Google and Apple face increased international scrutiny

By L. Carol Christopher

INMA

Pleasant Hill, California, USA

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The last chapter of Apple’s crackdown on first-party data or enforcement of its App Store rules, as it turns out, has not yet been written. Nor has the end of the story in Australia been told. The ACCC is now setting its sights on competition in app markets — with particular attention to Apple and the App Store and Google and its Google Play Store.

And the United States has weighed in, post-submission period, on Google’s side of the news media bargaining code, while simultaneously announcing a possibly premature antitrust pursuit of the company.

Meanwhile, a five-country multilateral agreement puts Google under increased pressure.

ACCC launches mobile apps market scrutiny

Just as we were going to press, the ACCC announced it will be “examining the experiences of Australian consumers, developers, suppliers, and others in a new report scrutinising mobile app stores.” 

Robert Whitehead, the Sydney-based lead on INMA’s Digital Platforms Initiative, said this is notable because Apple was explicitly excluded from the news media bargaining code, as were app stores. This places Australia squarely in the global movement to address app store monopolies, led by Spotify and Epic, the makers of the Fortnight gaming juggernaut. Apple announced on Tuesday it is filing a countersuit against Epic, saying Epic’s lawsuit is “nothing more than a basic disagreement over money. Although Epic portrays itself as a modern corporate Robin Hood, in reality it is a multi-billion dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the App Store.” 

The report is part of a five-year ACCC inquiry that is examining markets for the supply of digital platform services in Australia, according to an ACCC statement, and is due by September 30, with a report into app marketplaces is due March 31, 2021. Surveys for both consumers and app developers are available on the ACCC’s Web site. Submissions will close on October 2. 

The commission will issue further interim reports every six months until the inquiry concludes March 31, 2025, with a final report to be provided to the Treasurer. “We want to know more about the market for mobile apps in Australia, including how transparent and effective the market is, for consumers as well as those operating in the market,” ACCC Deputy Chair Delia Rickard said in the statement.

“We will focus on the extent of competition between the major online app stores and how they compete for app sales with other app providers. For app developers and suppliers, gaining a spot in one of the major app stores can result in significant sales, while failing to gain access can be a major setback. We are keen to provide greater transparency on how this process works. We are also interested in how data is used and shared in the app ecosystem, including the data available to Google and Apple as a result of their control of the major app stores.”

Google faces increased pressure as multilateral trade agreement signed

A recently signed, non-binding multilateral trade agreement creates an alliance between antitrust regulators in Australia, the United States, Canada, New Zealand, and the UK — a formal pathway for sharing “information about competition laws and policies, with a focus on coordinating cases and investigations spanning international borders,” according to Mashable. Hours after the signing of the agreement, information emerged that the U.S. Justice Department has plans to bring an antitrust case against Google, possibly this month. Google is under more pressure than Facebook to show that it is willing to negotiate because of that confluence of events, observes Australia’s Financial Review.

“Google working with a competition authority like the ACCC, when Facebook is talking about exiting the news market, is helpful (if anecdotal) evidence in demonstrating that it is not engaging in conduct that would fall foul of U.S. antitrust competition law, regulations, and policy,” said Rob Nicholls, University of New South Wales associate professor of competition law, regulations, and policy. He noted that Google and Facebook are “rivals with different aims.”

“I … think that Google has the option of taking a large proportion of the advertising revenue currently earned by Facebook if it stays and enhances its offerings against a news-free Facebook and Instagram,” Nicholls surmised.

The Financial Review said: “Worryingly for the search giant, the suddenly hurried time frame in the U.S. investigations appears to suggest that President Donald Trump would view tough action against Google as a strong pre-election statement.” 

The Trump Administration gets tough with Google, yet the administration isn't sure it agrees with the ACCC's push to force Google and Facebook to pay news media companies for content.
The Trump Administration gets tough with Google, yet the administration isn't sure it agrees with the ACCC's push to force Google and Facebook to pay news media companies for content.

President Trump, as reported by The Verge, “has complained without evidence for some time that Google is biased against him, tweeting in 2018 that a search for ‘Trump News’ brought up entirely negative results, and that ‘Google & others are suppressing voices of Conservatives and hiding information and news that is good.’”

Google refused the Financial Review’s request for comment on the U.S. case, although Melanie Silva, its local managing director, said: “We are willing and had already reached deals with some news businesses to pay to license news content for a new product,” maintaining that the news media bargaining code is “unworkable,” citing unhappiness over sections that deal with algorithms, user data, and what Silva described as a “fundamentally unfair negotiation/arbitration process.”

U.S. Justice Department close to antitrust suit against Google

In the United States, the rush to file an antitrust suit against Google — with a focus on search and advertising — goes against the advice of career lawyers at the Justice Department, with the complaint expected as late as mid-October, according to CNBC, although other sources report that it could come this month. A Federal Trade Commission probe of Google, wrapped up in 2013, found no justification to take action on, although since then, the E.U. has fined Google US$2.6 billion “for favouring its own price-comparison shopping service over smaller European rivals.” 

While five countries sign a multilateral trade agreement, creating an alliance between antitrust regulators in the countries, the U.S. Department of Justice announced it soon will bring an antitrust case against Google.
While five countries sign a multilateral trade agreement, creating an alliance between antitrust regulators in the countries, the U.S. Department of Justice announced it soon will bring an antitrust case against Google.

