly. Epic's lead counsel on appeal argued at the mid-November Ninth Circuit hearing that his client should win even under the district court's market definition because the justifications offered by Apple aren't procompetitive justifications. That's understandable, but I'm philosophically much closer to what Circuit Judge Milan D. Smith said at the hearing about the first step being to get the market definition right. I consider it the more logical approach, but I also believe that it would solve more problems (when looking beyond just Epic's case). I remain hopeful that Judge Smith and at least one other member of the panel will overcome concerns over a failure of proof, and that he can then win over at least (former Chief) Circuit Judge Sidley Thoams. The district court's decision not to believe Epic's expert on lock-in need not be dispositive. There's enough in the record, including in the district court's opinion. And if all else fails, the appeals court can just focus on those justifications, a topic the two circuit judges on the panel already dealt with in the case that became known as NCAA v. Alston when it was ultimately decided by the Supreme Court.

This month's hearing is going to be an uphill battle for the credit card issuers in light of the Epic and Reilly decisions in the same district. In Epic, the judge got market definition wrong. In Reilly, another judge relied on Epic, and one of the very best litigators in the entire United States--Mark Perry--squared off with a "no name" attorney. But those decisions are now precedent in that district, and the credit card issuers' best hope is probably that the Ninth Circuit decision in Epic v. Apple will come down and strengthen the case for a single-brand market, either before Judge White adjudicates Apple's motion to dismiss the Affinity complaint or after a dismissal, in which case an appeal might succeed.

I certainly agree with Apple is that there is no "tying" argument here with respect to end users: they don't have to use Apple Pay. But there is monopoly abuse, provided that a single-brand market definition is adopted, and it may take more than one aftermarket to get there.

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Apple argues foreign app developers cannot bring antitrust lawsuits ANYWHERE on Earth: developer agreement requires suing in California, but FTAIA allegedly immunizes Apple

In the previous post I acknowledged that Apple has a reasonable basis to challenge the UK Competition & Market Authority's market investigation reference over mobile browser engines and cloud gaming. But in some other respects, Apple is the Evil Empire, extremely unreasonable, and acts in highly abusive ways.

A class-action lawsuit brought by French publishers over the way Apple's App Store terms and policies affect them puts Apple's utter unreasonableness on full display. Apple unilaterally imposes a forum-selection clause on app developers: Northern District of California. But when foreign developers actually sue there, as do those French media companies, Apple argues that the Foreign Trade Antitrust Improvements Act (FTAIA) bars such claims.

As Epic Games CEO Tim Sweeney once mentioned in a tweet I haven't been able to find again (search is an area in which Twitter has huge room for improvement, and using Google to search Twitter is also suboptimal), Apple's position taking in different jurisdictions often amount to denying liability under the antitrust laws of any jurisdiction. Epic filed lawsuits in the U.S. (where a Ninth Circuit panel is now working on its decision), UK, and Australia, and Apple then moved to dismiss or stay the foreign cases in light of the California action, but in California argued that any remedies could not apply to foreign markets.

If one thinks it through, Apple's positions across jurisdictions are just another expression of the neofeudalist attitude of an arrogant and abusive organization that knows no shame: the tyrannical dictator forces developers to sign agreements that bar them from suing anywhere other than in the Northern District of California, and then tells foreign developers serving foreign target markets that they have no rights under the antitrust laws of the United States "because FTAIA".

In the end, only entities who are not bound by Apple's unilaterally-imposed developer agreement would be able to bring antitrust cases in foreign jurisdictions: competition authorities and, maybe, consumers.

Heads I win, tails you lose. Or: What's mine is mine, what's yours is mine, too. That behavior, in and of itself, constitutes an abuse.

The case (Société du Figaro et al. v. Apple) was already filed in August (in the Northern District of California), Apple responded with a motion to dismiss in October, and as I suggested at the time, the complaint was subsequently amended:

Société du Figaro et al. v. Apple (case no. 4:22-cv-4437-YGR, N.D. Cal.), December 2, 2022: Plaintiffs' First Amended Class Action Complaint for Violations of the Sherman Act, California Unfair Competition Law, and California Cartwright Act

On Friday, Apple renewed its motion to dismiss:

Société du Figaro et al. v. Apple (case no. 4:22-cv-4437-YGR, N.D. Cal.), January 20, 2023: Defendant Apple Inc.'s Motion to Dismiss Plaintiffs' Amended Complaint

Apple describes "plaintiffs' purely foreign claims" as "[t]ransactions between French developers and foreign consumers, made on foreign App store storefronts, in foreign currency, and through a foreign (non-party) Apple entity" as "foreign nonimport commerce, not subject to any FTAIA exception."

