ACADEMIC ARTICLE SUMMARY

Harming Competition and Consumers under the Guise of Protecting Privacy: An Analysis of Apple’s iOS 14 Policy Updates

University of Southern California Center for Law & Social Science (CLASS) Research Paper No. CLASS21-27, University of Southern California Legal Studies Research Paper No. 21-27, 2021
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Written By:

Feng Zhu

Feng Zhu

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ARTICLE SUMMARY

Apple’s iOS 14 update claims to protect privacy by requiring consumers to opt in to allow data sharing by third-party apps. But this unfairly advantages Apple’s own products.

POLICY RELEVANCE

Apple intends iOS 14 to restrict competition. Pro-consumer privacy policies support consumer choice.

KEY TAKEAWAYS

  • Prior to iOS 14, developers could monetize apps offered in Apple's store by charging consumers a fee (to which Apple added a surcharge), or by sponsoring the app through advertising, so the app is free to consumers.
  • Content supported by personalized advertising benefits advertisers, app developers, and consumers; personalized ads help small businesses find consumers on a low budget, allowing small, new, or niche brands to compete with national brands.
  • Apple's iOS 14 update bars third-party (non-Apple) apps from using data needed for personal advertising, unless the consumer opts in.
    • The opt-in screen for third-party apps includes pejorative warnings about tracking.
    • The privacy controls for Apple's own apps refer only to personalized ads, not to tracking.
    • Studies suggest that 80-85 percent of users will not opt in.
  • Apple's new policy is disguised as a privacy measure, but is really an anti-competitive measure.
  • Advertisers' ability to show relevant ads to consumers will be greatly reduced, undermining free (advertiser supported) apps.
    • Consumers will be shifted to Apple’s paid model.
    • Third-party apps will be more expensive than Apple's apps, the price of which do not include a surcharge.
  • Apple’s own advertising service will not be required to follow the same rules, giving it an advantage over rivals.
  • Apple’s policy will shift consumers to Apple-affiliated apps, in turn raising the cost to consumers of switching from Apple to Android.
    • Apple apps are not available for Android.
    • Documents show that Apple executives wish to build a moat around iOS to prevent cross-platform competition.
  • Apple’s new policy harms consumers by forcing them to pay for apps that previously were free; studies show that 84 percent of consumers prefer an ad-supported internet with free content.
  • If Apple’s real goal was to protect privacy, Apple could offer less restrictive alternatives, similar to Facebook’s “Off-Facebook Activity feature,” which allows users to review apps’ use of data and choose different levels of sharing.
    • Apple offers only a binary choice.
    • Apple’s policy is discriminatory and discourages consumers from opting in.
    • Apple supplies no information about the benefits of personalized advertising.
  • Research shows that stringent opt-in requirements reduce the effectiveness of personalized advertising and can hamper innovation.

QUOTE

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Daniel Sokol

About Daniel Sokol

D. Daniel Sokol is the Carolyn Craig Franklin Chair in Law and Business at the USC Gould School of Law and an Affiliate Professor of Business at the Marshall School of Business, where he teaches in the marketing department. He serves as faculty director of the Center for Transnational Law and Business and the co-director of the USC Marshall Initiative on Digital Competition.

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