U.S. judiciary endorses EU antitrust chief Margrethe Vestager's solution-oriented approach to merger reviews while UK CMA keeps its own--but also constructive--profile

At this stage the question does not appear to be whether but when--Monday, Tuesday, or in August--Microsoft will consummate the acquisition of Activision Blizzard King. There were signs of ABK being delisted from NASDAQ or at least removed from the NASDAQ-100 index as early as tomorrow.

Even a commercial agreement between Sony and Microsoft to keep Call of Duty on the former's PlayStation has fallen into place. Sony was the only vocal deal critic, though Google was lobbying against the transaction as well.

The contractual target date for closing is Tuesday, July 18. There have been media reports of a potential extension since the UK Competition & Markets Authority (CMA) opened a new investigation in light of a new proposed deal structure, with a late-August deadline and the plan to wrap up ahead of schedule (PDF). The Financial Times wrote:

"[A]fter this week’s legal victory in the US courts and a potential lifeline in the UK, people close to the companies say they are likely to agree an extension to the deal early next week.

"'Things are moving quite quickly,' said one person close to the negotiations."

There's been a flurry of news recently. On Tuesday, Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California denied (PDF) a motion by the Federal Trade Commission (FTC) for a preliminary injunction that would have blocked the transaction. That was the outcome I predicted in my previous post on that topic. Just as I already observed when I attended the five-day PI hearing in person, the FTC failed to meet multiple requirements for a merger PI.

Between that decision and the Ninth Circuit's denial of an emergency motion by the FTC, various gamers reported that my name became a trending topic on Twitter for that community. But I'd rather talk now about the actual decision makers and the key institutions, and what the current situation means for them and their regulatory philosophies:

DG COMP showed the way

In the wake of the U.S. court rulings, a very thoughtful gamer and developer active on social media as EverbornSaga--who made various great contributions to my recent Twitter Spaces (basically, talk shows via Twitter)--declared the European Commission's Executive Vice President Margrethe Vestager "[t]he True Hero of this Story":

The True Hero of this Story… pic.twitter.com/DlHuwRqsIx

— Everborn Saga (@EverbornSaga) July 15, 2023

Everborn has a point.

Judge Corley started the final part of her PI denial order ("Conclusion") with the following observation:

"Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services."

That paragraph was just a more formal version of something she said at the PI hearing about those commitments and agreements:

"In many ways you [the regulators] won."

The FTC's trial counsel rejected that notion. They just wanted to block the merger. They wanted both the district court and the appeals court to turn a blind eye to the remedies that were already in place and constituted market realities. But Judge Corley was right--and is even more right now that Sony--albeit at long last--accepted an offer by Microsoft.

In a speech I called "historic" on Twitter and in various interviews, EVP Vestager stressed the need to focus on how regulators can bring about results that benefit the competitive process and consumers. She opposed the idea of--in my words--a hawkishness contest between regulators.

I still believe that actually the regulators who cleared the transaction unconditionally--most recently the Turkish competition authority--got it right. In fact, the Brazilian and Chilean decisions were my favorite ones, and in Chile they even conducted a survey among gamers to get an idea of whether vertical input foreclosure would work. But as Judge Corley wrote, the size of the deal warranted scrutiny, and that's why I don't blame regulators for launching a Phase II investigation. Still, I think that the most that a regulator could reasonably have expected here--given that the deal raises no competition concerns if analyzed competently and viewed rationally--would have been some public statements prior to clearance. Enforceable remedies with an independent monitor just seem unnecessary to me. Be that as it may, the European Commission received extremely positive feedback from gamers for clearing the deal on the basis of consumer-oriented formal remedies.

The U.S. judiciary has, by extension, endorsed EVP Vestager's regulatory philosophy.

FTC should drop its "case" now

As someone who spent far more time in court supporting (in 2019) than criticizing (in 2023) the FTC, I'm disappointed. The FTC's emergency motion with the Ninth Circuit was disingenuous in various ways. And it failed miserably.

The FTC's in-house trial is scheduled to start on August 2, and as per the Ninth Circuit's normal schedule (which can always be extended) for PI appeals, it has until August 9 to file an opening brief. The only logical thing now would be to seek an extension from the Ninth Circuit (easy, especially as I'm sure it would be unopposed) and to postpone that trial to conserve resources. And to drop the "case" after the deal has closed, as the FTC has historically always done.

Will this FTC make a rational decision? Maybe today's annoncement of an agreement between Microsoft and Sony makes it easier.

UK CMA still an outlier, but now a solution-oriented one

I stand by my harsh criticism of the UK CMA's April 26 decision and last year's issues statement. The blocking decision was all the more disappointing as I actually thought they were on the right track when they dropped their console market theory of harm in late March. Now I see that a lot of gamers are not really trusting the CMA anymore, though I encourage them to appreciate the fact that the CMA is willing to evaluate a new deal structure.

According to rumors in the media, that new deal structure would involve the divestiture of Microsoft's UK cloud gaming business to British Telecom subsidiary EE, which already had a 10-year agreement in place with Microsoft for Activision's titles.

If the CMA now approves the deal, it will have maintained the integrity of its processes, avoided a decision by the UK Competition Appeal Tribunal (which will hold a case management conference tomorrow in light of the parties' motion to stay the proceedings), and remained consistent with its position that non-divestiture remedies are disfavored even for vertical mergers.

That makes the CMA a winner, too. The question is now whether a solution can be found that enables the closing of the deal in the days ahead while also allowing the new merger review to go forward. My personal opinion is that if the CMA is philosophically inclined to clear the deal based on a UK-specific divestiture remedy, they could make an exception here and let the deal close for the time being. This merger review process is unlike any other, and therefore not really precedent-setting. Today's announcement of the agreement between Microsoft and Sony could make a major difference now.

There are serious issues in the tech industry, and arguably some even bigger problems that the world is facing in other respects. I've always said I want those regulators to emerge stronger. The FTC under its current chair has lost all four of its merger challenges. And the way they lose does not really suggest that they contribute to the evolution of U.S. merger case law or build an argument for legislative intervention, though I personally would actually consider it a good idea to make U.S. antitrust enforcement stronger if some problems (such as the FTC's in-house adjudicative proceedings, where the commissioners can ultimately just vote in favor of their own complaints) are addressed.

In the UK, the DMCC Bill will give the CMA's Digital Markets Unit more powers, and as an app maker I like that, too, though after this experience with the Microsoft-Activision case I believe a robust judicial review by the Competition Appeal Tribunal is key. Is the current framework good enough? Clearly, the CATribunal (or just CAT) is a winner here. It recognized the importance of this case, went out of its way to enable swift adjudication, and is clearly force to be reckoned with while a lot of "experts" suggested the CMA could basically do whatever it wants as the CAT would have to rubberstamp its decisions (not true) and always remand the cases anyway (not certain as the CAT itself interprets the relevant statute, which is not strictly limiting, and if the CAT effectively resolves a substantive question, a remand can be reduced to a mere notarization of a CAT decision).

I have great respect for the CMA's willingness to reevaluate the transaction in light of a new proposed deal structure, and I am hopeful that solutions will be found. Ideally also a provisional one that enables the closing of the deal in the days ahead.

As of now, prior to a new CMA decision and a New Zealand ruling that may come down in a matter of hours, the transaction can be closed with respect to 41 countries with 2.8 billion inhabitants and representing about two thirds of the global economy. With more to come.