Apple says "short shrift" should be given to the French publishers' argument involving the developer agreement's U.S. choice-of-law provision. Apple points to a Second Circuit decision (Lotes Co. v. Hon Hai Precision Industry, the latter being Foxconn, Apple's largest contract manufacturer) where the holding was that a party to such an agreement "remain[s] free to argue that, under the FTAIA, the Sherman Act does not apply to or regulate the conduct at issue in this case."

The 2nd Cir. decision is not binding in the 9th Cir., and therefore not on Judge Yvonne Gonzalez Rogers. One can reasonably disagree with it. But this is just one of several arguments made by the French publishers as to why the FTAIA does not bar their U.S. federal lawsuit with respect to foreign sales.

Those companies also offer their apps to U.S. consumers, but presumably their U.S. revenues are minuscule compared to the ones in France and other French-speaking countries and regions. So the FTAIA would not dispose of the entire case, but if Apple prevailed on its FTAIA argument, it would render the litigation commercially insignificant.

I plan to comment on the other elements of Apple's motion to dismiss as the briefing process unfolds. Apple really doesn't want to deal with litigation over its pernicious App Tracking Transparency (ATT) framework, and argues that the French publishers still don't get market definition right and, in any event, lack standing to challenge ATT. As for the market definition underlying the publishers' App Store claims, Apple expressly reserves the right to oppose their single-brand market definition, but does not raise that question at the motion-to-dimiss stage. What I think may be the focal point of the discussion at the motion-to-dismiss hearing is Apple's argument that the settlement in the Cameron v. Apple developer class-action litigation resolved the key issues, and now the same law firm (Hagens Berman) is suing Apple again, but with different plaintiffs (and now even challenging the reduced 15% app tax).

I'm one of those developers who consider the Cameron settlement's terms extremely unsatisfactory. The French publishers' case has more potential because that's a group of reasonably large and sophisticated plaintiffs who are not going to settle for a Cameron-style set of terms.

By the way, one developer wrote a letter to Judge YGR earlier this month, complaining that even though he's clearly a member of the class and is entitled to "a substantial sum" per the outcome of the Cameron litigation, he was not contacted about the settlement:

Cameron et al. v. Apple Inc. (case no. 4:19-cv-3074-YGR, N.D. Cal.), January 6, 2023: letter from Lionheart Software LLC

It's unknown whether this was just an oversight or clerical error affecting a single developer or whether there's a more fundamental problem.

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Brazil's antitrust authority (CADE) opens full-blown investigations of Apple's App Store monopoly abuse further to complaints by Mercado Libre and Clique, regardless of low iPhone market share

Brazil is becoming an increasingly important jurisdiction for competition as well as patent enforcement. In October, Brazil's competition authority--Conselho Administrativo de Defesa Econômica (CADE), which translates as Administrative Council for Economic Defense--rendered a well-considered decision clearing Microsoft's acquisition of Activision Blizzard. Earlier this week, IAM's Adam Houldsworth pointed out that Ericsson was on the winning track against Apple in Brazil, with a key decision by Brazil's top court shortly before the December 2022 settlement (paywalled article). I've obtained some documents and will analyze them in the days ahead.

The latest news is that CADE yesterday opened formal investigations of Apple's alleged abuse of its iOS app distribution (and in-app payments) monopoly further to complaints by Latin America's e-commerce giant Mercado Libre and another complainant named Clique. Mercado Libre is the Amazon on the continent of the Amazon river: the leading regional ecommerce company. To be precise,

• Mercado Libre (Spanish for "free market") is known in Brazil as Mercado Livre (the Portuguese version), and

• the formal complainants in Brazil are EBazar.com.br.LTDA and Mercado Pago Instituição de Pagamento Ltda, which belong to the Mercado Libre group.

The respondents are Apple Inc. (of Cupertino, California) and Apple Computer Brasil Ltda., Apple's Brazilian subsidiary.

In December, it became known that Mercado Libre brought formal antitrust complaints not only in Brazil but also with Mexico's competition authority Cofece (Comisión Federal de Competencia Económica, Federal Economic Competition Commission). It will be interesting to see whether the Brazilian momentum will also benefit the Mexican initiative. As I reported in September, Cofece referred another complainant to Mexico's telecommunications regulator.

Mercado Libre's complaints raise two closely related issues:

• Apple's exclusionary conduct with respect to the distribution of digital goods and services on iOS devices: In its complaint, Mercado Libre says that Apple "impedes the emergence of other distributors of digital goods and services on iOS devices." Apple "monopolizes the market by not allowing Mercado Livre or whatever other economic actor to expand its offering to digital goods and services produced by others and to become a marketplace for digital goods and services that would compete with Apple, which itself does offer such service."

