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The world is waiting for the new iPhone that Apple is expected to unveil today. But Washington is laser focused on whether Apple is unfairly stifling competition.
As Congress and the Justice Department launch a spate of antitrust probes into Silicon Valley companies, Apple looks increasingly poised to get drawn into the drama. Lawmakers and regulators are keen to know more about the power Apple wields as the operator of its App Store: It's the primary avenue for people to discover apps to download to their devices, but critics warn Apple may be abusing its position as the store's sole umpire to benefit its own apps.
The criticism has only increased as Apple develops its own video streaming or gaming apps designed to go head-to-head with popular competitors sold on its platform — investments we could hear more about today during the company's major event at its Cupertino, Calif., headquarters.
But Apple argues it should be able to curate apps available to iPhone users to protect them from security threats or other malicious content. Kyle Andeer, Apple’s chief compliance officer, has defended the App Store as “vibrant, competitive and ever-growing.” “Only a very small number of the nearly 2 million apps in the App Store are made by Apple, and in every category where our software competes, we face strong competition,” he testified to the House Judiciary subcommittee in July.
Yet recent press reports and complaints tell a different story. Here are some that raise questions about Apple's market power — and whether it's favoring its own services while limiting the reach of its competitors:
Apple may be prioritizing its own apps in search results: Recent analysis by the Wall Street Journal and New York Times has found that Apple's own apps were consistently ranking in the top search results for common queries in the app, consistently above other popular competitors. The Wall Street Journal found over the summer the company's own apps ranked first in more than 60 percent of basic searches, such as queries for “maps.” When it came to Apple's paid apps, like Music or Books, they show up in the first 95 percent of searches related to those apps. The Times found similar results in its own study, which found Apple’s apps have ranked first recently for at least 700 search terms in the store. That analysis said some searches showed as many as 14 Apple apps before displaying results from rivals.
“This dominance gives the company an upper hand in a marketplace that generates $50 billion in annual spending,” the Journal's Tripp Mickle writes.
Two senior Apple executives acknowledged the top App Store search results were “packed' with the company's own apps, Jack Nicas reports at the New York Times. The executives told Jack the company altered the algorithm so its own apps aren't appearing at the top of the search results as often. They told Jack the company didn't manually alter the search results to benefit itself.
“There’s nothing about the way we run search in the App Store that’s designed or intended to drive Apple’s downloads of our own apps,” Philip Schiller, Apple’s senior vice president who oversees the App Store, said. “We’ll present results based on what we think the user wants.”
Apple can take the best ideas and develop its own version of the same app or feature: This can threaten developers, as my colleague Reed Albergotti reported last week. As one example, Clue, a popular app that women use to track their periods, recently rocketed to the top of the App Store charts. But the app's future is now in jeopardy as Apple incorporates period and fertility tracking features into its own free Health app, which comes preinstalled on every device. Clue makes money by selling subscriptions and services in its free app.
“It’s a love-hate relationship, of course. You don’t want to annoy the milkman when you only have one milkman,” Ida Tin, Clue’s CEO, told Reed. She believes her Berlin-based start-up can survive with Apple, but said it underscores the “skewed power distribution” in the tech industry.
Some apps haven’t been so lucky, and Reed reports they’ve shut down under the pressure of trying to compete with Apple. Often they don’t even bring lawsuits because it would be costly and time intensive. But Apple projects confidence: “Healthy competition, in every category, constantly drives everyone who makes apps, including Apple, to improve,” Apple spokesman Fred Sainz told Reed in a statement. “We wouldn’t have it any other way, because that’s how our users get the best experiences possible.”
A so-called “Apple tax” can take a bite out of competitors' profits: The music streaming service Spotify has brought an antitrust complaint against Apple in the European Union, which has put the spotlight on what critics call the “Apple tax.” The company is particularly concerned about the 30 percent cut that Apple takes from all subscriptions made through its payment system.
“If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music,” Spotify chief executive Daniel Ek wrote in a blog post. “And to keep our price competitive for our customers, that isn’t something we can do.”
Ek wrote that Apple has technical limitations and restrictions for companies that choose not to use its payment system.
Apple has pushed back on Spotify’s claims, noting in a blog post that it only takes a 30 percent cut for the first year of a subscription, and that the number then drops to 15 percent in subsequent years. Apple argues that apps that are free to users aren’t charged by Apple. Apple also says that it provides paid subscription apps with a secure payment system, as well as critical development tools that allow users to update the app. "Spotify is asking to keep all those benefits while also retaining 100 percent of the revenue,” Apple said in a blog post.
