The case was jointly filed by the Justice Department, 16 States, and the District of Columbia, in the U.S. District Court for the District of New Jersey.

This isn’t something out of the blue, as we have previously reported, the U.S. Department of Justice has been preparing an antitrust case against the Electronics giant over the past few months. It had held discussions with the company before finalizing the lawsuit.

Apple ran into legal trouble at the end of 2023, when the U.S. International Trade Commission banned the company from importing and selling the Apple Watch Series 9 and Ultra 2 in the U.S. The Commission found Apple guilty of violating patents related to the SpO2 sensor (pulse oximeter), which belonged to Masimo. The ban however was short-lived, as Apple was allowed to sell the wearables once again, with a catch, it had to disable the SpO2 sensor’s functionality, so you couldn’t use it to measure blood oxygen levels, even though the hardware for the feature existed.

The tech mogul’s troubles were just beginning, as it had to open up the iOS ecosystem to third-party app marketplaces in the European Union region. However, the company’s compliance with the Digital Markets Act has come under scrutiny due to several limitations that it has imposed for app developers, and third-party app stores.

US Justice Department sues Apple in antitrust case

Now, the US Govt has claimed that Apple has selectively imposed restrictions that prevent users from switching from its devices. It also says that there are limitations for the functionality of third-party apps, which gives Apple’s own apps an unfair advantage over the competition. The complaint alleges that Apple has undermined messaging across operating systems by excluding its own apps from rival platforms, and that this makes it less secure and less innovative for users.

This is seen as one of the reasons that the company has made it hard for users to leave iPhone, as many iOS apps are not available on Android. The lawsuit alleges that Apple is in violation of Section 2 of the Sherman Act, and users its monopoly power to extract high prices from consumers, developers, etc.

The antitrust case also points out that Apple blocks cloud-streaming apps that allow users to stream apps and games. To be fair to Apple, it did open up the market recently to allow cloud-gaming platforms, so services like Xbox’s Game Pass Ultimate and Nvidia’s GeForce Now can be used on iPhone and iPad.

Apple’s failure to provide tap-to-pay (Apple Pay) functionality for third-party digital wallets is also being scrutinized. The lawsuit points out that Apple’s restrictions also affect web browsers, video communication, location services, advertising and other services.

Another argument made by the Justice department targets Apple’s restrictions for third-party smartwatches. Apple does not allow other OEMs to access the APIs required for a watch to read/write fitness data like the Apple Watch can, third-parties have limited access to the data. This is an unfair restriction that stifles the competition.

The company has reportedly claimed that it tried to make the Apple Watch compatible with Android phones, but failed to find a way to do so. I don’t buy this argument. Apple has an Android app for Apple Music, which as you know is a subscription-based service. It shows that the company can, and will provide an app for Android devices, if there is an incentive for it. So, why didn’t Apple create Android apps for Apple Watch and Health? Well, you could argue that if it had done so, Android users would buy the wearable, but they won’t buy an iPhone. By keeping the Watch exclusively compatible with iPhones, it has created an artificial market for the wearable and the iPhone, which is a monopoly.

Source: ghacks

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“Today, the Commission has opened non-compliance investigations under the Digital Markets Act (DMA) into Alphabet’s rules on steering in Google Play and self-preferencing on Google Search, Apple’s rules on steering in the App Store and the choice screen for Safari and Meta’s ‘pay or consent model,’” the European Commission said in a statement.

The first two probes focus on Alphabet and Apple and relate to so-called anti-steering rules. Under the DMA, tech firms are not allowed to block businesses from telling their users about cheaper options for their products or about subscriptions outside of an app store.

“The way that Apple and Alphabet’s implemented the DMA rules on anti-steering seems to be at odds with the letter of the law. Apple and Alphabet will still charge various recurring fees, and still limit steering,” the E.U.’s competition chief, Margrethe Vestager, said Monday at a news conference.

Apple has already fallen foul of the E.U.’s rules. This month, the company was fined 1.8 billion euros ($1.95 billion) after the European Commission said it found that Apple had applied restrictions on app developers that prevented them from informing iOS users about alternative and cheaper music subscription services available outside of the app.

In a third inquiry, the commission said it is investigating whether Apple has complied with its DMA obligations to ensure that users can easily uninstall apps on iOS and change default settings. The probe also focuses on whether Apple is actively prompting users with choices to allow them to change default services on iOS, such as for the web browser or search engine.

The commission said that it is “concerned that Apple’s measures, including the design of the web browser choice screen, may be preventing users from truly exercising their choice of services within the Apple ecosystem.”

Apple said it believes it is in compliance with the DMA.

“We’re confident our plan complies with the DMA, and we’ll continue to constructively engage with the European Commission as they conduct their investigations. Teams across Apple have created a wide range of new developer capabilities, features, and tools to comply with the regulation,” an Apple spokesperson told CNBC on Monday.

The fourth probe targets Alphabet, as the European Commission looks into whether the firm’s display of Google search results “may lead to self-preferencing in relation to Google’s,” other services such as Google Shopping, over similar rival offerings.