• Mercado Livre furthermore says Apple imposes a restraint on the growth of developers of digital goods and services, with video streaming serving as a good example. The complaint argues that developers' growth is impeded by not having access to alternative distribution channels (and, therefore, having to pay Apple's app tax).

What makes Mercado Libre's complaints in Brazil and Mexico so interesting in the global context are two aspects:

1. When defending itself against complaints by Epic Games and other purely digital companies, Apple always argues that it doesn't levy its app tax on the distribution of physical goods. The core business of the Latin American complainants actually is the sale of physical goods--but they also want to compete in the distribution of digital goods and services.

2. Apple's market share is particularly low in Latin America (though it's even lower in India). CADE's decision to open full-blown investigations quotes from Apple's response to the complaint that the iPhone allegedly has a market share below 10% in Brazil, and iOS devices (also including the iPad) of less than 20%.

Mercado Libre's Brazilian complaint contains the following chart, which compares the iOS and Android ecosystems and effectively visualizes what comes down to a single-brand market (foremarket and aftermarket) argument (click on the image to enlarge):

CADE is already investigating Google's Android practices (investigation no. 08700.002940/2019-76), but I'll leave that topic for another day.

CADE took note of Apple's argument about market share in the market for devices (or operating systems) and Apple's reference to other ways in which Mercado Libre can reach customers, but nevertheless decided that there were indications of monopoly abuse that warranted an investigation. Here's a screenshot of the final part of the decision (click on the image to enlarge):

The four action items CADE has put on its to do list are

1. to identify and better understand and define the key players who are affected by Apple's conduct in the relevant markets;

2. to conduct an inquiry into the existence (or lack thereof) of a dominant market position by Apple in the relevant market (Mercado Libre makes a tying ("venda casada" in Portuguese) argument, which presupposes market dominance);

3. to study in detail similar investigations in other jurisdictions in order to understand inhowfar they are relevant to the Brazilian case; and

4. to analyze the Terms & Conditions imposed by Apple, particularly the Apple Developer Program License Agreement, Paid Applications Agreement, and App Store Review Guidelines, and the role they play in the alleged restrictive conduct.

While the launch of formal investigations does not make it a foregone conclusion that Apple will be held in violation of Brazil's competition laws, the decision makes reference to preliminary investigations, so CADE is already fairly familiar with the issues.

I have confidence in CADE's understanding of digital markets (in light of the Microsoft-ActivisionBlizzard decision) and I'm reasonably optimistic that Apple will be found to have an aftermarket monopoly, and that it will ultimately be required to open up app distribution in Brazil.

In other App Store antitrust news, Spotify and various other companies and several European industry associations sent a letter to EU antitrust chief Margrethe Vestager, urging her to take action against Apple and other digital gatekeepers, particularly in connection with Spotify's complaint over Apple's restrictions on music streaming services.

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'Autocalypse Now' or Tesla Phone: what can save the digital dilettantes at Volkswagen, Toyota, and other car makers from Apple's and Google's world domination?

The latest edition of Wirtschaftswoche (German for "business week") came out on Black Friday, and there's a great article on pages 32 and 33 (available only to subscribers, at least for the time being) that I'd like to recommend: Autokalypse now (the "k" instead of the "c" is due to the German spelling of "apocalypse"). It's about an issue that this blog has dubbed as "carjacking"--meaning that Apple and Google use their mobile operating system monopolies to take control over connected vehicles:

• Automakers are oblivious to their *only* chance to prevent Apple and Google from digital carjacking

• Key EU politician tells FOSS Patents: maps should fall under Digital Markets Act just like other search engines

• Automotive industry increasingly at Google's mercy

Another term than "carjacking" is "carmageddon" (see The Android-ification of Cars).

The Wirtschaftswoche article starts with a high-profile Mercedes customer: former EU commissioner Guenther Oettinger says he uses Google Maps for navigation because it suggests better routes and more accurately predicts the time of arrival. That's what many of us have experienced with cars of different brands. During his tenure as the EU commissioner in charge of digital industry policy, Mr. Oettinger was already--and rightly--concerned about traditional car makers' share of the future automotive value chain. That concern is shared on Capitol Hill: on November 1, Sen. Elizabeth Warren (D-Mass.) wrote a six-page letter (PDF) to U.S. antitrust enforcers about this threat.

