Tech Watchdogs See Red Flags As Apple Expands

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By Emily Birnbaum, THE HILL

March 28, 2019

Tech watchdogs see red flags as Apple expands

Apple’s new entertainment subscription services and credit card, launched to great fanfare this week, could raise new concerns for the company over market power and competition issues.

Apple executives at a star-studded event in Cupertino, Calif., this week unveiled subscription services in gaming, news and television, as well as a new Apple credit card.

Apple has managed to avoid much of the scrutiny over tech company power and antitrust enforcement that have hit other giants like Amazon, Facebook and Google. But the company’s latest moves into entertainment services is raising red flags for antitrust experts.

“I would caution that enforcers need to be very vigilant to make sure that Apple is not tipping the scales in its favor,” Sally Hubbard, director of enforcement strategy at the Open Markets Institute, told The Hill.

Hubbard said she is concerned that Apple is “controlling the game and playing the game too” as the owner of both the iOS App Store and creator of the iPhone.

The new concerns over Apple are emerging as lawmakers show more interest in reining in big tech, particularly when it comes privacy and competition issues.

Sen. Elizabeth Warren (D-Mass.), a 2020 contender, earlier this month released a plan to break up some of Silicon Valley’s largest tech companies: Facebook, Google and Amazon. She later told media outlets that she would target Apple as well.

“Apple, you’ve got to break it apart from their App Store,” Warren said. “It’s got to be one or the other. Either they run the platform or they play in the store. They don’t get to do both at the same time. So it’s the same notion.”

Rep. David Cicilline (D-R.I.), chairman of the House Judiciary antitrust subcommittee, in particular has vowed to use his perch to crack down on tech giants’ enormous market power and potential antitrust violations.

Experts told The Hill they expect Congress and regulators to watch closely to ensure Apple does not prioritize its new subscription services over competitors.

Chris Sagers, a professor at the Cleveland-Marshall College of Law, told The Hill that Apple could run into trouble legally if it tweaks its App Store rules to disadvantage competing services.

Apple’s video streaming service, Apple TV+, will offer original content from celebrities including Oprah Winfrey, Jennifer Anniston and Steven Spielberg, among others. The company has not yet announced how much the service will cost per month, but Apple CEO Tim Cook at the Monday event said it is coming to Apple devices this fall in more than 100 countries.

It will be offered through Apple TV, which comes preloaded onto Apple products. 

The service puts Apple in competition with both Amazon and Netflix, which currently dominates the streaming market.

“Now that Apple is getting into the content creation business, there are some real questions about how it can bundle its services and how it might potentially distribute content that can only be used on its platform,” Jamie Court, president of Consumer Watchdog, told The Hill. “It could raise some antitrust questions.”

Court said Apple could quickly become the “dominant player” in music and video streaming, potentially driving out competitors and allowing the company to raise prices for consumers.

Meanwhile, Apple’s news subscription service, Apple News+, will offer customers access to more than 300 magazines, as well as some of the country’s largest newspapers, through their Apple News app for $9.99 per month. Some newspapers that require a subscription, including The Wall Street Journal and Los Angeles Times, will be available to readers through the subscription bundle.

“The question will be, is Apple doing anything to ease its entry that would hurt other people competing in these spaces?” Sagers said.

Apple is already dealing with concerns over its market power abroad. Spotify, a music streaming app, earlier this month filed a formal antitrust complaint against Apple in the European Union alleging the company is trying to unfairly stifle its competitors through the App Store.

Spotify in the complaint claimed that Apple is leveraging the App Store to keep competing services such as Spotify at bay, which Apple has denied. Apple offers its own music streaming app through its App Store.

Apple has tried to distinguish itself from other Silicon Valley titans by touting its robust privacy policies and, as seen at the launch event, its star power.

At the event, before a parade of celebrities spoke about Apple TV+, Apple executives repeatedly touted the privacy protections in their new subscription services.

“Apple doesn’t know what you read, Apple doesn’t allow advertisers to track you,” Apple’s vice president of applications, Roger Rosnor, said, discussing the news service. “What you read about in Apple News will not follow you across the web.”

The presentation promoting Apple’s new credit card, which will be issued by Goldman Sachs, promised that Goldman Sachs “will never share or sell your data to third parties for marketing.”

Those efforts have garnered Apple much goodwill, but as the company expands its services it could face the same tough questions as other giants.

“Apple has a much less destructive business model than Facebook and Google,” Hubbard said, noting the business model of those companies requires collecting user data to target ads in a way Apple’s does not.

“But you still have the same conflict of interest problems.”

Apple’s new subscription services in gaming, television and news, as well as its new credit card, will be fully rolled out over the next year. How they compete against other established companies remains to be seen.

But as Apple expands, Congress and regulators will likely be watching closely.

“I thought the platform in the most trouble was Amazon or maybe Facebook, but it’s starting to look like it could be Apple,” Sagers said.

Consumer Watchdog
Consumer Watchdog
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