“To comply with the Digital Markets Act, we have made significant changes to the way our services operate in Europe,” Oliver Bethell, director of competition at Alphabet, said in a statement.

“We have engaged with the European Commission, stakeholders and third parties in dozens of events over the past year to receive and respond to feedback, and to balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.”

Alphabet pointed to a blog post from earlier this month, wherein the company outlined some of those changes — including giving Android phone users the option to easily change their default search engine and browser, as well as making it easier for people to see comparison sites in areas like shopping or flights in Google searches.

Meta investigation

The fifth and final investigation focuses on Meta and its so-called pay and consent model. Last year, Meta introduced an ad-free subscription model for Facebook and Instagram in Europe. The commission is looking into whether offering the subscription model without ads or making users consent to terms and conditions for the free service is in violation of the DMA.

“The Commission is concerned that the binary choice imposed by Meta’s ‘pay or consent’ model may not provide a real alternative in case users do not consent, thereby not achieving the objective of preventing the accumulation of personal data by gatekeepers.”

Thierry Breton, the E.U.’s internal market commissioner, said during the news conference that there should be “free alternative options” offered by Meta for its services that are “less personalized.”

“Gatekeepers” is a label for large tech firms that are required to comply with the DMA in the E.U.

“We will continue to use all available tools, should any gatekeeper try to circumvent or undermine the obligations of the DMA,” Vestager said.

Meta said subscriptions are a common business model across various industries.

“Subscriptions as an alternative to advertising are a well-established business model across many industries, and we designed Subscription for No Ads to address several overlapping regulatory obligations, including the DMA. We will continue to engage constructively with the Commission,” a Meta spokesperson told CNBC on Monday.

Tech giants at risk of fines

The commission said it intends to conclude its probes within 12 months, but Vestager and Breton during the Monday briefing stressed that the DMA does not dictate a hard deadline for the timeline of the inquiry. The regulators will inform the companies of their preliminary findings and explain measures they are taking or the gatekeepers should take in order to address the commission’s concerns.

If any company is found to have infringed the DMA, the commission can impose fines of up to 10% of the tech firms’ total worldwide turnover. These penalties can increase to 20% in case of repeated infringement.

The commission said it is also looking for facts and information to clarify whether Amazon may be preferencing its own brand products on its e-commerce platform over rivals. The commission is further studying Apple’s new fee structure and other terms and conditions for alternative app stores.

This month, the tech giant announced that users in the E.U. would be able to download apps from websites rather than through its proprietary App Store — a change that Apple has resisted for years.

The E.U.’s research into Apple and Amazon does not comprise official investigations.

Source: NBC News

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An essential adage these days is to protect your private data to keep fraudsters at bay. A new paper has quantified the incidence of financial fraud complaints among app users who follow that advice. Titled “Consumer Surveillance and Financial Fraud,” the paper was co-authored by Wharton finance professor Huan Tang and finance professors Bo Bian at the University of British Columbia and Michaela Pagel at Washington University in St. Louis.

The authors focused on Apple’s App Tracking Transparency (ATT) policy, which by default opts out users on Apple’s iOS platform from sharing their data. They found that a 10% increase in the number of iOS users in a given zip code results in a 3.21% drop in financial fraud complaints from that location. The study also found that “the effects are concentrated in complaints related to lax data security and privacy.”

The drop in financial fraud complaints could grow tenfold if tight privacy laws are universally applied. “If the whole population of [cell phone] users on both the iOS and Android platforms were subject to a policy like the ATT, then the number of financial fraud complaints should drop to 32%, assuming the effect scales up linearly,” Tang said.

Apple’s ATT policy, which was launched in April 2021, required all app providers to obtain explicit user permission before tracking them across apps or websites owned by other companies. Consequently, without a user’s permission, Apple would not provide those apps and websites with so-called “mobile identifiers.”

Although the ATT policy only applies to mobile users, it has implications for commercial surveillance and fraud among the general population due to the prevalence of smartphones, the paper pointed out. After the ATT policy, companies with an app are 42% less likely to experience cyber incidents, compared to firms without an app, it added. The paper described the implementation of ATT as “an event that enhances data security and privacy standards.”

A Shock to the Data Industry

The ATT policy dealt “a major shock to the data industry,” especially providers of mobile apps that are available on the Apple App Store or the Google Play store, the paper stated. As of February 2022, 82% of users refused to grant permission to track them, or only 18% of app users allowed tracking among those who were asked for such permission, according to Flurry, a mobile advertising company.

“Facebook is the largest victim of Apple’s privacy campaign, because 98% of Facebook’s revenue comes from targeted ads.”— Huan Tang

According to Tang, Meta’s Facebook tops the list of ATT casualties. “Facebook is the largest victim of Apple’s privacy campaign, because 98% of Facebook’s revenue comes from targeted ads,” she said. In February 2022, Facebook’s share price plunged a record 26% after it announced its 2021 fourth-quarter results, where it blamed Apple’s privacy laws and macroeconomic challenges for its forecast of lower revenues in the subsequent quarter. Apple’s privacy policy would cost the company $10 billion in 2022, Facebook had warned. The implementation of ATT also caused sharp falls in the stock prices of other firms that own active iOS apps, the paper noted, citing a companion paper on data privacy in mobile apps that Tang co-authored.

