Apple Inc. Chief Executive Tim Cook on Tuesday warned that proposed antitrust legislation would have the unintended consequence of making iPhones less safe, putting users at risk to “data hungry” companies looking to sidestep its privacy features.
The iPhone maker faces twin threats to its App Store business from Congress and the European Union, where lawmakers intend to loosen its grip on the app economy and make the iPhone more accessible to third-party developers as part of efforts to increase competition.
Legislation in both jurisdictions would force Apple to allow third-party programs to be downloaded onto the iPhone outside of the company’s App Store, where it currently regulates the offerings and charges a commission as much as 30% from in-app purchases. Apple has said this change would hurt user security and privacy.
“Taking away a more secure option will leave users with less choice—not more,” Mr. Cook said Tuesday during a speech at the International Association of Privacy Professionals’ summit in Washington, D.C. “And when companies decide to leave the App Store because they want to exploit user data, it could put significant pressure on people to engage with alternate app stores—app stores where their privacy and security may not be protected.”
In Europe, the Digital Markets Act is moving toward final approval, while pieces of legislation in Congress are being considered and are far from becoming law.
“Apple believes in competition,” Mr. Cook said. “But if we are forced to let unvetted apps on to iPhone, the unintended consequences will be profound and when we see that we feel an obligation to speak up and ask policy makers to work with us to advance goals that I truly believe we share without undermining privacy in the process.”
The issue of user privacy is a favorite topic of Mr. Cook’s when he makes a rare public appearance, routinely calling it a “fundamental human right.” The company’s iPhone has been at the heart of multiple battles over privacy in recent years.
Several high-profile tech companies that operate in the app economy have taken issue with how Apple does business, arguing the iPhone maker’s claims that its restrictive policies ensure user privacy and safety are, in fact, unfairly benefiting its own business and hurting theirs.
Facebook’s Meta Platforms Inc. and other companies that profit from online ads are unhappy with a change Apple made to its phone software last year that requires users to agree to having their online usage tracked by apps. That data has played a key role in how the digital ad market has worked, and as most users have chosen not to be tracked, it has cut off access and hindered some digital ad businesses. Meta says it expects to see $10 billion in lost sales this year because of the change.
That is just the latest way in which the power Apple wields over third parties has come into focus amid a broader debate about the power tech companies play in digital markets and political speech.
After years of lobbying for change by the likes of Spotify Technology SA and Match Group, lawmakers and regulators around the world are taking strong interest in Apple.
The biggest blow yet to Apple came last September when a federal judge ordered the company to loosen its App Store rules. Under the order, Apple would be prevented from prohibiting developers from providing a link within their app to an alternative payment method. Apple is appealing the ruling.
That case was brought by “Fortnite” maker Epic Games Inc., which claimed Apple had an improper monopoly in controlling distribution of apps onto the iPhone and forcing it to use its in-app payment system. The judge rejected nine of 10 claims. Epic, too, is appealing the ruling.
The high-profile case put a spotlight on the extent to which Apple profits from its App Store. Internal records released during the trial suggest almost one in five dollars of Apple’s operating profit came from its commission on apps in 2020 and much of that was from videogames. Apple has disputed those figures as being too high but not provided its own tally.
Mr. Cook has placed an emphasis on growing Apple’s service business, which includes the App Store, after years of sluggish growth among its phones, tablets and computers. But strong sales of devices during the pandemic by buyers working and studying from home has helped the company see record profit from hardware sales. Revenue from services rose by more than 20% to $19.5 billion in the final three months of 2021 compared with the previous year.
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