Share|

Sony caught lying, possibly to EU antitrust chief Margrethe Vestager: Microsoft makes clearest public statement yet on 'parity' aspects of ten-year Call of Duty offer

Under merger laws as they stand, Microsoft's purchase of Activision Blizzard King (NASDAQ:ATVI) falls far short of what a regulatory agency could block: there is no theory of harm to competition itself. Sony is capitalizing on some antitrust enforcers' purely political concern over one of the world's largest tech companies buying one of the world's leading game makers. And in doing so, Sony appears to be lying to regulators and/or the media. That's a serious accusation, but Microsoft made it in public a few hours ago: Microsoft's communications lead Frank X. Shaw wrote on Twitter that he "hear[d] Sony is briefing people in Brussels claiming Microsoft is unwilling to offer them parity for Call of Duty if [it] acquire[s] Activision." According to the Microsoft spokesman, "[n]othing could be further from the truth":

We’ve been clear we’ve offered Sony a 10 year deal to give them parity on timing, content, features, quality, playability, and any other aspect of the game.

We’ve also said we’re happy to make this enforceable through a contract, regulatory agreements, or other means.

2/4

— Frank X. Shaw (@fxshaw) January 28, 2023

That's really a clear-cut definition of parity that would be justiciable if ever necessary:

• timing,

• content,

• features,

• quality,

• playability, and

• any other aspect of the game.

I'm not totally surprised. In November I noticed an untruthful representation made by Sony in a UK filing: they said Microsoft was being investigated over its cloud software licensing practices, but no regulator has launched formal investigations (even if Sony had known something at the time that I didn't, by now it would certainly be public). There may or may not be investigations further down the road, but Sony claimed so just on the basis of someone having brought a complaint.

Mr. Shaw or his Brussels-based colleagues must have heard, directly or indirectly, from persons who were told by Sony that Call of Duty on the PlayStation might somehow be degraded--relative to CoD on the Xbox--when Microsoft is in charge. The word "people" indicates a plurality of persons, and that also makes sense because I believe Microsoft would not bring a public accusation of lying based on a single person's claim without having obtained corroborating information.

But what kind of "people" is Sony lying to?

It must be one or both of the following options:

• European Commmission EVP Margrethe Vestager, who had a meeting with Sony's PlayStation chief Jim Ryan on Wednesday according to Reuters; and/or

• Brussels-based journalists who cover tech competition cases.

The latter is more plausible than the former, but neither can be ruled out given that this revelation comes on the heels of that EC-Sony high-level meeting.

Journalists are more likely to confront Microsoft with what Sony said. There could have been conversations in which Microsoft told reporters that the deal was going to ensure total parity between the PlayStation and Xbox versions of Call of Duty, and then some journalists said "but Sony told us the opposite."

It isn't inconceivable, however, that what Sony said in the meeting with the EU's antitrust chief somehow leaked. More than ten years ago I had a meeting with one of Mrs. Vestager's predecessors at the Berlaymont (the EC's main building in Brussels) about another tech merger. The commissioner had one member of her cabinet and one of the two co-leads of the case team on her side of the table; we were also three. After the meeting, we talked to outside counsel for two other parties opposing the deal. Nothing leaked, but it was a small meeting and the fact that it took place wasn't reported in the media.

What weighs against the hypothesis of Sony having lied to Mrs. Vestager is that the Commission's Directorate General for Competition (DG COMP) presumably has a copy of the ten-year license offer in its case file. Anything Mr. Ryan said could be verified by just reading the proposed contract. However, Mrs. Vestager herself will probably not read an entire license agreement: she's in charge of competition enforcement and digital industry policy, and can't read each and every document from a merger case. So it's possible that Sony lied to her, hoping that even if the case team told her that the deal was clear on parity, some sliver of doubt would remain.

There can be no doubt that the ten-year license agreement came up during the Wednesday meeting. At this stage, where the European Commission was reported by MLex and others to be preparing a Statement of Objections (SO), Mr. Ryan was not going to give Mrs. Vestager a tutorial on what a video game console is. This is the stage where remedies matter (even if there is actually nothing to be remedied in the first place).

Here's the comment with which I shared the news of that meeting:

That's interesting. I wonder how EVP @Vestager views Sony's rejection of a 10-year Call of Duty license. Serious and reasonable complainants are interested in their concerns being addressed. https://t.co/3L9nojY0zH

— Florian Mueller (@FOSSpatents) January 26, 2023

It's interesting that the original prediction of the SO being handed down this week did not pan out. I have no doubt that when MLex reported it, it was indeed the Commission's internal schedule, though anything can always change before a formal decision is adopted.

Wednesday would have been the day for the vote: that is the day the College of Commissioners meets every week except during the European Parliament's Strasbourg plenary weeks (which this week wasn't). Instead of a vote on the SO, what happened was Mrs. Vestager's meeting with Sony. It might have been Sony's last chance to convince her that the commitments offered by Microsoft do not satisfactorily address the issue.

Another thing happened on Wednesday. Politico's Samuel Stolton reported, based on information from four unnamed sources, that DG COMP is "planning to open an antitrust probe into Microsoft over its video and messaging service Teams."

There is obviously no factual link between the merger and that unilateral-conduct topic. It's a coincidence that both topics are on the agenda at around the same time. But it could be that the Commission will simply make a rational and pragmatic decision about the Activision Blizzard deal while deciding to investigate Salesforce subsidiary Slack's Office-Teams tying allegations. Again, it would be a coincidence, but it would show that the Commission is not giving Microsoft any preferential treatment, just that the Activision Blizzard deal simply doesn't raise issues, especially not when a hard and fast ten-year license agreement can serve as a de facto structural remedy.

On Thursday, Bloomberg reported that, according to a former U.S. antitrust official, the FTC rushed to its in-house court in December with its Activision Blizzard complaint in order to discourage the EC from striking an agreement with Microsoft. I don't know whether this is true (the Capitol Forum disagrees), but it could be. There definitely are interdependencies between regulatory processes, as evidenced by what Microsoft's counsel said at the first hearing in the FTC case and indicated by the postponement announced by the Commerce Commission of New Zealand. But Washington doesn't remote-control Brussels.

Bloomberg reporter Nick Turner jokingly called this an "America first" policy: first in a chronological sense (first to file), but obviously not in a policy sense. Prior to Lina Khan becoming FTC chair, it would have been unthinkable for a U.S. government agency to pursue the objective of derailing a merger U.S.-U.S. merger that raises no legal issues, and to try to use foreign competition authorities for that purpose.

I doubt that Mrs. Vestager, her aides and her services (i.e., DG COMP) were amused when they heard of that Bloomberg article. The FTC-DG COMP phone call that the article references undoubtedly took place; even the Capitol Forum does not dispute that fact. But the notion of an FTC in-house lawsuit serving to influence the Commission's independent decision on whether certain merger commitments are more than good enough to facilitate clearance is a bit of an insult. I'm sure the Commission won't be influenced either way: neither will it engage in a race to the bottom in terms of who is prepared to ignore the applicable legal framework to a greater extent than their peers, nor do I think the Commission will grant clearance just to prove its independence after the Bloomberg article.

In my observation, some of the reports on the EC-Sony meeting implied that it was a win for Sony to get that audience. But the opposite is possible: it could be that the meeting was held to give Sony one last chance to show why a justiciable PlayStation-Xbox parity commitment for what is an eternity in this industry should not be accepted. Sony may have failed to make that showing, and then there might not even be an SO. We will find out soon.

