Thursday, February 2, 2023

Apple makes debatable claims concerning foreign investigations in answer to Brazil's antitrust authority CADE: investigation of Mercado Livre, Clique complaints

Last month it became known that Brazil's competition authority--Conselho Administrativo de Defesa Econômica (CADE), which translates as Administrative Council for Economic Defense--launched an antitrust inquiry into Apple's App Store terms and practices further to complaints by Latin American e-commerce companies Mercado Livre (in Spanish: Mercado Libre) and Clique. Brazil is becoming an increasingly important jurisdiction for patent and competition cases. Yesterday Apple filed its answers (PDF) to certain questions raised by CADE in a January 12 letter.

CADE's question 2(b) was about the state of affairs in App Store antitrust investigations in certain other jurisdictions. CADE had specifically asked about App Store investigations in the EU (agency: European Commission), UK (CMA), the Netherlands (ACM), Germany (Federal Cartel Office), Australia (ACCC), South Korea (KFTC), Japan (JFTC), India (CCI), and Indonesia (ICC).

Apple's response is somewhat defensible, but not exceedingly forthcoming, with respect to certain jurisdictions (UK, South Korea, Australia, and Germany), as I'll explain further below. Here's my translation, with [comments in brackets]:

  1. The case before the European Commission and the related proceedings are confidential in accordance with applicable procedural rules. The European Commission launched a formal investigation into the App Store in June 2020. In April 2021, a Statement of Objections, with a focus on effects on the market for digital music distribution, came down. A Statement of Objections is not a final decision by the Commission, but rather a preliminary assessment of an alleged antitrust violation. The case is still pending.

    [COMMENT: The Commission issued the SO right before the Epic Games v. Apple trial in the Northern District of California. Two weeks ago, Spotify--the main complainant--and other parties wrote an open letter to EU antitrust chief Margrethe Vestager, urging her to move forward with a formal decision. Some members of the EU antitrust community believe the Commission may not be interested in taking the next steps as the EU's Digital Markets Act (DMA), which was adopted last year, is in the process of being implemented and may solve Spotify's and other music streaming services' problems next year (it won't make an actual impact on the market before). I can see why some would like the Commission to act now, but can also understand what is suspected to be the Commission's perspective, and haven't formed a definitive opinion.]

  2. In India, the Competition Commission of India ("CCI") launched an investigation into the App Store in September 2021 further to representations of an organization that represents the interests of consumers and, subsequently, representions by developers. The investigation is in progress.

    [COMMENT: In India, Apple's market share is tiny--just about 3%. The focus of competition enforcers is, therefore, on Android. Google has now started to make changes, though they appear to fall short of what is actually required.]

  3. In Japan, no inquiry into the App Store is currently being carried out by the Japan Fair Trade Commission ("JFTC"). The JFTC closed an App Store investigation in 2021 when Apple proposed the implementation of measures that eliminated the agency's concerns.

    [COMMENT: The Japanese settlement was narrowly focused on "reader" apps. The JFTC should do more.]

  4. In the Netherlands, the Authority for Competition [WRONG: it's Consumers] and Markets ("ACM") put forward a decision in December 2021, concluding that Apple had supposedly abused a dominant position with respect to the App Store's treatment of dating apps (e.g., Tinder), and imposed a measure ("order") determining that Apple had to make certain adjustments. Apple in turn appealed the decision before the ACM itself and also obtained a preliminary judicial decision that suspended the effects of the ACM's decision in part. The proceedings concerning the recourse before he ACM are still ongoing.

    [COMMENT: What Apple is not saying here is that the preliminary injunction it obtained in court bars the ACM not only from enforcing but even from publishing a key part of the decision. The public part relates to the permission of alternative in-app payment systems. The part that the ACM is not able to talk about, but which became known nonetheless, prevents Apple from imposing excessive charges on app developers using such alternative payment systems.]

  5. In March 2021, the Competition and Markets Authority of the United Kingdom ("CMA") opened an investigation into the App Store. The investigation is still in progress.

    [COMMENT: Apple's answer narrowly refers only to an investigation into the App Store, but the CMA is also conducting a market investigation into Apple's mobile browser engine dictate and its efforts to hamstring third-party cloud gaming services. Apple is appealing the market investigation reference before the UK Competition Appeal Tribunal.]

  6. Upon the enactment of a new law in South Korea in 2021, the South Korean Communications Commission ("KCC") launched an investigation in order to ascertain the App Store's compliance with the new law. The investigation is still in progress.

    [Here, again, the question is whether half the truth is a whole lie. In September 2022, the Korea Fair Trade Commission (KFTC) performed a dawn raid on Apple's South Korean headquarters because it effectively charges a 33%--not 30%--App Store commission in South Korea. Apple conveniently omits that fact.]

  7. Apple is not aware of any investigations into the App Store that are ongoing in Indonesia, Australia, and Germany.

    [COMMENT: I don't know for sure about Indonesia, though I have seen reports that something is pending there. In Australia, the ACCC performed a market investigation and believes that legislative action is needed. It is investigating Apple over Apple Pay. With respect to Germany, Apple's claim if being unaware of "any" investigations into the App Store is overbroad: There is an investigation by the Bundeskartellamt (Federal Cartel Office) into Apple's app tracking rules. Apple's App Tracking Transparency (ATT) is enforced by Apple being the App Store's gatekeeper through its arbitrary review process for which Apple self-servingly makes the rules. Mercado Livre's and Clique's complaints in Brazil are not just about the app tax but also about the current inability--due to Apple's rules--of such third parties to offer their own app stores, which could also come with different ad tracking rules. What the Federal Cartel Office cannot do is investigate the very same issues that the European Commission is looking into at the same time (Art. 11 para. 6 of EU Regulation 1/2003 lets EU Commission investigations take precedence over investigations by the Member States' national competition authorities). The German ATT case is distinguishable from the EU music streaming case, but it can be reasonably described as an App Store-related investigation and Apple should have disclosed it to Brazil's CADE.]

CADE can reach out to its counterparts in other jurisdictions to find out more, just like Australia's ACCC said today that it is "engaging with overseas regulators" in connection with their reviews of Microsoft's acquisition of Activision Blizzard.