In parallel to the Justice Department, reports the article, “a large group of states attorneys general” is also investigating Google and meeting regularly with federal law enforcers, with at least 12 of them likely to sign on to the Justice Department lawsuit.” Among those are some Democratic state attorneys general who believe the federal government is moving too fast to allow the amount of work to ensure success, the article concluded.

Trump administration takes issue with ACCC 

Meanwhile, The Sydney Morning Herald reports the Trump administration is taking issue with the ACCC’s news media bargaining code that would force Google and Facebook to pay for news. Sources told SMH that the U.S. Trade Representative filed a submission with the ACCC. Details of the submission are expected this week. 

Sources told SMH that while the administration shares some of Google and Facebook’s concerns, it is reluctant to “openly criticise” the ACCC because of the close relationship between the two countries. The submission is the first time the United States has espoused its views during the 2.5-year review process and comes after the submission period formally closed August 28. Significantly, the article said, “The involvement could be considered crucial for the two tech giants.” 

The article notes that U.S. involvement in the proposed Australian regulatory changes follows its withdrawal from international digital trade talks in late June: “Negotiators had planned to strike a deal by the end of the year that would set international standards for how and where online activity may be taxed, but the talks ended with letters from U.S. Treasury Secretary Steve Mnuchin in June, at which point the U.S. threatened retaliatory tariffs.”

Apple rolls back implementation of privacy protections and App Store rules enforcement

We have written extensively about Apple’s App Store in recent weeks. Here’s the latest: 

The Wall Street Journal reports that Apple is delaying its iOS-based privacy change until early next year to give developers time to make necessary changes. The delay, says Nieman Lab, means Apple won’t enforce the rule and require developers to adopt it, adding that Apple plans to release additional details on implementing the feature later this year. The article called the privacy feature “among the iPhone maker’s most aggressive policy changes it has introduced in recent memory.” 

The Partnership for Responsible Addressable Media (PRAM) is a coalition of advertisers and ad-tech companies, formed in July to prevent Apple’s change. “This is welcome news given the potential impact on the media landscape. This will allow for more time for details to be understood and discussed among stakeholders,” said PRAM’s lead counsel. 

Apple also has another new privacy feature developers will have to comply this year: privacy information attached to App Store product listings that “detail in depth how a given app collects and stores information across a series of domains, ranging from health and fitness data to location information to Web browsing history,” reports The Verge. The requirement extends to the practices of third-party partners whose code is integrated into the primary app, and also requires that developers identify whether data collected is linked to the user’s account, device, or identity.

Russia challenges 30% Apple tax

Elsewhere, in August, Russia found Apple guilty of anti-competitive prices, based on its third-party parental control apps, reports 9to5Mac. Relatedly, the lower Russian Parliament is entertaining a new bill that would cap App Store commissions at 20% and require Apple to allow third-party app stores, reports Reuters, which said that if passed, the bill would also require app developers to turn over a third of their commissions to a special training fund for IT specialists on a quarterly basis.

Platform moves to watch in the E.U.

We’re also following these stories with implications for news media publishers:

Apple, Google, and Amazon respond to European tech taxes by passing on costs 

The Verge writes that Apple, Google, and Amazon are planning on passing the costs of a new digital service act that some E.U. nations have introduced along to their customers. The tax increases tax on any revenue produced by 2%. The affected services include search engines, social media services, and online marketplaces. 

All three companies have announced price changes for U.K. For example, Apple is changing the payment structure for App Store developers on App Store. In addition to the 20% value-added tax it pays to the government on each purchase, The Verge explains, “it’s adding an extra 2% before splitting what remains between the developer and Apple, meaning less money for both. Google, meanwhile, is increasing fees for all advertising bought on Google Ads and YouTube … by 2%,” beginning in November. Amazon is also increasing its fees to third-party sellers from September 1 by 2% in the U.K. The increase will affect referral fees, Fulfilment by Amazon (FBA), monthly FBA storage fees, and multi-channel Fulfilment (MCF) fees. 

Originally, European nations (including the U.K., France, and Italy) had hoped for a new global tax on Big Tech, but negotiations fell apart several months ago when the United States refused to participate. That led them to write national laws, where similar price increases are being enacted. Turkey, for example, will see a rise in App Store prices for consumers by 7.5%. 

What the platforms say they want, according to The Verge, is “a new global framework for tech taxation” (Google), “so that rules would be consistent across countries and clearer and fairer for businesses” (Apple). However, those hopes appear to have been dashed — for now — by the U.S. pullout of the negotiations.

Google pushes Europe to limit gatekeeper platform rules 

TechCrunch reports Google has submitted a 135-page response to the E.U.’s coming Digital Services Act (DSA), an update to its e-commerce rules that also introduces new rules for “gatekeeper platforms,” those that come between consumer and businesses and hold outsized market power. The legislation Google is fighting is ex ante, or geared toward preventing abuse before it happens. Along the lines of its response to Australia’s ACCC code, the company argued it could hurt the user experience, also urging reliance on existing laws rather than creating new ones.

“The criteria for identifying ‘gatekeeper power’ should be independent of the particular business model that a platform uses, making no distinction as between platforms that operate business models based on advertising, subscriptions, sales commissions, or sales of hardware,” Google wrote. “The gatekeeper assessment should … recognise that a range of platforms — operating a range of different business models (e.g., ad-funded, subscription-based, commission-based, hardware sales) — may hold ‘market power’ in different circumstances and vis-à-vis different platform participants.”

About L. Carol Christopher

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