In other Microsoft-ActivisionBlizzard news, Sony filed a new agreed (with Microsoft) motion for an extension of time (PDF) to bring a potential motion to quash or limit Microsoft's subpoena. Further to the first extension, the deadline would have been on Friday (January 27). It has now been pushed back further to Wednesday (February 1). All that we can conclude from this is that the parties are still talking, but that they apparently find it hard to reach an agreement. Sony may have more problems with the truth than most people would have thought. They must have something to hide.

Microsoft's Twitter thread about the nature of the ten-year offer and Sony lying about it creates an interesting situation. Sony either has to contradict--which could lead to further public discussion, possibly even the publication of the entire agreement (with or without some of the commercially relevant numbers redacted)--or, by remaining silent, Sony fails to dispute that it lied. What makes all of this even more serious is that potentially Mr. Ryan himself was lyin'. But who--other than a liar--would not refute that kind of allegation?

Share|

Spotify, other app makers, and media companies urge EU antitrust chief Margrethe Vestager to take decisive action against Apple, other digital gatekeepers

Politico's Samuel Stolton reported today (here's a LinkedIn post that contains a link to the actual Politico Pro article) on a letter by several companies and industry associations to European Commission EVP Magrethe Vestager. The subject of the letter, dated January 17, 2023, is "Call for swift and decisive action against anticompetitive practices by digital gatekeepers".

The corporate CEOs among the signatories are:

• Basecamp (online collaboration) co-owner David Heinemeier Hansson

• Deezer (music streaming) CEO Jeronimo Folgueira

• Proton (encrypted email and personal information) CEO Andy Yen

• Schibsted ("family of digital brands ... across media, online marketplaces and technology ventures") CEO Kristin Skogen Lund

• Spotify (music streaming) CEO Daniel Ek

The following industry associations also signed the letter:

• European Publishers Council

• France Digitale (which also brought a data privacy complaint in France that recently resulted in Apple being fined)

• News Media Europe

The letter particularly focuses on Apple, which it says "has imposed unfair restrictions on [the signatories'] businesses" that "hamper [their] development and harm European consumers." The signatories generally urge the EU to act against Apple and other digital gatekeepers, also by enforcing as soon as possible the Digital Markets Act (DMA). But what appears to be the most immediate priority here is a call for "a rapid decision in the competition case against Apple for its illegal, anti competitive behaviour involving music streaming services."

As the letter notes, the Statement of Objections (SO) in the Spotify case is "nearly two years old" (it came down right before the Epic Games v. Apple trial in the Northern District of California).

Here's my take:

It is indeed unusual that almost two years after an SO, no decision has been handed down. Normally it takes about a year or less.

The letter correctly notes that Apple's conduct causes problems every day.

That said, no victim of those practices--neither Spotify nor its co-signatories or third-party app makers like me--would benefit from a DG COMP ruling that Apple gets annulled by the Court of Justice of the EU. Apple has vast resources and will exhaust all appeals. The Commission has lost some cases for (partly) procedural reasons. It's key to ensure that Apple cannot make a meritorious argument centered around a violation of its rights of defense and/or on the substance of the case.

According to media reports, EU antitrust chief Margrethe Vestager met with Spotify CEO Daniel Ek a few months ago. For now, I have no reason to believe that the case is going nowhere, but I would agree that things are a bit slow.

Epic Games--represented by Clifford Chance in the EU just like Spotify--brought its own antitrust complaint about two years ago, and its counsel told a reporter that Epic was "joining" the Spotify case. In formal terms, however, that is not the case, and the question is what the Commission is going to do about Epic's complaint.

Clifford Chance's EU antitrust practice needs a new success story, and needs it badly. They brought those high-profile complaints over Apple's conduct, but neither has resulted in a ruling and one has not even given rise to full-blown investigations. Then they're behind that European Superleague Company case, where the Advocate General clearly disagrees with Clifford Chance on the most important questions (such as Clifford's "conflict of interest" mantra), and the way the firm is attempting to litigate the case via conferences is not necessarily advisable.

The letter is a bit premature with respect to the DMA. There will be important things happening this year (designation of core platforms etc.), but actual DMA enforcement won't begin before next year. It appears to me that the letter just tries to put the Spotify-Apple case into a wider context.

The signatories--all of whom are European (at least at the personal level)--are a pretty good group, but I'm not blown away. They're long-standing complainants over Apple's App Store practices. A big part of the problem is that for fear of retaliation, many app makers don't dare to speak out, and that even includes large companies.

I'm underwhelmed by the letter for stylistic reasons as well. For example, the letter twice mentions "softwares", which Wiktionary describes as "[g]enerally an error made by non-native speakers" (it's an uncountable noun).

The open app markets movement is fighting the good fight, but it has room for improvement in various respects.

Share|

Apple's climate change hypocrisy and deceptive lobbying: ACT | The App(le) Association lobbied EU Commission EVP Vestager's cabinet against waste reduction policies on September 8, 2022

Apple's positions on climate change require greater scrutiny (as to its privacy and security claims and other talking points). Let me start with a quote from an article that appeared on the website of the Tech Transparency Project on May 31, 2022:

‘Green’ Apple Backs Business Groups Stalling Action on Climate Change

Apple CEO Tim Cook talks about a ‘greener’ future. But his company is a member of business associations fighting efforts to reduce greenhouse gas emissions.

The Tech Transparency Project names such groups as "the Texas Association of Business, which has questioned whether humans are causing climate change and has a long history of fighting against regulations designed to curb carbon emissions." And it says that seven of the industry associations Apple disclosed in 2020 to be involved with oppose right-to-repair legislation. The first one on the (alphabetical) list: ACT | The App Association, an astroturfing group that Bloomberg exposed in September as being overwhelmingly funded by Apple and falsely claiming to represent the interests of small app developers.

Just about a week before that Bloomberg article, which (as I also said in my previous post) should dissuade any policy maker from ever taking ACT seriously, ACT seized one opportunity--which should be the last--to attempt to fool the European Commission.

Thanks to the AskTheEU website it has become known that on September 8, 2022, at 2 PM Brussels time, two unnamed representatives of ACT | The App(le) Association met with Mrs. Alina-Stefania Ujupan and Mr. Alejandro Cainzos, members of the cabinet of the European Commission's Executive Vice President (in charge of competition enforcement and digital industry policy) Margrethe Vestager as the following minutes of the meeting show (click on the image to enlarge or read the text below the image):

This is the summary:

"In a short meeting, the App Association raised their concerns regarding the draft Ecodesign Regulation for Mobile Phones, Cordless Phones and Tablets, claiming that giving users the ability to switch back to Operating System versions older than the last two available would create difficulty for App Developers to ensure the cybersecurity of their applications. Cab Vestager took note of the views expressed and recalled the important aims of the Regulation to reduce electronic waste." (emphasis added)

ACT--which receives the vast majority of its funding from Apple and doesn't even have regular membership dues for small app developers--emailed Mr. Cainzos on July 11, 2022. The subject line was "Meeting request with the App Association on the new Ecodesign Regulation proposal." ACT | The Apple Association said it "wanted to flag some concerns [they] have on the proposals in the draft regulation" and asked:

"Would you be available for a short meeting in the next couple of weeks to discuss further the potential impact of this regulation on small app developers?" (emphasis added)

The world's richest corporation, lobbying against environmentally sound policies in the name of "small app developers" while engaging in greenwashing all the time...

There are simply two reasons why Apple does not want users to be able to switch back to older iOS versions:

• Apple wants users to buy new devices as frequently as possible.

• Apple wants to save software development costs, so they don't want to keep older iOS versions secure and ensure backward compatibility of apps with older iOS versions.

