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Apple's big motive for fighting a new antitrust law

·Technology Editor
·5 min read
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This article was first featured in Yahoo Finance Tech, a weekly newsletter highlighting our original content on the industry. Get it sent directly to your inbox every Wednesday by 4 p.m. ET. Subscribe

Wednesday, April 13, 2022

Apple has a better motivation than privacy to fight antitrust reform

Apple (AAPL) CEO Tim Cook made his most public declaration this week against proposed antitrust legislation aimed at the company’s App Store. Cook claims that allowing customers to download apps onto their iPhones from third-party sources would make them less safe.

“If we are forced to let unvetted apps on the iPhone, the unintended consequences will be profound,” Cook said during a gathering of the International Association of Privacy Professionals on Tuesday.

Cook is right that the App Store helps protect users from malware, and third-party options would open up iPhone users to the increased risk of downloading scammy apps. However, the Apple chief has a bigger reason to protest the legislation: Apple’s bottom line.

That’s because if users download apps outside of the App Store, Apple would lose out on the 30% fee it collects on many app sales. Apple doesn’t break out revenue for its App Store, but its services division, which includes the App Store, brought in $68 billion of the company’s total $365 billion in revenue in 2021. Since 2008, the App Store raked in $260 billion.

“Maintaining central control is immensely profitable for Apple — it is the mechanism that allows Apple to set prices for users on both sides of its platform, app developers and consumers,” Penn State Law professor John Lopatka told Yahoo Finance. “And maintaining central control inevitably injures competitors.”

Apple’s App Store keeps users safe

Cook contends the proposed antitrust legislation, called the Open App Markets Act, would make users less safe by removing Apple’s ability to vet every app users install on their devices.

And he’s right.

Without the App Store, users would be able to download and install apps from any third-party app store or site of their choosing. While that gives users more freedom, it also opens them up to the potential for downloading apps loaded with malware that could steal their information, scoop up their login credentials, or capture their banking data.

“Tim Cook is right that there is a real-trade off here,” NYU Tandon School of Engineering professor Justin Cappos explained. “And it's not a small trade-off. There will be a privacy and security trade-off that happens if things are changed, especially for side loading.”

That’s not a unique stance either. Lopatka echoed Cappos’ concerns about consumer security and privacy, saying that removing Apple’s central control of apps “unquestionably creates a risk of malicious and invasive software making its way onto phones.”

It’s a basic line of thinking. Giving users more ways to download apps naturally makes them more susceptible to dangerous apps.

Of course, Apple’s App Store doesn’t keep you completely safe. According to a 2021 report by The Washington Post, 2% of the App Store’s 1,000 top grossing apps on one day were scam apps.

Still, Apple’s iOS and iPadOS are more secure than competing products because they have the latest software updates. Apple’s devices automatically download security and feature updates as soon as they’re available, protecting users from malware that exploits flaws in Apple’s software.

It’s about Apple’s bottom line

Apple’s privacy and security chops are one of its biggest selling points. For consumers tired of having their data sucked up or sold by seemingly every organization online and offline, it’s worth paying a premium for the company’s devices. Apple’s entry-level iPhone SE starts at $429, while Samsung’s A03s starts at $159.

Apple, of course, benefits from user data, as well. The company’s Safari browser uses Google as its default search engine, which nets Apple between $8 billion and $12 billion a year, according to a Department of Justice lawsuit. Google, naturally, uses information gleaned from users’ searches to inform its advertising business.

Tim Cook arrives at the Oscars on Sunday, March 27, 2022, at the Dolby Theatre in Los Angeles. (Photo by Jordan Strauss/Invision/AP)
Tim Cook arrives at the Oscars on Sunday, March 27, 2022, at the Dolby Theatre in Los Angeles. (Photo by Jordan Strauss/Invision/AP)

That aside, Apple losing control of the App Store would hurt Apple’s bottom line. The company currently collects 15% or 30% fees on the sale of some apps. However, Apple only applies those fees when developers use its in-app payment technology. Of course, only developers can only use Apple’s tech, so they’re forced to pay every time a customer purchases an app.

That, developers say, forces them to raise prices, which hurts them and their customers. Spotify (SPOT), Epic, and a slew of other developers have battled this for years. With antitrust legislation finally making its way through Congress, it looks as though Apple may finally be forced to loosen its iron grip on the App Store.

That doesn’t mean users will be left to fend for themselves. According to the proposed legislation, covered organizations will not violate the Open App Markets Act for actions meant to protect users’ security and privacy or prevent spam or fraud.

That doesn’t mean that Apple will be able to completely protect users, especially those that want to use third-party app stores. It does mean Apple would still have the ability to provide users with at least some security.

Apple already works to ensure its macOS products remain protected, even though it allows users to side-load apps on Mac desktops and laptops. The company will simply have to do the same with its iOS and iPadOS products if the Open App Markets Act becomes law.

While it won’t be as secure as when Apple had complete control of the App Store ecosystem, it will allow for more competition. That will help consumers in a different way — by protecting their wallets.

By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley

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