Apple now a target for stricter controls

Not long after Apple successfully blocked a UK antitrust action against the company, a German antitrust regulator has declared that the iPhone maker is a legitimate target for special measures designed to prevent abuse of market dominance.

The regulator found that Apple was a company “of paramount significance for competition across markets,” which means that it can be subjected to stricter controls on anticompetitive behavior …

German antitrust regulator’s investigation

The regulator, known as the Bundeskartellamt, began an investigation into App Tracking Transparency back in June of last year. This was opened on the basis that Apple requires third-party apps to ask permission for tracking, but the company does not do so for its own apps.

The Bundeskartellamt has initiated a proceeding against the technology company Apple to review under competition law its tracking rules and the App Tracking Transparency Framework. In particular, Apple’s rules have raised the initial suspicion of self-preferencing and/or impediment of other companies, which will be examined in the proceeding.

Apple found to have an unfair advantage

That investigation has now concluded, and it has found that Apple does indeed give its own apps an unfair advantage over competing ones.

This finding means that Apple is now subject to a special section of the German Competition Act, GWB, designed to target companies whose power means that they are able to act unfairly.

Andreas Mundt, President of the Bundeskartellamt: “Apple has an economic position of power across markets which gives rise to a scope of action that is not sufficiently controlled by competition. Based on its mobile end devices such as the iPhone, Apple operates a wide-ranging digital ecosystem which is of great importance to competition not only in Germany, but also throughout Europe and the world.”

He continued: “With its proprietary products iOS and the App Store, Apple holds a key position for competition as well as for gaining access to the ecosystem and Apple customers. This decision enables us to specifically take action against and effectively prohibit anti-competitive practices.”

The regulator says one issue of particular concern is the fact that the iPhone maker is able to carry out tracking without user consent, while other developers cannot. It argues that Apple’s monopoly control of iOS app sales means that the company can dictate rules to developers that may be unfair to them and to consumers.

The usual counterargument raised is that developers are not forced to make iOS apps, and can stick to Android ones if they don’t like Apple’s rules. However, the Bundeskartellamt says this is not realistic given the size of the market, and the power of the ecosystem.

Based on this tight proprietary vertical structure and an installed base of more than 2 billion active devices worldwide, Apple is active in many ways on market levels and business areas that are linked to each other and is therefore in a position to tie its users to its complex ecosystem on a long-term basis.

This is associated with a strong power to set rules for third parties, above all for app developers. Apple controls access to Apple customers and shapes this access based on its rules and economic framework conditions.

Apple told Reuters that it plans to appeal.

Apple said it would continue to work with the cartel office to understand its concerns but that it planned to appeal the decision.

“The (cartel office’s) designation misrepresents the fierce competition Apple faces in Germany, and it discounts the value of a business model that puts user privacy and security at its core,” an Apple spokesperson said in an emailed statement.

Photo: Balint Mendlik/Unsplash

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