The problem is that the C-level execs, chief lawyers, and lobbyists of automotive companies don't get it. They're sort of aware of the problem, but far from taking the measures that would be required to respond to the threat. Those execs and the "experts" they rely upon would rather downplay the issue than take decisive action outside their comfort zone. Meanwhile,

There is only one outlier: Elon Musk. While he may not have had the chance yet to develop a regulatory strategy and to figure out the full potential of the EU's Digital Markets Act, he is clearly prepared to go to bat. That's a lot more than those traditional automakers can say: it seems to me that most of the decision makers there have no strategy other than hoping that they won't have to deal with the problem before they reach the age of retirement. But that could prove a mistake not only for their companies but even for those decision makers: Wirtschaftswoche quotes a McKinsey partner who says it will be decided in a matter of three to five years who will be in control of the automotive industry (car makers or gatekeepers).

Earlier this week I outlined the three reasons Mr. Musk has to fight Apple's and Google's gatekeeper power: the third one involves Tesla and is no less important than the other two, which are about Twitter in the short term. On Black Friday, Mr. Musk said he didn't rule out making "an alternative phone" if that was the last resort to deal with the mobile gatekeeper problem:

I certainly hope it does not come to that, but, yes, if there is no other choice, I will make an alternative phone

— Elon Musk (@elonmusk) November 25, 2022

Patently Apple reported on it. That's where I first saw the tweet.

I agree with Jim Hanson, who says Mr. Musk should "[f]irst give Apple a good taste of lawfare."

But what would an Elon Phone, Twitter Phone, or Tesla Phone (about which there have previously been rumors) mean for the automotive industry at large?

That depends on interoperability. That new phone (likely based on the open-source code base of Android, but without a Google license and, a as result, without Google Maps, the Google Play Store etc.) could give Tesla another competitive advantage. But it might also be the lesser evil than the "Goopple" duopoly for the digital dilettantes at companies like General Motors, Ford, Volkswagen, Toyota, BMW, and Mercedes. If Mr. Musk made the strategic decision to enable all car makers to provide the same level of integration, it would be an opportunity for the entire industry.

Again, I think the first step is to put pressure on Apple and Google at other levels: policy, regulation, and litigation. Whether Apple and Google will make concessions because of Mr. Musk threatening to enter the smartphone market is doubtful. So far it seems that both mobile gatekeepers only make changes to their terms and policies when they absolutely have to. But anything can happen, and a Tesla Phone is yet more of a possibility than seeing the Facebook Phone rise from the ashes...

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Twitter and Block (Square) founder Jack Dorsey attacks #AppleBrowserBan, thereby validating UK CMA's regulatory initiative, and throws his weight behind Open Web Advocacy

More and more tech luminaries call out Apple on its shameless abuse of market power and the damage it does to innovation and the economy at large. As Epic Games' CEO Tim Sweeney has repeatedly said on Twitter, "Apple must be stopped." Nothing is even half as urgent in the tech regulation context (Google is a clear but distant second). Instead of addressing the issues, Apple brazenly keeps causing additional problems. Apple is the tech industry equivalent of the Lernaean Hydra.

Not everyone dares to speak out against the tyrant. That's always been a problem in any dictatorship in history. But Apple has gone so far, and suffering is so widespread, that slowly but surely its critics grow in numbers and in profile.

Take Twitter's current owner--Elon Musk has more than one reason to fight Apple's (and Google's) app store monopolies--and its former chairman, serial entrepreneur Jack Dorsey. On Thanksgiving, Mr. Dorsey tweeted the following:

We need a new mobile OS that’s web-only.

— jack (@jack) November 24, 2022

He then laid out the three priorities, the first one of which he described by means of a hashtag: #AppleBrowserBan.

this is great (and great 3 priorities: #AppleBrowserBan, deep system integration, web app equality): https://t.co/wUNUdVNotB

— jack (@jack) November 24, 2022

I'm particularly happy to see that Mr. Dorsey pointed to www.open-web-advocacy.org. In June, I republished various charts that Open Web Advocacy had previously posted to Twitter. They really do great work on the Apple browser engine monopoly issue.

That same month I also drew addition to long-time web browser developer Alex Russell's write-up that explains Apple is not defending browser engine choice. Apple forces all iOS browsers to use its WebKit engine (like Safari).

Apple's browser engine dictate is bad for competition, for innovation, for choice. It's a shame that Apple got away with it for so long, but it won't stay that way.