Is this of concern to small app developers? Seriously, the average small app developer wouldn't even be aware of the European Commission preparing an Ecodesign Regulation for Mobile Phones, Cordless Phones and Tablets. ACT has a budget of approximately 10 million dollars and claims to represent 5,000 small app developers, which would mean that the average member would have to pay annual membership dues of 2,000 dollars. In reality, Apple foots the bill, and those 5,000 "members" are just a claim. On ACT's website, one can only find a few dozen companies, and they're mostly service providers (as opposed to app makers who publish their own products). I attended an ACT event in Berlin in September 2019, and I was definitely the only app developer in the room...

Do small app developers have a "cybersecurity" problem if users can switch back to older operating system versions, as Apple's astroturfers told the Commission?

Being an actual app developer, what I can say is that, generally speaking, fragmentation is not in our interest, and that's a concern that should be taken seriously. I say so even though I also advocate competition enforcement against Google in the Android context, where Google makes "anti-fragmentation" arguments all the time.

However, what makes no technical sense here is that our own apps would have "cybersecurity" problems if Apple simply allows more backwards compatibility. If our code is secure on the latest version of iOS, why would it be insecure on an older version? Only if Apple doesn't keep older versions sufficiently secure.

Small app developers like my company actually have a problem with Apple's planned obsolescence of products. When we write software for desktop operating systems today, we can rely on that software still being functional and available to end users in, say, ten years from now. On mobile platforms, especially iOS, we are forced to upgrade software to newer API versions all the time. Apple (and Google) could add features and still ensure backward compatibility. They could expand their APIs without deprecating old APIs after a short while.

One example is that Apple decided to make version 2 (and, as a result, all subsequent versions) of its Swift programming language incompatible with version 1. That's because Apple recognized some design mistakes: there were features in Swift 1 that seemed innovative at first, but adversely affected code legibility. Instead of remaining backward compatible, Apple stopped supporting newer iOS API versions in Swift 1. In 2018, Apple then gave developers an ultimatum: upgrade to a newer API version (which implied upgrading from Swift 1 to a newer version of the language) by a certain date, or you can no longer update your app--which was definitely not good for cybersecurity because developers must update an app to fix a security issue in the code.

Simply put, Apple doesn't care about the burden on small app developers, but its lobbyists masquerading as representatives of small developers hoped the Commission would be swayed on that basis. "Look at us poor little guys. Don't you have sympathy with us?" Astroturfing at its worst.

The best part of the minutes of that September 8 meeting between two members of EVP Vestager's cabinet and ACT is that they stressed the policy goal of waste reduction, which suggests to me that ACT's fake small developer arguments were unpersuasive.

The worst part, however, is that two (!) members of the cabinet of one of the key players of the European Commission wasted some of their precious time with Apple-funded astroturfers. Maybe they'd have canceled the meeting if the Bloomberg article on who really funds ACT had been published just a couple of weeks earlier (and if they had seen it in that case).

Should ACT get any more meetings with any member of cabinet of any EU commissioner now that it has been exposed as an Apploturfing operation, someone should start a petition for the EC to get a free Bloomberg subscription...

Share|

EU Commission staffer who tweeted about plans for Call of Duty is competition chief Margrethe Vestager's former spokesman: Microsoft-ActivisionBlizzard update

This is a quick follow-up to my previous post, DG COMP faces worst case-specific credibility problem in history as PlayStation-loving EC official's tweet taints Microsoft-ActivisionBlizzard merger review, so-called clarifications don't help. The European Commission's attempt to explain away the Sonygate affair has already been reported in media around the globe, not only on game websites like Video Games Chronicle, but even including news.com.au, an Australian website run by Rupert Murdoch's News Corporation. We can't blame games-specialized and mainstream media journalists for not having seen immediately why the EU Commission's statement does nothing to assuage the actual concern, which is that they launched an in-depth merger review with a preconceived notion favoring a position taken by Sony that cannot withstand scrutiny.

A Brussels-based reporter has now brought it to my attention that the PlayStation-loving EC official (whom I jokingly named "Sonyboy"--no offense)--is actually Executive Vice President Margrethe Vestager's (i.e., the bloc's competition chief's) former spokesman!

That background makes his tweet about what remedy the Commission has in mind all the more astounding.

Here's another tweet of his--from early 2019--about a New Year's cake that Mrs. Vestager baked for her team:

Commissioner @vestager: not only enforcing competition rules but also baking a great New Year’s cake for her team! I can formally confirm that it was an almond and chocolate concoction that tasted as good as it looked. pic.twitter.com/PgihiHsDer

— Ricardo Cardoso (@RCardosoEU) January 8, 2019

A Computerworld article from 2015 contains the following passage:

"Vestager spokesman Ricardo Cardoso confirmed the meeting at the Commission's midday press briefing Tuesday. He declined to comment specifically on what was discussed since it relates to an ongoing competition investigation."

It seems he's now less concerned about what "relates to an ongoing competition investigation."

The fact that he was replaced when Mrs. Vestager started her second term may mean that he didn't get along too well with her. At any rate, Mr. Cardoso is an EC insider (whose current job likely involves liaising with DG COMP) and a former DG COMP spokesman.

A Phase 2 merger investigation should not be a charade where the outcome is a foregone conclusion. DG COMP must always be receptive to arguments for unconditional clearance and focus on protecting the competitive process as opposed to a particular competitor such as Sony, whose agenda is clearly not pro-competitive as its restrictions on cross-platform play show.

Share|

SONYGATE: DG COMP faces worst case-specific credibility problem in history as PlayStation-loving EC official's tweet taints Microsoft-ActivisionBlizzard merger review, so-called clarifications don't help

At a time when the economy at large and society need the European Commission more than ever to enforce antitrust rules--now also the Digital Markets Act (DMA)--fairly and vigorously, it is extremely unfortunate that the EC's Directorate-General for Competition (DG COMP) must deal with its biggest credibility problem in history. It didn't arise in a minor context, but in an ultra-high-profile case (the merger review of Microsoft's $69B acquisition of Activision Blizzard King) and, worst of all, it directly relates to DG COMP's number one vulnerability, which is that it's often--quite often unfairly--accused of protecting competitors rather than competition and consumer welfare. Here, the beneficiary would be the undisputed leader of the gaming console market, Sony (and, by extension, Google).

The EC as an institution has certainly gone through worse. Here's a quote from the European Parliament's official website:

"Accused of corruption, misuse of power and fraud, the Santer Commission threw in the towel on 15 March 1999."

Compared to that, DG COMP has not had a Watergate, though the worst known excess resulting from its revolving-door problem, involving one of EVP Margrethe Vestager's predecessors in office, has been called the "Uber lobbying scandal" by Transparency International, an organization that believes the "European Commission['s] ethics rules are not up to scratch."

With what has happened this week, the EC lacks the moral authority to hand down a Statement of Objections (SO) against Microsoft-ActivisionBlizzardKing (should it have planned to do so in the first place, given that there is no legally defensible theory of harm anyway). And with statements that were issued yesterday, both the EC and its "Sonyboy" are digging an ever deeper hole for themselves as I'll explain further below. It's not just a lack of moral authority, but also that an appeal of a prohibition decision to the Court of Justice of the EU would be an uphill battle for DG COMP beyond the absence of a credible theory of harm. The judges--which have previously identified "procedural irregularities" in the Qualcomm case--would, at minimum, draw certain inferences from this.