Tang explained how exactly the ATT hurt Facebook. In order to target consumers for advertising, Facebook needs to link different pieces of data from various sources about the same individual using a mobile identifier that links all of the individual’s mobile devices and that links all user choices from different websites, she explained. But after ATT, Facebook couldn’t use mobile identifiers unless iOS users explicitly agreed to share their data with a third party, she added.

Facebook’s Loss, Apple’s Gain

Apple, in contrast, benefited because its users were happy that it was taking steps to protect their privacy, Tang said. “Apple’s privacy campaign is self-serving because it allows the tech giant to tap into the targeted ad industry,” she continued. “And its largest opponent besides Google is Facebook. By taking down Facebook, there’s a void to be filled.” Incidentally, France’s competition authority and Italy’s antitrust agency accused Apple of abusing its dominance in the market to set unfair conditions.

Apple stepped in later with crowd-level targeting, where it could use aggregated information of specific communities of users it created, Tang added. Other platforms that wanted to target Apple users had to adopt that approach, which allows “less refined targeting,” she explained. As Apple’s guide to search ads stated, “targeting specific audiences will prevent ads from appearing to users who have turned off the Personalized Ads setting.”

Apple had begun tightening the screws on data privacy more than a year before it launched the ATT policy, the paper noted. In December 2020, Apple introduced “nutrition” privacy labels, which required all developers to provide information about their data practices in a standardized and user-friendly format. Developers who failed to comply with that policy faced the risk of having their future app updates rejected by Apple’s app store.

In July 2022, Google too launched data safety forms on its Google Play platform, which also required firms to disclose the types of data they collected from users and how they would use that. Google’s data safety form also required disclosure of data security practices, including whether the user data is encrypted during transit.

How the Study Tracked Financial Fraud

The authors began with detailed foot traffic data from Safegraph (a provider of datasets on global places) to calculate zip-code-level shares of iPhone users out of all smartphone users. Next, they analyzed data from the Consumer Fraud Prevention Bureau (CFPB) and the Federal Trade Commission (FTC) on the number of financial fraud complaints and the amount of money lost due to fraud. They then applied the 82% opt-out rate of ATT to arrive at their finding of a 3.21% reduction in financial fraud complaints.

“Apple’s privacy campaign is self-serving because it wants to tap into the targeted ad industry.”— Huan Tang

Significantly, the study found that trends in the likelihood and number of financial fraud complaints were more pronounced among minorities, women, and younger people, suggesting that these groups are more vulnerable to surveillance and fraud. Those findings contribute to the process of creating new regulations and rules to enhance consumer data protection and privacy, the paper stated.

To isolate CFPB complaints that relate to financial fraud originating from lax data security, the authors used keyword searches to look for indicators such as fraud, scam, or identity theft. They used that in combination with a machine learning method that generates a likelihood of complaints being related to financial fraud caused by data security issues.

Main Findings of the Study

• A 10% increase in the number of iOS users in a given zip code results in a 3.21% drop in financial fraud complaints from that location.
• About 26% of financial companies listed in the CFPB complaints database own an app, and 11% of them collect and share user data with third parties, such as data brokers, other websites, and advertising networks. The effect of ATT on consumer complaints is more pronounced for companies that are active in the app market, share user data with third parties, or do not encrypt user data in transit.
• Complaints of financial fraud are more likely in categories like credit reporting and debt collection than in others like student loans and mortgages. Specifically, the ATT policy reduced the number of financial fraud complaints about credit reporting and debt collection in a zip code by 2.48% and 0.61%, respectively, when it has 10% more iOS users.
• The ATT policy helped reduce money lost in all complaints by 4.7%. Of that, the money lost as reported in internet and data security complaints would be about 40% less with the ATT policy.

Regulatory Reforms

“Our results provide compelling evidence in favor of industry-led regulations aimed at constraining consumer surveillance practices,” the paper stated. Tang recently presented her findings to the FTC, which she said is eager to use her paper’s findings in its efforts to frame future regulation on data privacy and security.

“For their cost and benefit analysis, the FTC was interested in the cost to consumers when firms collect excessive amount of data, but it is very hard to find empirical evidence of that,” she said. “This is where our paper comes in. We provide a point estimate.”

According to Tang, Apple’s efforts at strengthening data privacy for cell phone users have advantages over the European Union’s General Data Protection Regulation (GDPR) that was launched in 2018. She said users have found it cumbersome to navigate the privacy notices of firms that pop up on their screens, especially because they are not standardized and require multiple clicks before they can understand how their data might be used. A CNBC report referred to that experience of users as “consent fatigue.”

The paper pointed to other efforts that are underway to limit data transfers across firms, including Google’s plan to phase out third-party cookies in Chrome by 2024. Similar to the GDPR, laws in Virginia and Connecticut require opt-in consent for sharing sensitive personal information, according to a report by OneTrust, a firm that advises companies on issues including privacy standards. Other privacy laws in California, Colorado, and Utah follow an opt-out mechanism for consent in most areas, it added.

Source : Knowledge at Wharton

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