Some of Apple's sycophants, astroturfers and others vassals, and brainwashed followers incredibly argue that if Apple opened up browser engines on iOS, Google's Chrome would win and the last bastion to a total Chrome monoculture would fall. We should not take people seriously who say that. It's just crazy. If Google abused a browser monopoly, regulators would have to deal with it. But the fundamental difference between Chrome and Safari is that Chrome is a meritocratic monopoly. Chrome got there because of quality. Again, that doesn't justify abuse, but the first question is how a market gets monopolized, and Google undoubtedly did something right while Safari's market share on iOS is the result of anticompetitive wrongdoing that will hopefully be found unlawful. Safari never got serious traction on a third-party operating system, while Chrome managed to displace anyone, anywhere, provided that Chrome could come with its own engine.

Without mentioning the UK's Competition & Markets Authority (CMA), Mr. Dorsey effectively endorsed its very recent decision--a so-called market investigation reference (MIR)--concerning mobile browsers and cloud gaming.

In my commentary on two documents that became public on Wednesday owing to the CMA's Microsoft-ActivisionBlizzard merger review, I noted that Fortnite hasn't really succeeded on mobile devices as an Xbox Cloud Gaming offering and that Apple (and, to a lesser degree, Google) are responsible for large parts of the problem, and mentioned the CMA's market investigation reference.

The timing of Mr. Dorsey's public criticism of Apple's browser ban could hardly have been better.

I will soon write about the CMA's market investigation as well as a UK legislative initiative called Digital Markets Unit (DMU), but wanted to immediately share the news of one of the most famous tech entrepreneurs having spoken out in no uncertain terms. I also made my little contribution on Twitter:

Thank-you Florian and Jack for the support. We have a long way to go, but the momentum is building!

— Open Web Advocacy (@OpenWebAdvocacy) November 25, 2022

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Sorry to dampen the joy over the UK's Digital Services Tax having exceeded targets, but part of it is paid by app developers, even tiny ones: the CMA could and should end that monopoly abuse

A UK government agency--His Majesty's (HM) Revenue and Customs Department (HMRC)--today released a "Value for money" report following an investigation into the impact of Britain's Digital Services Tax (DST). The announcement celebrates that HMRC "received £358 million in DST receipts for the 2020-21 tax year, which was 30% more than forecast"--and, as the Guardian notes, DST has "rais[ed] more from most of the digital businesses than they have been paying in UK corporation tax."

I wish I could say "great success to you." But I can't join in the congratulations as long as the UK doesn't fix a fundamental flaw of its DST.

What is DST really meant to accomplish? To tax extremely large and profitable companies. But in reality, it also affects app developers, even the smallest ones among us. Today's announcement says how it should work in theory, and I'll then explain why it doesn't work exactly as intended in practice:

"DST is designed to tax business groups that derive large revenues from UK users of search engines, social media platforms and online marketplaces. It taxes the revenues (rather than profits) derived from these activities at a rate of 2%. The DST is levied on business groups (groups of companies with the same controlling interest) rather than each individual company. Groups are liable to pay DST if their worldwide revenues from in-scope activities are more than £500 million and more than £25 million are derived from UK users." (emphases added)

The one swho should be taxed here are Apple, Google, Amazon, Meta, and eBay (that's the list I found in today's UK Tech News article on DST).

Now, I'm not complaining about the fact that companies with market power can ultimately pass those taxes on to consumers. That is also a reality, but it would apply to any tax. The DST-specific "bug" that needs to be fixed is the following:

App store revenues (whether we're talking about Apple's App Store on iOS or the Google Play Store for Android) are split between their operators--the platform duopolists--and app developers using a certain percentage. There's a 30% commission that Apple and Google impose on the revenues of app makers that make more than a million per year, and 15% for the little guys, which on average means that the commission is still close to 30%. Value-added tax (VAT) or its U.S. equivalent called sales tax obviously reduce the amount that can be split, and that is totally fair because those are taxes on sales (not profits) and they are levied on everyone, meaning that even very small app makers would have to pay them.

But Apple deducts DST from the amount it distributes (minus the commission). I haven't checked on whether Google does so as well, but in Apple's case it's a known fact.

Last year I already explained that the App Store tax (that applies to the bulk of the transaction volume) exceeds 30% in some jurisdictions: in reality, it's 31.5% in the UK (not 30%), and even 35.25% in Turkey. It means that app developers have to pay their share of Apple's DST--and practically no app maker would actually owe DST-- probably not even a company like Epic Games would meet the criteria. That's because DST is based on a mix of qualitative (business model) and quantitative (revenue thresholds) criteria. In some countries, there are special VAT rules that work like DST, but in the UK, there is a clear distinction between VAT and DST.

