Thread by @PatrickMcGee_

*thread* begins:

Sen Klobuchar said @Apple and @Google “operate at gatekeepers, with the power to decide how or whether apps can reach iPhone and Android users.”

“Just because a company creates a successful innovative business that consumers like doesn't give it a free pass to harm competition or ignore our antitrust laws.”

“In 2020, consumers are estimated to have spent $72.3bn in Apple's App Store and $38.6bn in Google's Play Store. Applying their standard commission rates to these amounts net Apple and Google billions of dollars.”

“We can also strengthen our laws (and…) we also have to make sure that the agencies have the resources to take on these complex matters.”

“You can imagine, if you're actually taking on the world's biggest companies that we've ever known in the world, you actually have to be able to have the resources to do that. So …those agencies (need to have) the resources. They just can't do this with duct tape and band aids.”

Sen Mike Lee now speaking. Brings up @Parler

"In January, in a matter of days both Apple and Google removed Parler from their app stores. They did this despite Parler's close collaboration with the FBI in advance of the January's 6 events."

"Parler (was) disfavored by the wolf barons of Silicon Valley -- was just taken down, millions of voices went silent.... disappeared into thin air. I found this troubling."

Sen Lee upset with Apple and Google:

"In many ways is I am very dismayed that it took three and a half months, and the intervention of the United States Senator, in order to get (here today). These are not the actions of companies that feel like they have meaningful competition"

Sen. Lee acknowledges the Parler issue isn't really an anticompetive issue, but it highlighted the power Big Tech has.

"If big tech is going to take a side in the culture wars, or in political conversations, big tech should be prepared for the greater scrutiny that will come with that unfortunate choice."

First up: @Apple Chief Compliance Officer Kyle Andeer

Just before this hearing a group of activists launched a campaign called Abolish the App Store claiming the App Store is a monopoly wielding enormous power at the expense of small businesses and human rights.

The group calls the App Store “a censorship machine” b/c of how Apple abides by laws and regulations of authoritarian countries where it operates — a problem it wouldn’t have, arguably, if companies could just install apps on the phone directly without going through App Store.

“The problem is that once an app is removed from the App Store, there is no alternative way to install it,” the group said. “This creates a situation where apps can be created to uphold power, but never to challenge it."

Apple's Kyle Andeer calls in remotely, says App Store is one of Apple's key innovations. Says app distribution used to be limited, expensive, and when they web-based were subject to security threats.

Andeer says the App Store "truly revolutionalised app distribution."

"And we know that our approach works. Study after study shows that the iPhone has fewer malware infections than any other device in the marketplace."

(Contrary view: ft.com/content/914ce7…)

"The App Store isn't just a store, it's like a studio stocked with canvases, brushes and paint - the tools that artists need to create their works. A gallery where they can display and sell their creations."

Now speaking: Wilson White, @google Senior Director Public Policy & Government Relations

"Android has increased competition and choice across the ecosystem. Because of Android, today a consumer selecting a mobile device isn't limited to one or two or even a handful of alternatives."

"Some of these Android devices cost less than 100 bucks, which has made computing more accessible to communities that haven't been well served by the tech platforms in the past."

"Our business only succeeds when our developer partners succeed, and consumers view us as a trusted destination for digital content. More than 90% of the apps on the Google Play Store frequent (are) free to consumers."

"If a developer does not agree that the value proposition is adequate, the openness of Android allows those developers the options to display and distribute their apps through other means, either directly to consumers, or via other app stores."

Now speaking, Mark Cooper, Director Of Research
Consumer Federation of America

Cooper is hilariously wonky. Says he is worried about companies moving from "Schumpeterian rents" - profits based on disruption that helps consumers - to "Rockefeller rents", rents that accrue from business size and anticompetitive moats.

Now: Mr. Horacio Gutierrez - Head Of Global Affairs & Chief Legal Officer, Spotify

Gutierrez says Spotify's complaints are "urgent."

Unless legislative action is taken, "other gatekeeper platforms inevitably will follow Apple's examples, resulting in further concentration of power in a handful of typical sovereigns."

*Great* point from Spotify:

"Some might not remember this, but iPhones weren't that popular when first introduced. Apple soon realized that the iPhone would not succeed if it only offering Apple's proprietary apps and invited third parties to develop app for the iPhone."

"Apple therefore has things exactly backwards when it claims that companies like Spotify are free riding on Apple's innovations. **It is Apple success that rode in large part on the creativity of third party app developers that created demand for Apple's devices.**

(@dhh)

Biting: "And the proof is Apple's own slogan: There's an app for that. Which it used to drive sales of Apple devices."

(Spotify exec -- the best speaker so far)

"How did Apple show its gratitude for app developers? By doing a classic bait and switch. They waited until 10s of millions of device owners were locked into iPhone before changing the App Store rules to impose burdens on app developers that compete with Apple's own application"

Kirsten Daru, @TheTileApp

Says Apple's Air Tags have a great improvement: a UWB chip that lets you find goods exactly your room. The problem? Tile developed this functionality, too, but Apple barred them from using the iPhone 12 tech that would enable it, she said.

