Apple Inc Chief Executive Officer Tim Cook listens as U.S. President Joe Biden delivers remarks during a meeting with members of his national security team and private sector leaders to discuss how to “improve the nation’s cybersecurity,” in the East Room at the White House in Washington, August 25, 2021.
Leah Millis | Reuters
Apple warned in a letter sent to lawmakers Tuesday that antitrust bills being considered in the Senate would increase the risk of security breaches to iPhone users, in part because they could force it to allow sideloading, where apps are downloaded outside the App Store.
Apple’s pushback reflects growing concern from the iPhone maker about the American Innovation and Choice Online Act and the Open App Markets Act, both of which are scheduled to be considered this week.
“The bills put consumers in harm’s way because of the real risk of privacy and security breaches,” Apple’s senior director of government affairs, Timothy Powderly, wrote in a letter to the Senate Justice Committee viewed by CNBC.
Apple has drawn consistent scrutiny from regulators in the past few years over its control of the App Store, which is the only way to install software on an iPhone. Apple takes a cut of between 15% and 30% on digital purchases made through iPhone apps.
The American Innovation and Choice Online Act, introduced by Sens. Amy Klobuchar, D-Minn., and Chuck Grassley, R-Iowa, would prohibit dominant platforms from favoring their own products over rivals.
That could have significant implications for companies like Apple and Google, which host rival apps on their app stores alongside their own, and Amazon, which sells private-label products on its marketplace alongside third-party brands.
The Open App Markets Act, introduced by Sens. Richard Blumenthal, D-Conn., and Marsha Blackburn, R-Tenn., would similarly prevent dominant platforms from preferencing their own products, but is focused specifically on app stores.
The bill would prevent companies with dominant app stores, like Apple and Google, from conditioning distribution of an app on whether the developer uses the platform’s in-app payment system, for example.
Apple has consistently argued that its control over the App Store is essential to deliver a secure and private experience to its customers. Otherwise, it argues, users could install malware and other malicious software. Android phones allow users to sideload apps, although users have to agree to several warning pop-ups in the software to do so.
In the Tuesday letter, Apple warned that allowing users to sideload apps, as the bills would enable, would be a “big loss for consumers” and said it would allow app developers to ignore Apple’s privacy policies and open the door to attacks from scammers.
“But, if Apple is forced to enable sideloading, millions of Americans will likely suffer malware attacks on their phones that would otherwise have been stopped,” Powderly wrote in the letter.
Apple argues that the bills should give the company the ability to defend its rules under the argument that they “increase consumer welfare.”
A spokesperson for Klobuchar disagreed with Apple’s interpretation of her bill.
“The bill does not force Apple to allow unscreened apps onto Apple devices,” the spokesperson said in a statement. “All of Apple’s arguments about ‘sideloading’ really amount to a desperate attempt to preserve their app store monopoly, which they use to charge huge fees from businesses they are competing against. Let’s be clear – this multi-trillion dollar company is more that capable of protecting privacy and security while still giving consumers greater choice by allowing competition. The legislation includes strong provisions that all platforms to safeguard user privacy and security.”
In a blog post Tuesday, Google’s Chief Legal Officer Kent Walker similarly argued that the bills could make their products less secure by preventing Google from integrating automated security features or making it harder to detect security risks across products if forced to break the connections between them. He also said the bills could force Google to share sensitive data with other companies and that its app store and search engine “might have to give equal prominence to a raft of spammy and low-quality services.”
Walker also argued the bills would put American innovation at a disadvantage and ultimately hurt consumers and small businesses that use its services.
Still, more than three dozen companies signed a letter Tuesday backing the Klobuchar-Grassley bill, saying alleged self-preferencing by dominant platforms “prevents companies like us from competing on the merits.” The signatories include rivals of Big Tech companies, many of whom have spoken out or even sued some of the large firms in the past, like Basecamp, DuckDuckGo, Genius, Neeva, Proton, Sonos and Yelp.
Both bills are scheduled to be marked up by the Senate Judiciary Committee on Thursday, where they could become amended and potentially voted to advance to the floor. Even if they are voted out of committee, however, Senate leadership will have to make the time for them to get a vote, amid a mountain of other pressing issues.
Tech-funded groups have been pushing back forcefully against the Klobuchar-led bill in particular, with the left-of-center Chamber of Progress warning consumers it would block Amazon from offering free shipping on select products through its Prime subscription service. Klobuchar’s office has said that’s simply untrue. Amazon, Apple, Google and Meta are among the Chamber of Progress’ backers.
Another tech-backed group, the Information Technology and Innovation Foundation, called on lawmakers to postpone the hearing ahead of its original date last week, with director of competition policy Aurelien Portuese saying in a statement that “this bill creates unfair competition and harms consumers by limiting online platforms’ capacity to innovate and, as a consequence, offer consumers better and more price-competitive products.”