Apple is stuck in a damned if they do, damned if dont protect privacy conundrum.
I’m never one to watch Apple events, but NYU marketing professor Scott Galloway pointed out on his podcast last week that Apple CEO Tim Cook made privacy a tentpole selling point of the new Apple HomePod announcement.[1]
Privacy is not necessarily new for Apple – the company took a public stance on its commitment to privacy by opposing FBI requests to unlock iPhones associated with the San Bernardino terrorist attack in 2015/2016[2] – but it is an interesting selling point considering tech companies are broadly described as indifferent (at best) to user privacy. Heck, even the House Antitrust Committee thinks the best way of identifying a big bad tech monopoly is to find a privacy violation. Or as I wrote two weeks ago:
“Though I agree with many of the observations the committee makes about the state of consumer privacy, I am baffled by their ultimate conclusion is that these firms are monopolists because rather than raising prices they degrade privacy. Abusive data collection is not a symptom of monopoly but the evidence of monopoly itself. Or, in the committee’s own words, ‘The best evidence of platform market power therefore is not prices charged but rather the degree to which platforms have eroded consumer privacy without prompting a response from the market.’’[3]
I later discussed one of the committee’s arguments:
“[T]he committee turns around and declares that when consumers do hear about degrading privacy practices, they “often switch to a competitor that offers a better product or service.” Which is it? Are consumers stuck in a system that harvests data as a monopolistic practice or are they unaware but responsive when informed? The latter implies that privacy focused competition should be flourishing, because a privacy centric company could attack rivals based on bad practices. Later, DuckDuckGo (a privacy focused search engine) is cited as an alternative that can’t succeed because “they’re not compatible with the business models that have made the Internet platforms so successful.” The Committee says it’s found an example that fits its conclusion: A competitor that distinguishes itself via privacy cannot compete because it cannot sell exploitative ads. From what I can tell reading the DuckDuckGo Wikipedia page, the 12-year-old competitor to Google is doing fine… While DuckDuckGo and Signal may have miniscule market shares compared to their large rivals, their existence and flourishing seems to disprove the theory that privacy loss is an indicator of monopoly, because a small [privacy-focused] competitor has been thriving in the shadows for so long. Rather it suggests that privacy alone is not a sufficient competitive feature, for most people, to get them to stop using a Big Tech service.”[4]
Apple’s actions this week throws this whole line of reasoning a wrench. Now, a giant is using privacy as a selling point (and you could argue they’ve been doing that for a while – see the San Bernardino FBI standoff). Maybe this offers a third option to the two arguments presented above. Perhaps privacy alone is not enough to push a tech offering to significant market share. But if it is offered as the perk of a luxury item, like many Apple products are, then it can add some value.
Writing this post gave me an excuse to go back and look a little closer at the House Antitrust Committee’s report, especially at what they say about Apple. In the House Committee’s report, privacy is not mentioned during the Committee’s probe into Apple’s business practices (most of the section devoted to the company focuses on the practice of charging app developers 30% of in-app purchases). In the section on the Effects of Platform Market Power, which I wrote about 2 weeks ago, Apple is only mentioned in the context of “measures that appear to improve privacy for consumers may also have anticompetitive effects.”[5] Interesting.
Though not mentioned directly in the Committee’s analysis of Apple, they characterize dominant firms as entities that can impose draconian terms of service, which can be used to “collect and use data more expansively and more intensely.” This, in turn, is characterized as an element of market power that “would be difficult to impose unilaterally in a competitive marketplace.”[6] Apple characterizes it a bit differently – they feel like their absolute control over the app store allows them to protect consumers from abusive apps from third party developers. By controlling the rails, they can kick off anyone who refuses to abide by their privacy standards.
The Committee’s report quotes two industry professionals on this issue. Kirsten Daru, Chief Privacy Officer and General Counsel of Tile, told the Subcommittee: “Apple has used the concept of privacy as a shield by making changes in the name of privacy that at the same time give it a competitive advantage.”[7] Ram Shriram, a prominent investor who is a founding board member of Google, noted that “[p]rivacy does impact how you think about dominance, for example, in a market because Google and Apple both eliminated third-party cookies, which then makes your data a little more private. But it ironically will hurt the young companies that are trying to build digital advertising businesses while improving user privacy.”[8]
If you believe Mr. Shiram or Ms. Daru, as the Committee evidently did, then Apple’s actions disprove how the Committee views privacy’s role in antitrust. Instead of eroding privacy with their market power, the Committee’s primary assertion, Apple appears to have done the inverse. Once they chose to make a stand on privacy, either as a marketing tentpole or as a matter of principle, their privacy protecting actions are evidence of competitive advantage. But if they were to use that position to degrade user privacy, that would also be evidence of competitive advantage. Seems like Apple is damned if they do and damned if they don’t.
I bring this up not because I think Apple is above investigation. I certainly have not attempted to ascertain whether Apple’s privacy promises are backed up by actions – do the product decisions match the marketing? And I don’t think that the Committee’s critiques of Apple’s business practices are without merit. But attempting to push privacy into antitrust feels like trying to butter toast with an axe – you may accomplish the goal, but a lot is going to get messed up along the way.
Thanks for reading. We’ll get away from antitrust one of these days.
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Today’s tweet of the week is a history lesson:
[1] https://podcasts.apple.com/us/podcast/5g-disney-and-all-things-social-media/id1498802610?i=1000494818704
[2] https://en.wikipedia.org/wiki/FBI%E2%80%93Apple_encryption_dispute
[3] https://dumbprivacy.com/2020/10/08/is-privacy-part-of-antitrust-now/. Citations omitted.
[4] Id.
[5] https://www.theverge.com/2020/10/6/21504814/congress-antitrust-report-house-judiciary-committee-apple-google-amazon-facebook. At 55.
[6] Id. at 56.
[7] Id. at 55.
[8] Id. at 55-56.
Dumb Privacy Guy 