"We have made many requests to access that chip so that we can use it for the benefit of our customers. in fact, we made an amazing experience using augmented reality with UWB where you can use your phone and see exactly where in the room.."

"...But Apple refused our requests, and therefore we cannot bring that innovation to the market, for the benefit of our customers, yet the Air Tag is going to use the UWB because Apple's decided to reserve it to use exclusively in its product."

More from Kirsten Daru later - some great points but I'm too slow.

Now up: Jared Sine from Match Group (owner of @Tinder etc)

Sine says no need to listen to him on "lock-in" problems:

"The late Apple CEO Steve Jobs devised this strategy. Back in 2010, Apple grew wary that it was far too simple for users to switch between iOS and Android devices...

"... because app developers were allowing users to buy services directly from them, that could be used readily on either platform. His directive was simple: Let's force them to use our payment system."

Match's Sine says Apple's App Store practises aren't about "curation", but "iron fisted monopoly control."

Says Apple is "authoritarian."

Match once wanted to institute ID verification rules in its Taiwanese app that mirrored those required in Japan. The App Store disagreed, "I was told in no uncertain terms that he disagreed with our assessment of how to keep our users safe."

Sine says the App Store motto should be: "There's a tax for that."

Spotify exec says Apple forced the company to raise prices to $12.99 -- because of a change requiring it to use in-app payment -- and unbeknownst to them Apple was in process of acquiring Beats (for $3bn+), which let it launch a rival streaming service for $9.99

Klobuchar asks about the marketing-ban, wherein Spotify and others aren't allowed to tells users within the app that a subscription costs less if they buy on a desktop.

Tile's Daru:

What Apple did: w/ the exact OS update that introduced Find My (a rival items tracking app), they took away one of our critical permissions which required our customers to go deep, deep into their settings to turn on. For Find My, the setting on by default.

Match's Sine talking about retaliation, by Google, for complaining about antitrust concerns.

"We're all afraid, is the reality, Senator."

Says Google has threatened Match since 2017 with an in-app payment requirements (and other things)

Google's White responds, saying Google would never threaten its partners and it would be antithetical to.

Apple's Andeer says of Air Tags: "We think it's a very different product than anything else that's out there."

Says Tile has 80-90% of the market and this will raise more competition.

(Wasn't anticipating the 'Tile is the real monopoly' defense.)

This is fascinating: @TheTileApp's Daru is asked about Apple's Find My app. She says she's barred from answering b/c of an NDA with Apple.

So...Apple's chief compliance officer is asked for a waiver. He declines.

Mike Lee pressuring Apple....

Apple's Andeer: "We're collecting feedback from a number of developers, where we're engaged with dozens of third parties who are really excited to use this technology and giving us feedback... So I'm in a bit of a difficult position."

Match says Apple constantly lets underage users join the Match apps for 18+ years users. Apple knows their age, from user ID, but still lets them download the dating apps. Match has asked them to stop. Instead the onus is on Match.

"In addition, our platforms for years have run registered sex offender checks. We've asked Apple and Google to share the data with us that would make it easier to run those checks and again, there has been ... very little work done."

Apple and Google asked why there's a 30% fee on digital goods but not physical goods (like Uber).

Apple's Andeer says Uber is real-world - the connection happens on the street. But dating apps connect people over the phone, so that's a digital service.

Mike Lee not buying it.

"I'm not grasping the differentiation point between meeting a stranger for transportation and meeting a stranger to go to dinner, I don't, I don't get it."

!! @SenBlumenthal:

"Google and Apple are here to defend the patently indefensible. If you presented this fact pattern in a law school antitrust exam the students could laugh the professor out of the classroom b/c it's such an obvious violation of our antitrust laws."

Spotify: "If Apple is convinced that their payment system is that superior, that they really should command a 30% fee, they should allow for competition to let the market determine that. Let supply and demand determine what the fees are."

@SenBlumenthal said "it's potentially actionable" that Google called Match Group's chief legal officer a night before the hearing. "It looks like a threat, it talks like a threat...."

@SenBlumenthal (apparently) quotes Steve Jobs: Apple has "always been shameless about stealing great ideas."

Adds: that seems to be the MO of Apple, and there are numerous examples of this copy and kill strategy.

cnet.com/news/what-stev…

Sen. Hawley now in the Question Seat. Says it's no secret he wants changes to antitrust laws.

Says Apple has been on a stock buyback spree, but:
"You don't seem to invest very much of it into actual security."

Apple's Andeer says Apple has spent billions on App Store security.

"This is a priority for us, each and every day we wake up - 24/7, 365 days a year...."

Hawley (correctly) says that Apple originally said its 30% App tax for security, not profit. Asks Apple lawyer it will commit to spending all of that revenue on security.

Apple lawyer gives a lengthy non-answer that Hawley takes as a no.