BITS: It's official. A bipartisan group of attorneys general from 50 states and territories formally announced an antitrust probe into Google on Monday. The first priority is going to be tackling online advertising, my colleague Tony Romm reports, as the search giant is projected to make more than $48 billion in digital ad revenue this year.
Arkansas attorney general Leslie Rutledge (R) expressed concerns that the company’s advertising business, which helps shape the top search results for users, could harm consumers. “I want the best advice, from the best doctors — not the doctor, not the clinic who can spend the most on advertising,” she said.
But the probe, which Tony first reported last week, could delve into a number of other concerns state lawmakers have about the tech giant, including search rankings and the company's consumer privacy practices, Tony reports.
While states attorneys general may be working closely with federal counterparts in the Department of Justice as it conducts its own Google probe, Washington attorney general Karl Racine (D) says that states investigation is wholly independent. “So I’m very confident that this bipartisan group is going to be led by the facts, and not be swayed by any conclusion, that may fall short, if you will, if it’s inconsistent with our facts, on the [federal] side,” he said.
NIBBLES: The White House is considering a controversial proposal that would study whether monitoring the personal devices of mentally ill users could prevent mass shootings, my colleague William Wan reports. But experts say the study would possibly not only violate civil liberties but promote an unverified connection between mental illness and gun violence.
“The irony is that there are low-tech solutions that already exist for some of these problems that we simply aren’t funding or deploying enough,” said Stephen Hart, a clinical forensic psychologist and researcher on violence risk assessment. Hart pointed to the known flaws in existing predictive policing technology, such as artificial intelligence used to determine parole and sentencing decisions that overestimates the likelihood of black offenders committing further crimes.
Moreover, the link between mental illness and gun violence is a “weak link at best,” and the proposed study probably would result in false positives, says Marisa Randazzo, former chief research psychologist for the U.S. Secret Service. “I would love if some new technology suddenly came along that would help us identify violent risk, but there’s so many things about this idea of predicting violence that doesn’t make sense,” she told William.
As first reported by my colleague Jacqueline Alemany, the proposed project would fall under a new research arm dubbed the Health Advanced Research Projects Agency, which is being pitched as a corollary to the military’s experimental projects agency DARPA.
BYTES: More than 900 Amazon employees will walk out of the company's offices Sept. 20 to demand the company reach zero carbon emissions by 2030, Lauren Kaori Gurley at Vice reports. This is the first time corporate Amazon employees have led a walkout, though some have supported strikes at Amazon warehouses this summer.
Amazon employees began mobilizing to get the company to address its large carbon footprint in December, when the group of employees filed a shareholder resolution demanding the company meet zero emissions by 2030. Both the climate resolution and a resolution banning the sale of the company's facial recognition software to government agencies failed to pass.
Microsoft workers will also be walking out as a part of the global climate strike, the group Microsoft Workers 4 Good confirmed on its Twitter account yesterday. Amazon organizers told Lauren that Google workers, who have staged walkouts over sexual harassment and discrimination, may also join.
Microsoft workers will be joining millions of people around the world by participating in the youth-led Global Climate Strike on September 20th to demand an end to the age of fossil fuels. Microsoft workers, join us by pledging to take action at https://t.co/KL3e0xKyYR— Microsoft Workers 4 Good (@MsWorkers4) September 9, 2019
— News from the private sector:
— News from the public sector:
— Tech news generating buzz around the Web:
- Apple will host a special iPhone event on Tuesday at 10 a.m. Pacific time in Cupertino, Calif.
- The Center for Data Innovation will host a keynote address by Michael Kratsios, Chief Technology Officer of the United States, followed by a panel discussion on the state of the global AI race at the National Press Club at 9:30 am
— Coming soon:
- The Senate Judiciary Subcommittee on Intellectual Property will host a hearing on how to make the patent system stronger on Wednesday at 2:30 p.m.
- The House Antitrust Subcommittee will hold a hearing on the role of data and privacy in competition as a part of its series of hearings about online platforms and market power on Thursday at 9 a.m.
- The Senate Judiciary will host an oversight hearing on the enforcement of antitrust laws on September 17 at 2:30 p.m. Eastern time
- The Senate Judiciary will host a hearing to “explore issues relating to competition in technology markets and the antitrust agencies’ efforts to root out anticompetitive conduct.” on September 24
The new Nest Hub Max, a smart speaker with a camera, lets Google’s Assistant AI use facial recognition on your family. Should you welcome it home? Geoffrey Fowler explores: