Germany’s antitrust watchdog latest to probe Apple’s app privacy framework

A major privacy feature Apple launched last year, called App Tracking Transparency (ATT) — which requires third party apps to request permission from iOS users to track their digital activity for ad targeting — is facing another antitrust probe in Europe: Germany’s Federal Cartel Office (FCO) has just announced it’s investigating the framework over concerns that Apple could be breaching competition rules by self-preferencing or creating unfair barriers for other companies.

Last year, France’s antitrust regulator declined to pre-emptively block Apple from implementing ATT — but said it would be watching how Apple operates the feature. Poland also opened probe of the feature at the end of last year.

The UK’s Competition and Markets Authority (CMA) also set out concerns about Apple’s implementation of ATT in a deep dive mobile market study published last week. However the UK watchdog has so far deferred intervention over the feature — prioritizing other areas of Apple’s business to investigate (such as App Store rules) as it continues to wait for the government to enact a major competition reform targeting tech giants’ market power which was confirmed as incoming in November 2020 but is still pending legislation (that’s not now expected until next year at the earliest).

Germany is ahead of the curve here as its ex ante digital competition reboot came into force at the start of 2021 — targeting tech giants that are judged to have so-called “paramount significance for competition across markets” with tighter abuse controls.

Since then the FCO has been busy determining which giants the regime applies to — confirming, in a first decision in January, that Google meets the bar.

A number of other assessments are ongoing. And it’s still considering whether or not Apple’s business is in scope of the updated regime after opening a market power procedure last summer. But — as regards the ATT probe being announced today — the regulator says it’s taking action against conduct that “can possibly” be classified as meeting the definition for the ex ante powers to apply.

So it looks like the FCO is leaning towards a view that Apple will be in scope of the beefed up regime — and, consequently, trying to optimize future enforcement by opening a probe of Apple’s tracking rules now that’s based on the updated law (specifically it cites Section 19a(2) sentence 1 of the updated competition act). Such parallel procedures should save time vs sequential working (i.e. if it waited for the market power procedure to complete first before probing ATT).

“In this context, the possibilities for Apple itself to combine data across services and users’ options regarding the processing of their data by Apple can be relevant, just like the question whether these rules may lead to a reduction of users’ choice of apps financed through advertising,” the FCO notes in a press release which gives some further hints of its concerns.

Commenting in a statement, Andreas Mundt, president of the regulator, added:

“We welcome business models which use data carefully and give users choice as to how their data are used. A corporation like Apple which is in a position to unilaterally set rules for its ecosystem, in particular for its app store, should make pro-competitive rules. We have reason to doubt that this is the case when we see that Apple’s rules apply to third parties but not to Apple itself. This would allow Apple to preference its own offers or impede other companies. Our proceeding is largely based on the new competencies we received as part of the stricter abuse control rules regarding large digital companies which were introduced last year (Section 19a German Competition Act — GWB). On this basis, we are conducting or have already concluded proceedings against Google/Alphabet, Meta/Facebook and Amazon.”

Apple was contacted for comment — and it sent this statement, attributed to a spokesperson:

“Apple believes in thriving and competitive markets, and through the App Store, we’ve helped millions of developers turn their brightest ideas into apps that change the world. In Germany alone, the iOS app economy supports hundreds of thousands of jobs and has given developers of all sizes the same opportunity to share their passion and creativity with users, while creating a secure and trusted place for customers to download the apps they love.
“Privacy has always been at the center of our products and features. At Apple, we believe that a user’s data belongs to them and they should get to decide whether to share their data and with whom. We have long believed in the power of advertising to connect businesses with customers — and that you can have great advertising with great privacy. App Tracking Transparency (ATT) simply gives users the choice whether or not they want to allow apps to track them or share their information with data brokers. ATT does not prevent companies from advertising or restrict their use of the first-party data they obtain from users with their consent.
“These rules apply equally to all developers — including Apple — and we have received strong support from regulators and privacy advocates for this feature. Apple holds itself to a higher privacy standard than almost any other company by providing users with an affirmative choice as to whether or not they would like personalized ads at all.
“We will continue to engage constructively with the FCO to address any of their questions and discuss how our approach promotes competition and choice, while protecting users’ privacy and security.”

European regulators’ concerns over ATT appear to be centered — not on the fact that Apple is requiring app developers to ask users for consent to track them, which has been acknowledged by several competition watchdogs as a privacy benefit for users — but rather on the concern that Apple is tilting the playing field by not applying the same user-facing process to its own ‘personalized’ ads, which do not trigger the ATT pop-up that’s been accused of generating friction for rivals’ ads.

For its part, Apple argues such a comparison is an unfair one — since it’s using first party (i.e. iOS user) data for ads; and further claims higher privacy standards vs third parties in how it targets ads.

However European antitrust regulators may take a different view, given their overriding focus on competition — and they could force Apple to make changes to how it implements ATT in these markets as they continue to scrutinze the operational detail.

For example, in a section in its mobile market report on Apple’s ATT privacy framework, the UK’s competition regulator writes: “It is clear that there are privacy benefits associated with the introduction of ATT as it enhances users’ privacy and control over their personal data and significantly improves developers’ compliance with data protection law, which requires developers to have user or subscriber consent to access information from their device” — before switching gears to assess “whether and to what extent ATT undermines the current model of advertising to users of mobile devices”; and discuss how its implementation “may benefit Apple’s own advertising services and reinforce its position in app distribution”, with the CMA concluding that Apple’s choice architecture for ATT is “potentially problematic”.

The UK regulator also goes on to raise concerns that Apple’s current implementation of ATT “is likely to result in harm to competition, make it harder for app developers to find customers and to monetise their apps, and ultimately harm consumers [by raising app prices and/or reducing quality/variety]”, adding: “[W]e consider that there are a number of ways in which the potential competition harms of ATT could be mitigated while retaining the benefits in terms of user choice and privacy.”

Another recent regulatory development is hanging over tech giants operating in the region: Incoming changes to European Union competition law aimed at setting ‘rules of the road’ for how so called Internet gatekeepers must do business — which are set to pre-emptively ban stuff like self-preferencing — were agreed earlier this year; and are due to come into force in Spring 2023.