Hawley asks about alleged special deals for Amazon.

Apple: "Senator, there was no special deal provided solely to Amazon. Those negotiations led to a new program on the App Store to premium video partner programs. There are over 200 devs who have taken advantage of this program"

Hawley: "For those who are keeping score at home (what happened) is that years later, when it was discovered that Apple had given Amazon a deal (is that) Apple comes back and says, 'Oh no, We've had a program, it's established, it's this program for premium subscription video.'"

Hawley..."It wasn't, by definition, open to everybody. Yhis is not the first time that Apple has has done this. The house antitrust subcommittee revealed that Apple granted Baidu ...a fast track through the app review process ... you've also given Netflix special deals..."

Pretty sure the fine 'scams in the App Store' work of @keleftheriou being cited here by Jon Ossoff, but no shout-out.

Apple, responding to scams in the App Store:

"One of the real risks of opening up the iPhone to sideloading or third party app stores is that this problem will only multiply. If we look at other app stores out there, if we look at other distribution platforms, it scares us."

@ossoff asking Google why X-Mode SDKs that track user locations continue to be widely used despite Google/Apple banning X-mode.

background:

techcrunch.com/2021/01/28/x-m…

Sen. @MarshaBlackburn

"One of the questions we ask is, 'who owns the virtual you'?"

To Google: "We are fully aware that you collect this information, and then you monetize this information and so the question is, why should we trust that, Google?

Asks Google to commit to not collecting user data and to monetise is.

"Sir, you're skirting the question, so I'll reclaim my time."

Sen @MarshaBlackburn now going after Apple for pulling Hong Kong pro-democracy apps off the App Store but not providing the FBI with help getting into a terrorist's iPhone.

Sen @MarshaBlackburn says prefers the values of Apple of Jimmy Lai -- a Hong Kong entrepreneur behind 'Apple Daily', an unrelated newspaper - who is risking his life fighting Beijing rather than acquiescing.

Sen @MarshaBlackburn asking Apple why they take 30% fees, a "massive sum", but then fails to invest in top-notch security.

Spotify: "Senator, the reality is they won't (change) out of their own initiative, they have to be forced to change, and that is why we were the first company to publicly have the courage to speak about these things"

Spotify exec asked if Apple retaliates:

"Off the top of my head (I can think) of at least four clear examples of threats and retaliation that we faced...

"...From the very existential threat of being removed from the app store b/c we had decided not to implement the payment system, to the clear statement to us that our app ... would never be promoted on the App Store or receive any marketing."

Sen Mike Lee just referenced the headline quote here:

ft.com/content/914ce7…

Apple's Andeer says the App Store has "unlocked" all kinds of competition and that Apple's own apps are just a "drop in the bucket in this ocean of 1.7m apps."

Apple's Andeer says App Store has a strong 12yr record of supporting Spotify, processing updates and supporting them. "There is no evidence of retaliation."

Klobuchar asks Apple what benefits the user gets beyond security.

Andeer: "...all the investments, and all the things we've done in terms of continuing to open up the iPhone...additional features and technologies...frameworks and resources and software..."

Andeer, on why Apple doesn't let Spotify tell users they can pay a lower fee outside the App Store:

Says that would be like Apple going to a Verizon store to "put a sign up that says, 'go buy our iPhone down the street at the Apple Store'."

Klobuchar cites former head of the App Store review process saying it costs less than $100m to run the App Store, compared with estimate that Apple makes $15-18bn from the store.

Andeer won't discuss the numbers, says Apple doesn't break-out what the revenues are etc.

Klobuchar: "So you have no numbers? Which I'm sure exists. We'll try asking you in writing, but I have no choice but to go w/.. $100m a year to run the app store and that you make $15-18bn

Spotify, on the idea that Apple brings it all kinds of value and services:
"Spotify ... (is not) successful because of what Apple has done; we have been successful despite Apple's interference. And we would have been much more successful but for their anti competitive behavior"

A good line from Match's Sine:

"They have essentially taken the internet and moved it into the app stores, and so they've set up their gateways they set up their toll booths. You got to pay the toll."

Match's Sine:

"The reality is, they are fighting so hard because it is core to the maintenance of their monopoly."

Spotify's Gutierrez says decisions in Cupertino are affecting Spotify's business worldwide, like in Indonesia

Tile's Daru urges action: "We're concerned that if we wait for sweeping legislation ... we could have more irreparable damage done to competition and innovation, in America."

Apple's argument that they don't receive $ from 85% of apps seems bad given the reason most apps don't pay Apple is because they are monetised by ads -- a model now under attack by, ahem, Apple.

Closing comments from Klobuchar:

"I just don't think this 'we built it so trust us and we can run it' is going to work anymore. Because if you look at history as a guide: of course people build things...

"...and they do great things to employ a bunch of people, and then at some point it becomes a monopoly. And then it becomes a problem, as Adam Smith warned, and then we're supposed to be doing something about it."

the hearing is adjourned. Stand by for story.