South Korea's antitrust authority--the Korea Fair Trade Commission (KFTC)--raided Apple's Korean office about two months ago for a somewhat similar reason. In South Korea, app makers effectively pay a 33% app tax because Apple charges app makers a 30% commission on the price paid by end users, which includes VAT.

The UK's Digital Services Tax was not meant to tax the little guys. The idea was that Apple and Google would pay the 2% out of their 15% or 30% app store commission. The way to prevent Apple (and, should it apply to them as well, Google) from passing on 15%-30% of their DST is to enforce the antitrust laws against them. If developers could do their own in-app purchasing (IAP) transactions, virtually all of them would not owe DST, and that's why it's unfair to let them pay (in part) a tax that was never designed to apply to them.

The UK's Competition & Markets Authority (CMA) could address this issue--and correct the only major design flaw of Britain's DST, a loophole that Apple is shamelessly abusing.

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Apple's climate change hypocrisy and deceptive lobbying: ACT | The App(le) Association lobbied EU Commission EVP Vestager's cabinet against waste reduction policies on September 8, 2022

Apple's positions on climate change require greater scrutiny (as to its privacy and security claims and other talking points). Let me start with a quote from an article that appeared on the website of the Tech Transparency Project on May 31, 2022:

‘Green’ Apple Backs Business Groups Stalling Action on Climate Change

Apple CEO Tim Cook talks about a ‘greener’ future. But his company is a member of business associations fighting efforts to reduce greenhouse gas emissions.

The Tech Transparency Project names such groups as "the Texas Association of Business, which has questioned whether humans are causing climate change and has a long history of fighting against regulations designed to curb carbon emissions." And it says that seven of the industry associations Apple disclosed in 2020 to be involved with oppose right-to-repair legislation. The first one on the (alphabetical) list: ACT | The App Association, an astroturfing group that Bloomberg exposed in September as being overwhelmingly funded by Apple and falsely claiming to represent the interests of small app developers.

Just about a week before that Bloomberg article, which (as I also said in my previous post) should dissuade any policy maker from ever taking ACT seriously, ACT seized one opportunity--which should be the last--to attempt to fool the European Commission.

Thanks to the AskTheEU website it has become known that on September 8, 2022, at 2 PM Brussels time, two unnamed representatives of ACT | The App(le) Association met with Mrs. Alina-Stefania Ujupan and Mr. Alejandro Cainzos, members of the cabinet of the European Commission's Executive Vice President (in charge of competition enforcement and digital industry policy) Margrethe Vestager as the following minutes of the meeting show (click on the image to enlarge or read the text below the image):

This is the summary:

"In a short meeting, the App Association raised their concerns regarding the draft Ecodesign Regulation for Mobile Phones, Cordless Phones and Tablets, claiming that giving users the ability to switch back to Operating System versions older than the last two available would create difficulty for App Developers to ensure the cybersecurity of their applications. Cab Vestager took note of the views expressed and recalled the important aims of the Regulation to reduce electronic waste." (emphasis added)

ACT--which receives the vast majority of its funding from Apple and doesn't even have regular membership dues for small app developers--emailed Mr. Cainzos on July 11, 2022. The subject line was "Meeting request with the App Association on the new Ecodesign Regulation proposal." ACT | The Apple Association said it "wanted to flag some concerns [they] have on the proposals in the draft regulation" and asked:

"Would you be available for a short meeting in the next couple of weeks to discuss further the potential impact of this regulation on small app developers?" (emphasis added)

The world's richest corporation, lobbying against environmentally sound policies in the name of "small app developers" while engaging in greenwashing all the time...

There are simply two reasons why Apple does not want users to be able to switch back to older iOS versions:

• Apple wants users to buy new devices as frequently as possible.

• Apple wants to save software development costs, so they don't want to keep older iOS versions secure and ensure backward compatibility of apps with older iOS versions.

Is this of concern to small app developers? Seriously, the average small app developer wouldn't even be aware of the European Commission preparing an Ecodesign Regulation for Mobile Phones, Cordless Phones and Tablets. ACT has a budget of approximately 10 million dollars and claims to represent 5,000 small app developers, which would mean that the average member would have to pay annual membership dues of 2,000 dollars. In reality, Apple foots the bill, and those 5,000 "members" are just a claim. On ACT's website, one can only find a few dozen companies, and they're mostly service providers (as opposed to app makers who publish their own products). I attended an ACT event in Berlin in September 2019, and I was definitely the only app developer in the room...

Do small app developers have a "cybersecurity" problem if users can switch back to older operating system versions, as Apple's astroturfers told the Commission?