On Tuesday, after the EU Commission announced that it had opened an in-depth investigation into Microsoft's acquisition of Activision Blizzard King (see my same-day commentary), Sony PlayStation fan Ricardo Cardoso--the deputy head of an EC unit--shared DG COMP's related tweet and added the following commentary:

"The Commission is working to ensure that you will still be able to play Call of Duty on other consoles (including my Playstation). Also on our to do list: update stock pictures. These gamers have wired controllers whereas Xbox and Playstation have wireless ones since about 2006!" (emphases added)

Many people absolutely correctly interpreted this as an admission of institutional bias. Sony has been lobbying regulatory authorities around the globe against the deal (and Google, too), with Sony known to argue primarily that Activision's Call of Duty is a "must-have title" Microsoft could allegedly leverage to monopolize the gaming console market. It is actually Sony who strikes exclusive deals all the time and acquires game studios; Microsoft has a track record of maximizing the reach of AAA titles like Minecraft, and would shoot itself in the foot by removing CoD from the PlayStation. But Sony makes that argument anyway, and while some regulators have seen through that smokescreen, others are still "investigating."

Yesterday (Saturday), two attempts to explain away the said admission of a Sony-friendly (rather than competition-preserving) agenda were made. Mr. Cardoso added a tweet:

"To clarify: I am not involved in the assessment of the merger and don't even work in the department dealing with mergers. As is clear from my profile my comments are personal and not a Commission position, whose decision will be taken on the basis of the facts and the law."

That is partly wrong, and what is not outright wrong misses the point. (Of course, I hope he is not wrong that the EC's "decision will be taken on the basis of the facts and the law.")

The issue is not whether "Sonyboy" is himself in charge of the merger review process. It's that he--as an EU official who was verified by Twitter as such--made a mission statement that starts with "The Commission is working to ensure ..."

He didn't say: "As a PlayStation fan, I hope the Commission will ..."

This is a credibility issue just on the basis that an EC insider plausibly claims to know what the Commission's objective is.

So, the test is not whether he's the one to decide. In the end, the decision will require a vote in the College of Commissioners, i.e., by all commissioners including the one Mr. Cardoso is working for (Thierry Breton). The only relevant question here is whether Mr. Cardoso is likely to know the EC's agenda, and--in a second step--whether that agenda reflects a bias that calls into question the fairness of the merger review (due process). To my dismay, both questions must be answered in the affirmative.

Let's look at Mr. Cardoso's Twitter profile (red underlinings added) (click on the image to enlarge):

• He's got the blue checkmark, and in the EU, Twitter isn't selling checkmarks for $8/month yet, so he asked Twitter to be verified as an EU official.

• The profile starts with his EC function (and by the way ends with with a link to the EC's website, not a personal homepage or whatever).

• The "Views, mine" and "RT≠endorsement" disclaimers are irrelevant because, again, the only question is whether he was sharing on Twitter what he knew about the Commission's agenda.

• And contrary to not having a professional involvement with EU merger reviews, his profile tells us that his responsibilities and interests include "industry" and "competition" issues as well as "gaming."

It is simply not true that his DG has nothing to do with merger reviews. The fact of the matter is that while DG COMP is in charge, DG COMP does discuss the issues in those cases with other relevant DGs, particularly if they have a relevant industry focus, and officials from other DGs are invited to DG COMP merger hearings. DG GROW is the Internal Market DG, and its responsibilities are more closely related to those of DG COMP than that of any other DG, especially under President von der Leyen, where competition chief Vestager and internal market chief Breton both have responsibilities for digital industry issues such as the DMA. I've heard from Brussels sources that Mr. Breton even has a de facto veto right (under an unwritten agreement) against major DG COMP decisions.

Mr. Cardoso's Twitter profile suggests that it's one of his unit's responsibilities to liaise with DG COMP.

He can can say whatever he wants, but there can be no reasonable doubt--based on the wording Mr. Cardoso used in the relevant tweet, the information in his profile, and the fact that DG COMP does discuss merger cases with other DGs, above all, with DG GROW--that what he tweeted on Tuesday was "inside baseball." It means that DG COMP entered into Phase 2 not with the open mind that is required from a due process perspective, but with the stated objective of using the merger control process to force Microsoft to make concessions regarding Call of Duty. Again, Mr. Cardoso was not expressing a wish, but telling the world--via Twitter--what the EC is up to.

Once upon a time, years before Mrs. Vestager was appointed to the Commission, the following happened at a DG COMP merger hearing (which followed an SO, so they were really close to the end of Phase 2 as opposed to that phase just having been entered):

Near the conclusion of the hearing, the DG COMP unit in charge of that merger review explained the issues in the given deal (which I won't name) with a slide deck. The final slide of that final presentation for the day said that the transaction would have to be blocked in the absence of a certain structural concession. The lawyer representing the acquirer was outraged and demanded that a copy of the slide be given to him immediately. He said: "This will be Exhibit 1 to my appeal [to what was then called the European Court of First Instance and is now called the EU General Court]."

I doubt that the Activision case will get to that stage, but should it happen, the Commission will look really bad in the eyes of the judges of the EUGC when Mr. Cardoso's tweet is shown. The judges won't buy any attempts by DG COMP to disavow it. It's a smoking gun, and here's a screenshot in case those tweets get deleted (click on the image to enlarge):

Also, TweakTown's Derek Strickland reported on the response he received--again, on Saturday--from EC spokeswoman Adriana Podesta:

"As you've correctly pointed out, Mr Cardoso works in the Director General for the Internal Market and not in the Directorate General for Competition. Mr Cardoso is not involved in the assessment of this transaction. Furthermore, as indicated clearly in his Twitter profile, he tweets in a personal capacity."

On Tuesday, Derek Strickland had already criticized "some of the European Commission's arguments" (for an in-depth investigation of Microsoft-ABK) as "really off" and particularly found it "not realistic" that Microsoft could use Activision Blizzard King games "to dissuade people from using non-Windows operating systems". I totally agree with that, but let's get back to Sonygate.

The EC's official response again misses the point. The question is not whether a Sony fanboy will decide the case, but whether the people who will decide started their Phase 2 investigation with an open mind--or with a pro-Sony agenda and a bias. As for him having tweeted in a "personal capacity," that applies to subjective opinions, but changes nothing about someone with "EU" in his Twitter handle, his EC role and a link to the EC's website in his profile, having started a tweet with "The Commission ..." and having revealed his institution's agenda ("our to do list").

Seriously, I can't see how DG COMP could really solve the problem other than by recognizing that there is no legally defensible theory of harm, and granting unconditional clearance. In that case, no one would be able to complain in the end, and "Sonygate" wouldn't matter. If the Commission tried to block the deal (which would require it to enter an SO) over CoD and/or the outlandish Windows-related theory that Derek Strickland finds "really off" and "not realistic," Mr. Cardoso would apparently have tweeted about what he knew was going to happen. If the Commission, at whatever stage of proceeding, reached an agreement with Microsoft (though the latter has so far declined to make concessions as the acquisition raises no legal issues) that would involve CoD, one would also have to assume that Mr. Cardoso indeed shared information on the Commission's preconceived notion (aka bias) and agenda.

I am writing this here just in my personal capacity and as an app developer who wants the EC to be able to enforce existing competition laws and the DMA against abusive platform operators (one of which may be Sony, though I haven't made a PlayStation game so far). Before writing this, I didn't discuss this with anyone and only found out about it on Twitter. Also, I don't have the blue checkmark yet, though I hope I will soon :-)

Share|

EU General Court materially affirms European Commission in Google Android antitrust case: major implications for Google Play Store investigation

This here is a very short post. I will do a follow-up in the coming days after having had the chance to digest the EU General Court's judgment that just came down and affirmed the European Commission's Google Android antitrust decision. The court issued a press release (PDF). The fine was adjusted slightly, but still amounts to well over 4 billion euros.

