Apple is facing challenges on several fronts that could affect its App Store revenue. From judicial rulings in the U.S. to antitrust decisions in The Netherlands but more importantly, from legislative proposals in Europe and the US that could limit Apple’s exclusive ability to distribute apps for its operating system. However, Apple is doubling down on its privacy-enhancing features to persuade regulators that opening its App Store to third parties could significantly affect user’s privacy and safety. And Apple may have good legal arguments to do that.
In the U.S., the American Innovation and Choice Online Act and the Open App Markets Act might force Apple to make significant changes to its App Store, potentially opening it up. In Europe, lawmakers reached an agreement on the Digital Markets Act (DMA), a set of new rules aimed at ensuring that gatekeepers do not give their services an advantage over their competitors. This would apply to the app distribution market.
On a recent public statement in Washington D.C., Apple’s CEO stated that these recent interventions are “[t]aking away a more secure option [for consumers and] will leave users with less choice, not more.” Cook’s comments were his most conspicuous efforts to date in the fight against legislation that would lessen Apple’s grip on app downloads, forcing the company to revamp a vital line of business. Cook used Apple’s image as a privacy-friendly tech behemoth in his recent speech in D.C., saying that the plans would allow app developers to bypass the App Store’s privacy and security safeguards, leaving users with unsafe apps or malware on their devices.
But these references to App Store’s privacy and security safeguards may offer Apple an antitrust defense if the antitrust bills are approved in Congress, and to certain extent, they may also offer some protection in Europe when the DMA is applied.
For instance, the American Innovation and Choice Online Act includes, among others, two notable defenses (Section 3, part b): (I) “protect safety, user privacy, the security of nonpublic data, or the security of the covered platform” and (ii) “maintain or substantially enhance the core functionality of the covered platform.” The Open App Markets Act (Section 4) refers to similar defenses: “a covered company shall not be in violation … for an action that is (A) necessary to achieve user privacy, security, or digital safety; (B) taken to prevent spam or fraud. Therefore, privacy could be an exemption to the application of these bills or at the very least, it may play an important role in the analysis. However, it would likely be a judge who may need to determine whether user privacy or security outweighs certain practices.
In Europe, the DMA sets a very narrow scope for defenses. The DMA (Article 9) is much more restrictive by stating that “an exemption … may only be granted on grounds of: (a)public morality; (b)public health; (c) public security. Thus, an exemption based on privacy grounds may be more difficult to achieve. But there are some articles in the law that may allow Apple to put forward the “security or safety” argument to prevent or delay the implementation of the law.
For example, article 6.1 of the DMA says: “The gatekeeper shall allow the installation and effective use of third-party software applications or software application stores using, or interoperating with, operating systems of that gatekeeper and allow these software applications or software application stores to be accessed by means other than the core platform services of that gatekeeper.”
But then, it allows gatekeepers to impose some restrictions: “The gatekeeper shall not be prevented from taking proportionate measures to ensure that third party software applications or software application stores do not endanger the integrity of the hardware or operating system provided by the gatekeeper.”
The interpretation of this provision and how far Apple can go to protect its operating system will likely be decided by European Courts, but it offers Apple another reason to raise the privacy flag to defend its App Store.
