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Why the German regulator has launched an investigation into Apple’s App Tracking Transparency

Germany’s Bundeskartellamt has initiated a proceeding against Apple to review whether its ATT app tracking rules are anticompetitive. 

What’s the news? Germany’s cartel office Bundeskartellamt on June 14 announced that it has initiated a proceeding against Apple to review whether its tracking rules and the App Tracking Transparency (ATT) Framework are anticompetitive. “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,” the regulator said.

What are Apple’s app tracking rules? In April 2021, Apple released the App Tracking Transparency (ATT) Framework that requires all apps on ‌iPhone‌ and ‌iPad‌ to ask for the user’s consent before tracking their activity across other apps. Before ATT was launched, apps could track a user across apps based on the device’s unique advertising identifier without receiving this additional consent.

Why is ATT problematic for developers? “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,” the German cartel office said.

Why is this case important? App developers, small indie developers as well as large companies like Facebook, have complained that ATT has hurt their revenues significantly and that Apple is benefitting unfairly because it is not subject to the same rules as others. Meanwhile, privacy experts have praised ATT for giving consumers the choice of how their data is collected and used. The German cartel office’s investigation will hopefully shed more light on how regulators view ATT.

All apps already seek consent from users: “Already based on the applicable legislation, and irrespective of Apple’s App Tracking Transparency Framework, all apps have to ask for their users’ consent to track their data. Apple’s rules now also make tracking conditional on the users’ consent to the use and combination of their data in a dialogue popping up when an app not made by Apple is started for the first time, in addition to the already existing dialogue requesting such consent from users,” Bundeskartellamt noted.

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Rules don’t apply to Apple: “These rules apparently do not affect Apple when using and combining user data from its own ecosystem. While users can also restrict Apple from using their data for personalised advertising, the Bundeskartellamt’s preliminary findings indicate that Apple is not subject to the new and additional rules of the App Tracking Transparency Framework,” the cartel office noted.

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. — Andreas Mundt, President of the Bundeskartellamt

Is there a flawed understanding of ATT and how it works? The regulator appears to believe that ATT applies only to third-party apps, but that is not the case. Writing for Daring Fireball, Apple analyst John Gruber said:

“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.”

Has Apple’s advertising revenue really benefitted because of ATT? Advertisers, Facebook, in particular, have alleged that ATT gives Apple an upper hand in running its own mobile advertising business on iOS devices. A report by the Financial Times dated October 2021 appeared to support Facebook’s claims by showing that Apple made a “windfall” in advertising with its mobile app advertising market tripling in the six months after the feature was introduced. Apple, of course, refuted this claim and commissioned a study into the impact of ATT that concluded that Apple was unlikely to have seen a significant financial benefit because of ATT. Explaining the nuances more clearly, John Gruber wrote:

“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?”

Is Apple of paramount significance for competition across markets: Bundeskartellamt stated that it is taking action against the conduct of Apple as a company which can possibly be classified as having paramount significance for competition across markets. The regulator has already classified Google, Meta/Facebook and Amazon as such under powers given by the new Section 19a of the German Competition Act introduced in early 2021. This classification gives the regulator more leeway to rein in any anti-competitive behaviour because any company declared to be of “paramount significance for competition across markets” will be prohibited from certain specified practices and the designated company carries the burden of proving the practice’s pro-competitive effects. Apple’s classification is yet to be determined, the office noted.

What is Apple saying? A spokesperson for Apple told TechCrunch:

“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. […]

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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.”

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