The part I wish to highlight here is that one key aspect of DG COMP's decision is the leverage Google gets from its control over Android app distribution--and the dominant market position of the Google Play Store. Today's judgment (which I'm sure Google will appeal) therefore also paves the way for formal EU antitrust investigations of Google's abusive conduct vis-à-vis app developers, a question the Commission is already preliminarily investigating.

DG COMP has now (apart from that minor adjustment) defended the second of its three Google antitrust rulings in court.

The Commission's victory is so significant that it will additionally impact antitrust cases and investigations in other jurisdictions. For an overview of what's going on around the globe, may I refer you to my previous post, in which I commented on antitrust complaints against the Google Play Store and Apple's App Store in Mexico, but also listed exemplary cases in various other countries. Despite significant differences between U.S. and EU antitrust law, today's judgment will benefit Epic Games and the 36 U.S. states suing Google over the Google Play Store in the Northern District of California.

In other Google antitrust news, class actions on behalf of publishers were announced yesterday in the UK and the Netherlands (whereas the Dutch case is not limited to one country, but plaintiffs are seeking damages on an EU-wide basis). The damages claims amount to approximately 25 billion euros. I'll also try to find out more about that.

Share|

EU competition chief's harsh words on Apple's Dutch antitrust issue presuppose non-compliance, which is very debatable

I just reported on Apple's latest patent settlement (with Japan's national patent licensing firm IP Bridge). This story is now about Apple's App Store monopoly, and an utterance by the EU's competition chief that I don't agree with.

The European Union is fortunate to have two really strong commissioners in key positions at the same time: both Margrethe Vestager (competition enforcement and digital industry) and Thierry Breton (who is dealing with a lot more than just the EU's Single Market) are power brokers, great communicators, and shakers and movers. At different times I had doubts about either one. I was worried about Mrs. Vestager being on an anti-American crusade, and I still don't believe in that Apple-Ireland "state aid" case because the issue is political, not one of (existing) competition law. However, most of the time she's right, also in the opinion of the EU judiciary. With Mr. Breton my concern came from the opposite direction, but his resistance to a clampdown on some major standard-essential patent holders ultimately proved right, as Daimler's settlement with Nokia and subsequent signing of a license agreement with the Avanci pool tells us that the sky isn't falling on Europe's automotive industry. Mr. Breton has a sense of Europe's weaknesses and is serious about addressing them.

The jury is still out on whether they will accomplish their goals. The problems Europe faces--such as with Apple and Google--are difficult to solve. Previous generations of politicians failed. Mrs. Vestager and Mr. Breton will either go down in history as the ones who put Europe's industrial policy on the right track for the Digital Age, or their efforts will ultimately be judged as "too little, too late"--or the outcome could land in a gray area between those two scenarios.

Today, however, I saw articles such as Techcrunch's story on the EU swiping at Apple that made me aware of an acceptance speech Mrs. Vestager gave in Berkeley, CA, where she received the Riesenfeld Memorial Award. The following passage strikes me as gratuitous Apple-bashing:

"Effective enforcement, which includes the [European] Commission having sufficient resources to do so, will be key to ensure compliance. Some gatekeepers may be tempted to play for time or try to circumvent the rules. Apple’s conduct in the Netherlands these days may be an example. As we understand it, Apple essentially prefers paying periodic fines, rather than comply with a decision of the Dutch Competition Authority on the terms and conditions for third parties to access its app[ ]store. And that will also be one of the obligations included in the [Digital Markets Act]."

There's that qualifier or disclaimer: "As we understand it ..." But even those four words don't justify prejudging the Dutch situation, and denying Apple the right to disagree on what appears to be a reasonable basis. Let's look at this issue from the perspective of the rule of law:

• Yes, the Dutch Authority for Consumers & Markets (ACM) has fined Apple for five weeks in a row, to the aggregate amount of €25 million by now (with a cap of €50 million being approached soon). Here's my commentary on the fifth weekly fine, which was threatened for this week.

  But:

• The ACM is an executive government agency. Its decisions are reviewable by the courts of law, in this case potentially all the way up to the European Court of Justice, which also has the power to toss or affirm Mrs. Vestager's decisions.

• A court allowed the ACM to go ahead for the time being and force Apple to comply. However, Apple is still appealing the underlying decision, and no court of law has held Apple to be out of compliance with the ACM's decision.

• All we have is the ACM itself saying week after week that Apple is not doing enough to comply. So, what exactly is it that leads the ACM to deem Apple to be out of compliance? The only issue that the ACM specified in its most recent statement on this enforcement dispute is the requirement to submit a separate app for the Dutch market. There are other--but totally unspecified--issues.

• The Google-Apple mobile app store duopoly must be broken. However, if a regulatory agency or even a legislature in one small country orders Apple to support alternative payment systems there, it's not unreasonable for Apple to argue that all it has to do is to allow the submission of--and grant approval to--apps that are designed for that particular market and meet those requirements.

• There is a possibility--and that's undoubtedly the case in the Dutch market now--that developers won't benefit from a decision in practice. The market may be too small to create a separate app and have the existing user base migrate; and with Apple imposing an app tax of 27%, developers couldn't even pass on any savings to end users. That's understood. But that's not necessarily non-compliance. It may just be a structural issue with a decision that didn't go far enough.

• Some jurisdictions--such as the Netherlands--may allow a government agency to enforce an antitrust decision while it is being appealed. By contrast, in the United States the government firstly has to go to court and seek an injunction from an impartial judge. But Dutch lawmakers apparently didn't elect to give the ACM the power to really impose its own interpretation and application of a decision on private companies like Apple. The ACM faces a limit of €50 million; that maybe a draconian sanction for most companies, but not for Apple, and the alternative would have been a percentage of worldwide sales (which is what the EU Commission can impose, subject to court review) or even the possibility of sending executives to prison (which would obviously have to be decided by a court in the end, but the law could allow the ACM to initiate the process).

  Given that Dutch lawmakers decided that any sanctions for disagreeing with the ACM on the scope of its decisions should be limited. That makes it a legitimate choice for Apple to take its chances and continue with its appeal.

Having said that, I believe Mrs. Vestager should have given Apple the benefit of the doubt here. In dubio pro reo. That's an old European and even pretty universal concept. Mrs. Vestager is one of the most important players in the global fight against app store monopoly abuse. She should avoid coming across as biased. Here, she simply takes sides with the Dutch antitrust authority--when she doesn't even have a basis at this stage to be convinced of whether the underlying decision by the CMA was right (much less whether the ACM is applying it appropriately now), given that the Commission itself has not made a single final decision against Apple on App Store issues, and the only preliminary decision (the Statement of Objections in the Spotify case) that it has handed down deals with the narrow issue of a third-party app maker competing with an Apple offering (Apple Music), while the Match Group can't (and to the best of my knowledge doesn't) claim that Apple is competing in the dating-app business.

So the ACM is far ahead of DG COMP with respect to App Store monopoly abuse both on the merits and in procedural terms. It's simply too early for Mrs. Vestager to endorse the ACM's course of action. DG COMP and the CMA obviously communicate through the European Competition Network. Still, if DG COMP believes that Apple is abusing its App Store monopoly by requiring the use of its own in-app payment (IAP) system even when app makers don't compete with Apple as directly as Spotify does with Apple Music, then why leave it to its smaller Dutch counterpart to enforce the law?

And why does Mrs. Vestager just ask for more resources for her institution when the very best and most effective way to enforce the Digital Markets Act is actually to enable private enforcement (through litigation, of course) in addition to DG COMP's own efforts?

It's very shortsighted on some app developers' part to bet on overreaching interpretations of decisions--be it Judge YGR's "consolation prize" injunction in Epic Games v. Apple or the Dutch ACM's dating-app ruling. What's needed is a structural and principled approach--such as requiring Apple to allow third-party app stores and enabling enforcement through private lawsuits.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

EU competition chief's tough talk on cartels doesn't bode well for automotive SEP licensing negotiation groups

This is my second of at least three consecutive posts on automotive patent licensing issues. The previous one discussed the L2 Mobile Technologies v. Ford Motor Company case that is pending in the District of Delaware.

At the annual conference of the Italian Antitrust Association, the European Commission's Executive Vice President and competition commissioner Margrethe Vestager gave a speech yesterday that ushered in--as its title promised--"a new era of cartel enforcement." The manuscript was published on the Commission's website.

1+1+1=3. Mrs. Vestager vowed to crack down, inter alia, on (i) novel types of cartels and (ii) buyer cartels, and (iii) recalled recent enforcement action against (German) car makers. Automotive standard-essential patent (SEP) licensing negotiation groups (LNGs) are the combination of all of that. Further below I'll quote the relevant passages, which speak for themselves. If this doesn't serve to discourage car makers from advocating a solution that is inherently worse than the alleged problem it purports to solve, what else will?

If you haven't previously read my thoughts on collective licensing negotiation groups, here are the links to all parts of my late-July trilogy:

1. SEP Licensing Negotiation Groups -- Part I: analogy to patent pools entails false symmetry between facilitating and complicating automotive patent licenses

2. SEP Licensing Negotiation Groups -- Part II: justice delayed is justice denied when unwilling licensees can hide behind a consensus-building effort

3. SEP Licensing Negotiation Groups -- Part III: legalization of buyers' cartels would invite group boycott and collective hold-out

In the passages from the speech that you find below, any emphases were added by me to highlight certain keywords.

Novel types of cartels (i); automotive cartels (iii)

In one way or another, most of the cartels we deal with are still fundamentally about fixing prices. But sometimes, what we want as consumers is not so much a cheaper product as a better one. More and more, for example, we want to be sure that the products we’re buying won’t harm the environment. So a cartel that holds back improvements in the quality or the sustainability of the products we buy can be just as harmful as one that fixes prices.

This is why we took our decision in July against the five German carmakers who limited competition between them on how effectively they would clean the exhaust of their diesel cars. The cartel took place within what was otherwise perfectly legal, even beneficial, technical cooperation. The companies were developing a new cleaning technology that used an additive, which they called AdBlue, to remove harmful nitrogen oxides from car exhausts. And they needed to cooperate to tackle the practical challenges – to set up a network of AdBlue filling stations, for example, or to design a standard pump nozzle that would fit any car.

But they crossed the line into illegal collusion when they indicated to each other that they wouldn’t aim at cleaning beyond the level required by the legal standard. They knew they could remove even more pollution than the law required, by injecting more AdBlue into the exhaust. So they could have competed to attract environmentally-conscious consumers, by making even cleaner cars. But instead, they chose not to compete for the best possible cleaning performance.

A case like this can be a powerful deterrent, showing companies that they can’t escape the rules, by colluding in novel ways.

...

[...] And at a time like this, it’s more important than ever that we keep our markets working fairly and well – not least, by taking firm action to tackle cartels.

That’s why we’re investing so much at the moment, to make sure our work stays relevant. It’s why we’re developing new ways to spot cartels, and why we take an interest in new types of cartel, as well as more familiar ones.

Buyer cartels (ii)

In the last few years, for instance, we’ve dealt with several cartels that manipulated industry reference prices, rather than fixing final prices. Last year, we fined four ethylene buyers more than 260 million euros, for conspiring to reduce the reference price that was applied in long-term contracts.

Buyer cartels like this one may not raise prices for consumers. But that doesn’t make them some sort of victimless crime. They still make our economy work less efficiently. And they still have direct victims – even if it’s suppliers, not consumers, who suffer.

And some buyer cartels do have a very direct effect on individuals, as well as on competition, when companies collude to fix the wages they pay; or when they use so-called “no-poach” agreements as an indirect way to keep wages down, restricting talent from moving where it serves the economy best.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Privacy and hypocrisy: Apple wants to know your location to sell you music, but governments must not ask you to scan QR codes to fight the pandemic

Last weekend I made an Android phone my primary mobile communications device. That was a lot of work, and I'll have to pay for some apps and content again. There are antitrust issues concerning Android, which is why Epic Games's amended complaint is worth reading, particularly the part about "sideloading" (direct installation of apps) "drastically" limiting app developers' reach. But faced with the choice, I clearly prefer Android because Apple is too heavy-handed.

The Epic Games v. Apple antitrust ruling may come down anytime now in the Northern District of California, though I wouldn't be surprised if that huge case took the judge another month or more to distill into what will hopefully be a razor-sharp ruling. Even without a major antitrust trial or decision, more and more people can figure out that Apple's defenses of its App Store monopoly abuse are pretextual.

This weekend, I had a defining moment in which I realized that Apple is fooling the world's antitrust authorities and lawmakers to a greater extent than even the epic Epic trial in May exposed. The only Apple app I'm still using after my remigration to Android is Shazam. And just yesterday, Shazam for Android--I kid you not!--asked for GPS permission so it could later tell me where I was when I "discovered" a song.

Give me a break, Apple. It's not merely hypocritical or ridiculous in the sense of dual standards. It's an utter disgrace that the very same company that obstructed the UK government's efforts to combat COVID-19 by rejecting an update to the British contact-tracing app that would have enabled users to scan QR codes of venues asks users to give them access to their GPS location data for a laughable purpose like this. Apple appears to be only about making money, not about principle. They want to sell music (iTunes), and that's why they acquired Shazam for a couple hundred million bucks. To give you another reason to use Shazam and, which is Apple's ultimate goal, to sell you more songs, Apple asks you for GPS access--but when a government facing the biggest global health crisis in about a century wants to ask (not require!) users to scan QR codes of venues in order to inform them of infection risks, Apple--like the most malevolent dictator you can imagine--prevents that app from being published on iOS.

Ask yourself this simple question: would you rather know that you might have gotten infected with COVID, or would you rather know where you first searched on Shazam for The Weeknd's Blinding Lights?

What makes Apple's double standards even worse is that an optional QR code scan compromises one's privacy to a far lesser degree than GPS access. Every location on Earth has GPS coordinates, but only a limited number of venues have QR codes at the entrance--and GPS is far more granular. And once you've granted an app GPS access, it can track you all the time, while you will always be in control when a QR code is scanned. But even if Shazam and the rejected version of the UK's contact-tracing app relied on the same method to determine your location, it's just unacceptable to have no qualms about collecting location data for music marketing purposes while prohibiting this when human lives are on the line.

The only consistency here is that Apple's leadership's approach to COVID is generally questionable, and its return-to-work plan has drawn well-founded criticism from many employees.

Today I tweeted about this Shazam v. contact tracing inconsistency (this post continues below the tweet):

#Apple's privacy pretext: Shazam asks for GPS permission to tell you where you discovered a song -- but the UK's official #COVID contact-tracing app was not allowed to ask users to (optionally!) scan QR codes of venues. #Antitrust enforcers shouldn't be fooled by a hypocrite.

— Florian Mueller (@FOSSpatents) August 8, 2021

I then decided to also write this blog post so as to ensure that many more of my readers, who include many decision makers and multipliers, would become aware of this.