Being an actual app developer, what I can say is that, generally speaking, fragmentation is not in our interest, and that's a concern that should be taken seriously. I say so even though I also advocate competition enforcement against Google in the Android context, where Google makes "anti-fragmentation" arguments all the time.

However, what makes no technical sense here is that our own apps would have "cybersecurity" problems if Apple simply allows more backwards compatibility. If our code is secure on the latest version of iOS, why would it be insecure on an older version? Only if Apple doesn't keep older versions sufficiently secure.

Small app developers like my company actually have a problem with Apple's planned obsolescence of products. When we write software for desktop operating systems today, we can rely on that software still being functional and available to end users in, say, ten years from now. On mobile platforms, especially iOS, we are forced to upgrade software to newer API versions all the time. Apple (and Google) could add features and still ensure backward compatibility. They could expand their APIs without deprecating old APIs after a short while.

One example is that Apple decided to make version 2 (and, as a result, all subsequent versions) of its Swift programming language incompatible with version 1. That's because Apple recognized some design mistakes: there were features in Swift 1 that seemed innovative at first, but adversely affected code legibility. Instead of remaining backward compatible, Apple stopped supporting newer iOS API versions in Swift 1. In 2018, Apple then gave developers an ultimatum: upgrade to a newer API version (which implied upgrading from Swift 1 to a newer version of the language) by a certain date, or you can no longer update your app--which was definitely not good for cybersecurity because developers must update an app to fix a security issue in the code.

Simply put, Apple doesn't care about the burden on small app developers, but its lobbyists masquerading as representatives of small developers hoped the Commission would be swayed on that basis. "Look at us poor little guys. Don't you have sympathy with us?" Astroturfing at its worst.

The best part of the minutes of that September 8 meeting between two members of EVP Vestager's cabinet and ACT is that they stressed the policy goal of waste reduction, which suggests to me that ACT's fake small developer arguments were unpersuasive.

The worst part, however, is that two (!) members of the cabinet of one of the key players of the European Commission wasted some of their precious time with Apple-funded astroturfers. Maybe they'd have canceled the meeting if the Bloomberg article on who really funds ACT had been published just a couple of weeks earlier (and if they had seen it in that case).

Should ACT get any more meetings with any member of cabinet of any EU commissioner now that it has been exposed as an Apploturfing operation, someone should start a petition for the EC to get a free Bloomberg subscription...

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Independent analysis debunks Apple's privacy and security pretexts--latest finding is that Apple's analytics data come with unique ID for each iCloud account, making users personally identifiable

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):

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.

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Elon Musk has three reasons to fight Apple's and Google's app store monopolies: Twitter's shift toward subscriptions, free speech, and Tesla's unsustainable resistance to Apple Car Play, Android Auto

Bloomberg's Mark Gurman authored some excellent analysis--published yesterday--of the potential for conflict between Twitter and the mobile platform duopolists. He separately pointed out that Apple's App Store chief (and previously long-time marketing chief) Phil Schiller deactivated his Twitter account that had about 200K followers:

While I expect lots of leeway, there is a real scenario in which Apple/Google remove Twitter because of content moderation issues or because Twitter decides to bypass the 15%-30% cuts. Notably, we appear to now know how Apple’s App Store chief feels about the new Twitter. https://t.co/PCjOEsWA1L pic.twitter.com/LWjFCgxINA

— Mark Gurman (@markgurman) November 20, 2022

Mr. Schiller's decision to quit Twitter may very well have to do with friction between Elon Musk and Apple over the latter's rules, though Tim Cook was still tweeting on Sunday. He has more than 13 million followers.

Elon Musk has repeatedly criticized mobile app stores fees as a "tax on the Internet." Most recently, on Saturday (in response to a Slashdot posting related to the latest revelation from Epic Games v. Google, which is that Google paid Activision Blizzard King $360 million to ensure its loyalty to the Google Play Store):

App store fees are obviously too high due to the iOS/Android duopoly.

It is a hidden 30% tax on the Internet.

— Elon Musk (@elonmusk) November 19, 2022

Resistance to Goopple's mobile app store tyranny usually goes through stages. Virtually every app developer would prefer competition among app stores (such as more than one iOS app store, and a level playing field for rival Android app stores). That would bring down fees, prevent the monopolists from complicating and taxing app discovery, allow a greater diversity of in-app revenue models, and such competitive constraint would also dissuade Apple and Google from imposing and arbitrarily enforcing content rules. But the fewest speak out publicly. I assume that practically every large company that is subjected to the app tax has asked Apple and Google for a more competitive deal, but those conversations are private. Some companies like Epic Games and Spotify started to speak out in public, and later brought antitrust complaints with regulatory authorities and/or (in Epic's case) private antitrust litigation.

