German Regulators Open Investigation Into Apple’s App Tracking Transparency

Tuesday, 14 June 2022

From a PDF press release (in English) from Germany’s Bundeskartellamt (“Federal Cartel Office”):

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 introduced the App Tracking Transparency Framework for third-party apps with its updates iOS 14.5, iPadOS 14.5 and tvOS 14.5 in April 2021. It establishes certain preconditions for user tracking as defined by Apple by third-party apps. Advertisers or app publishers, for example, can use tracking to display targeted advertising on websites and apps or to track and use user data for other purposes. These options can be particularly relevant to providers of third-party apps in case their business models rely on apps which are available free of charge, but financed through advertising.

Keep in mind that in Germany, big publishing companies like Axel Springer are pushing back against Google’s stated plans to remove third-party cookie support from Chrome. The notion that if a company has built a business model on top of privacy-invasive surveillance advertising, they have a right to continue doing so, seems to have taken particular root in Germany.

I’ll go back to my analogy: it’s like pawn shops suing to keep the police from cracking down on a wave of burglaries.

Back to the Bundeskartellamt (boldface added):

Andreas Mundt, President of the Bundeskartellamt: “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 give preference to 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.”

I think this is a profound misunderstanding of what Apple is doing, and how Apple is benefiting indirectly from ATT. Apple’s privacy and tracking rules do apply to itself. Apple’s own apps don’t show the track-you-across-other-apps permission alert not because Apple has exempted itself but because Apple’s own apps don’t track you across other apps. Apple’s own apps show privacy report cards in the App Store, too.

Apple’s own advertising offerings — Search Ads — have indeed grown significantly post-ATT, but that’s not proof of self-serving. It’s at least plausible that the basic gist of what’s going on is something like this:

• Pre-ATT, ad spending was heavily steered toward privacy-invasive surveillance ads. Centuries of pre-internet advertising prove that tracking isn’t necessary for advertising to work, but no one is arguing that tracking isn’t effective.
• Apple has never engaged in the sort of tracking that ATT addresses.
• Post-ATT, it appears that somewhere around 70-75 percent of iOS users opt out of tracking. That is to say, they ask not to be tracked on an app-by-app basis or turn on the system setting that disallows apps from even asking to allow tracking.
• In this new world where around three out of every four iOS users ask not to be tracked, non-tracking ad platforms benefit — including Apple’s own Search Ads.

If you want to argue that Apple engaged in this entire ATT endeavor to benefit its own Search Ads platform, that’s plausible too. But if Apple actually cared more about maximizing Search Ads revenue than it does user privacy, wouldn’t they have just engaged in actual user tracking? The Bundeskartellamt perspective here completely disregards the idea that surveillance advertising is inherently unethical and Apple has studiously avoided it for that reason, despite the fact that it has proven to be wildly profitable for large platforms.

Apple could have made an enormous amount of money selling privacy-invasive ads on iOS, but opted not to. Instead they developed a series of complex technologies, some of which incur substantial costs (e.g. iCloud Private Relay), and took on both Facebook and Google to change the industry in a way which generates much less advertising revenue than Apple would have earned by just joining in on the surveillance advertising party.

I’d go so far as to describe the fundamental foundation of the surveillance ad industry as cheating. App Tracking Transparency has effectively cut down on cheating, and thus, all ad platforms that have never engaged in cheating have benefitted. ATT hasn’t completely levelled the playing field, but it’s moved the field closer to level than it was before. The heretofore cheaters are griping that their advantage has been taken away.¹