There's a lot more that one could discuss when it comes to Apple, privacy, and hypocrisy. For now, instead of going into detail, let me just touch on a few items quickly:

• CNBC: Apple’s privacy reputation is at risk with the changes it announced (about its identification of objectionable/illegal images on users' phones)

  This tweet sums it up nicely ("What happens on your iPhone, stays on your iPhone -- but we'll take a peek"):

  I don't think Apple will ever live this sign down pic.twitter.com/PiwYZh3xda

  — Ben Schoon (@NexusBen) August 7, 2021

• Last month, a Bloomberg Law article on standard-essential patent (SEP) policy mentioned that "Apple and other tech companies, meanwhile, also are lobbying for state laws that could address what they view as anticompetitive behavior from some patent owners." (emphasis added)

  Hey, that's the same Apple that has been telling state legislatures in Arizona and many other states that they shouldn't legislate on mobile app stores (and I guess Apple is not exactly a fan of right-to-repair state laws either). By the way, patent law is exclusively federal law...

• A couple of months ago, a Nokia policy officer noted on LinkedIn that Apple opposes value-based (ad valorem, percentage of sales) SEP royalties but taxes app developers at a rate of 30% (which Judge Yvonne Gonzalez Rogers accurately summed up in her examination of Apple CEO Tim Cook as "charging the gamers to subsidize Wells Fargo"). Almost a decade ago, Apple wrote a letter to the Senate Judiciary Committee's leadership (a rebuttal of patent-licensing arguments made by Google) in which Apple used an analogy and said that all car drivers pay the same highway toll, whether they own a jalopy or a new sports car. Apple's 2019 FRAND policy statement, which is Cupertino's current position on SEPs to the best of my knowledge, advocates the "use of a common royalty base and rate."

  SEPs v. apps inconsistencies are an interesting topic that I may address more specifically on some other occasion.

In closing, let me just point you to this Reuters article by Foo Yun Chee, who was told by the Euroepan Commission's antitrust chief, Executive Vice President Magrethe Vestager, that Apple should not use privacy (and security) for "a shield against competition, because [the EU competition commissioner] think[s] customers will not give up neither security nor privacy if they use another app store or if they sideload."

In my own company's antitrust complaints against Apple, I describe alternative app stores as the best remedy.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Apple may already have lost the strategic battle over antitrust market definition in multiple European jurisdictions: App Store monopoly

Never before has there been so much hope that the mobile app store tyranny may come to an end. It's a marathon, not a sprint. There'll be appeals, and the freedom fighters of the Digital Era may experience setbacks. But the first week of March  2021 may very well be judged by history as the end of the beginning.

I've previously commented on the app store bill adopted by the Arizona House of Representatives. This is just the first legislative hurdle of three, and there may be court challenges even if the state senate voted in favor and the governor signed. But it shows that the app store liberation movement is able to build political majorities and overcome Apple and Google's counterlobbying. Initiatives are underway in multiple states, and it varies by state whether Democrats or (as in Arizona) Republicans take the lead.

On the other side of the Big Pond, Apple's purely pretextual defenses of its app store monopoly are falling apart. There were not one, not two, but three news cycles this week, two of which are bad news for Apple and the third is more likely than not to portend another decision against Apple:

• The Day of Reckoning is coming for Apple in Brussels, with the European Commission's Directorate-General for Competition (DG COMP) preparing a Statement of Objections (SO). Apparently the EU antitrust authority plans to issue the SO--further to a complaint by Spotify (there was also a similar one by a Rakuten subsidiary)--before the summer vacation season.

  An SO is not a final decision. Subsequently to the SO, a company under investigation gets to make its case again--and then there's a hearing and, finally, a ruling, which in turn is appealable. I repeat myself in the same post: It's a marathon, not a sprint.

  In Europe, Apple's market share is only about 30%. A dominant market position (the EU term for what is called a monopoly in the U.S.) can, therefore, be identified only by--which I consider absolutely correct in this case--defining a single-brand market. It's clear that Apple has failed to convince EU competition experts that the market should be defined more broadly, such as all mobile apps or all music distribution channels.

  The situation on the market definition front could be even worse for Apple: DG COMP may agree with Spotify's tying theory, which involves two markets: an iOS app distribution market and an iOS in-app payment services market. With a view to what may be the winning theory here in the EU, let me point you to the December 2020 version of what has already become a true app store antitrust classic: Professor Damien Geradin and Dimitrios Katsifis's The Antitrust Case Against the Apple App Store (Revisited).

  Apple's argument against tying is that the App Store and the payment system are just one product. Indivisible. Well, atoms were considered indivisible (thus the Greek name) until subatomic particles were discovered, and Epic Games achieved nuclear fission by an act of civil obedience, as its CEO called it in a CNN interview. Epic simply delivered proof that there is demand for alternative payment systems. Even if Epic had not done so, one would just have to download Amazon's shopping app or a parking or public transport app to come to the same realization.

  A Commission SO holding Apple responsible for tying might even give rise to a request for judicial notice in the period between the Epic Games v. Apple antitrust trial in the Northern District of California and Judge Yvonne Gonzalez Rogers's ruling.

  For a long time I was somewhat skeptical of whether Spotify's complaint was just going to lead to a "Lex Spotify" or help the developer community at large. Having researched the app store antitrust situation in greater detail since last summer, and considering that Epic--which doesn't specifically complain about direct competition from Apple, while Spotify is concerned about Apple Music--has joined the investigation, I'm definitely rooting for Spotify now. If Spotify prevails on market definition, Apple's App Store monopoly is finished in Europe.

  The closer I looked at the Spotify-Apple issue, the clearer it became to me that what Spotify is facing there is even worse than the problems experienced by major professional soccer clubs who are regulated by associations that are economic operators at the same time. To some degree, the associations' own soccer tournaments, especially some that involve national teams, also compete with club tournaments, and those sports bodies regulate them all. There are serious issues there, but Apple has an "octopus" growth strategy, seeking to grab market after market by leveraging its iOS app monopoly. Apple Arcade is another example.

• Another Reuters article reported on a letter sent out by the Authority for Consumers and Markets (ACM) of the Netherlands to developers and announcing that the investigation is complete and a ruling in the making. The Dutch antitrust agency didn't indicate what the decision would be. It's independent from DG COMP. But both are part of the European Competition Network and obviously in close contact. In light of DG COMP's upcoming SO, the odds are rather long against an acquittal unless there's something deficient about those specific complaints, which I doubt.

• The UK has left the EU, giving the UK Competition and Markets Authority (CMA) the opportunity to rule on high-profile cases that it previously had to leave to DG COMP. The primary author of the paper I mentioned further above, Professor Geradin, mentioned on Twitter that his firm, Geradin Partners, represents the companies whose UK complaints against Apple are now being investigated by the CMA.

  In the UK, the iPhone market share is approximately 50%, so the CMA might not even have to reach the question of a single-brand market: there's no plausible market definition in the UK that wouldn't make Apple's app distribution monopoly in that market subject to antitrust law.

A few years ago, Qualcomm appeared to be under similar antitrust pressure around the globe, but--unless a major surprise still happens somewhere--ultimately got off the hook. However, Qualcomm was able to do deals with key players such as Apple (which needed Qualcomm's 5G chips) and Samsung. It got a lot of support from the DOJ's antitrust chief at the time (a former Qualcomm lobbyist). There are reasons for which I believe Apple cannot extricate itself from this predicament the way Qualcomm did. But, again, this is going to be a rough ride and, to mention this word for the third and final time in this post, a marathon.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|