Is Elon Musk also contemplating the next step--"a possible standoff with Apple Inc. and Alphabet Inc.’s Google over fees and content" as Bloomberg describes it? Looking at the examples of Epic and Spotify, there definitely is the potential. And Mr. Musk would actually have not only one or two but at least three reasons to challenge the monopolists:

1. The app tax complicates Twitter's shift toward a subscription model ($8 per month for Twitter Blue). It siphons off money that Twitter needs for its turnaround. While Fortnite Mobile would be profitable even if Epic had to pay the app tax (which by the way exceeds 30% in some markets), the app tax alone could make it impossible for Twitter to overcome its current financial crisis. And that would make Twitter a potentially perfect plaintiff.

   Twitter could try to do what Spotify does, which is to take subscriptions only on its website and not in its mobile apps. That would adversely affect conversion rates--and Apple and Google might tell Twitter that it does not meet the criteria for a "reader" (content consumption) app.

2. Elon Musk's promise of free speech may be controversial, but it doesn't mean lawlessness. The key question is whether Apple and Google--the two tyrants--get to determine what social networks are allowed or required to do, or whether we leave that to governments. It's one thing for Thierry Breton, the EU internal market commissioner (and in some Brussels insider's opinion the most influential commissioner at the moment), to say that "in Europe, the bird will fly by [EU] rules" such as the Digital Services act. It's another for Apple and Google to exercise their gatekeeper power and elevate themselves to the ultimate censors. In the COVID tracking context, Apple and Google forced the world's governments to abide by their rules: democratically unaccountable corporations. There even were statistical indications that a number of COVID infections in the UK could have been avoided if Apple and Google had not abused their market power.

3. Tesla arguably has an even more fundamental problem with Apple and Google than Twitter ever did or ever will. It is the last (or at least the last important) company standing: as the "not a tesla app" website notes, Apple Car Play and Android Auto were released in 2014, but "eight years and countless requests later, Tesla still doesn't support CarPlay or Android Auto." The article attributes this primarily to the fact that "[t]he huge benefit that other manufacturers gain by integrating CarPlay just isn't as crucial in a Tesla, which already offers intuitive, responsive software with many features." And that "seamless experience" would not be possible if Car Play and Android Auto were integrated.

   The not a tesla app article predicts that Tesla's "true competitors" will be "powerful tech companies such as Apple and Google" that "not only have strong design and AI foundations but also have access to a large user base and a dominant platform." The article concludes by note that companies like Tesla and Rivian "understand the future of the [electric vehicle], but at the same time, their users are demanding access to CarPlay and Android Auto."

   When I bought my first electric car, I was considering a Tesla, but I'll be perfectly honest: even though I'm a vocal critic of the mobile app store monopolies, I want Android Auto. That was one of two key reasons (the other being availability) why I decided against buying a Tesla. I'm sure I'm not the only one to have made the availability of Android Auto a knockout criterion--and while we are a minority, our number will keep growing, especially with every release of Android Auto (or Car Play for Apple fans) that adds new features. Even though I know that it's bad for consumers if Apple and Google succeed with their digital "carjacking" strategy, I have to choose what suits my need as a customer.

   The question is not whether Tesla will need Car Play and Android Auto at some point, but when and--even more so--on what terms. If the terms ensure that Apple and Google will not be able to use their mobile platform market power to tax Tesla's transactions or to dictate rules that break the Tesla experience or are just generally unfair, there is no reason why Tesla shouldn't provide greater interoperability with Android and iOS. That's what customers demand, and by now virtually every car maker can sell you an electric vehicle.

   Tesla's strategic problem with the Android-iOS duopoly is even more fundamental than what Twitter has to deal with in the short term. I've previously written about car makers' incompetence in responding to the Android-iOS threat:

   • Automakers are oblivious to their *only* chance to prevent Apple and Google from digital carjacking: proactive lobbying (such as on EU Digital Markets Act) and competition enforcement

   • Automotive industry increasingly at Google's mercy: discontinuation of Android Assistant Driving Mode (after Android Auto for phones) reflects and reinforces monopolization--Tesla is the last man standing, but for how much longer?

Both Tesla and Twitter should have filed amicus briefs in support of Epic Games against Apple. There will be future opportunities because no matter what the Ninth Circuit will decide after last week's hearing (I believe a partial reversal and remand is much more likely than wholesale affirmance), the fight will go on. The losing party will most likely request a rehearing en banc. In the meantime, Twitter may become the next major app store antitrust plaintiff, which would indirectly benefit Tesla.

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