Apple Hit Over Privacy as US Tries to Undercut Antitrust Defense

The US Justice Department’s complaint against Apple Inc. singles out consumer privacy as a casualty of the iPhone maker’s allegedly monopolistic conduct, as the agency seeks to preempt Apple’s defense of its walled garden business model.

The lawsuit identifies several examples of Apple’s effort to allegedly maintain a smartphone monopoly that, according to the DOJ, degrades users’ privacy and security: allowing unencrypted messaging from iPhones to Android phones, prohibiting more secure or tailored alternative app stores, and setting Google’s search engine as the default in the Safari web browser rather than privacy-focused rivals, among other tactics.

The agency’s approach builds on the link between competition and consumer privacy highlighted in other recent tech antitrust cases and is aligned with regulators’ expansive assessment of anticompetitive harms.

“It comes out of a very broad understanding that privacy is not something the Big Tech platforms have ever done well, and that monopoly and lack of choices is complicating the privacy problem,” said Mitch Stoltz, intellectual property litigation director at the Electronic Frontier Foundation, a digital rights nonprofit.

The DOJ is also accusing the tech giant of using privacy as a pretext for its actions to solidify the iPhone’s market dominance, likely in anticipation of Apple’s claims that the company’s conduct enhances user privacy.

The company “wraps itself in a cloak of privacy, security, and consumer preferences to justify its anticompetitive conduct,” the DOJ said in its complaint, adding that Apple selectively applies its privacy policies to maintain its monopoly power.

Apple refuted claims that it uses privacy as a pretext for its business choices and said it prioritizes user privacy and security in the design decisions targeted by the DOJ. An Apple spokesperson said the company will “vigorously” defend itself against the DOJ’s allegations.

In their sweeping lawsuit, filed last month in the US District Court for the District of New Jersey, government officials alleged Apple has engaged in tactics across its ecosystem to preserve its dominance over the smartphone market. While the DOJ’s privacy concerns aren’t driving the agency’s theory of antitrust violations, antitrust professors and consumer advocates say they’re still poised to feature prominently in the case, amid a trend in regulators looking beyond consumer prices in their analysis of anticompetitive behavior.

Regulators at the DOJ and the Federal Trade Commission are questioning the notion, put forth by tech giants including Apple, that monopoly is safer than competition, Stoltz said.

Anticipating Apple’s Stance

Apple has repeatedly claimed its walled-off business model enhances user privacy and security—arguments the DOJ is likely trying to preempt, said Erika Douglas, a law professor at Temple University who studies the intersection of antitrust and data privacy.

In the private antitrust case against Apple filed by Fortnite maker Epic Games Inc., for example, Apple argued that restraints on iOS app distribution are geared toward protecting iPhone users. The company similarly leveraged privacy to justify its practices in response to the Digital Markets Act in Europe, new legislation to rein in the power of tech giants.

“It’s not so much about the offensive theories. It’s about the defensive theories,” Douglas said. “The relevant question is, can Apple justify its choices about competition based on privacy?”

The DOJ is trying to get ahead of Apple’s likely privacy-focused defense, agreed Sumit Sharma, a senior researcher at Consumer Reports specializing in technology competition. Agency officials could add to the list of concerns about consumer protection outlined in the complaint as the discovery process continues in their case against Apple, Sharma added.

Apple and its supporters have argued that requiring the company to allow third-party app stores or app sideloading—that is, installing software outside of the approved app store—would make its customers less safe.

“There are certainly elements of what Apple does that are beneficial to the consumer,” said Ramnath Chellappa, a professor of information systems at Emory University, referring to Apple’s relatively closed ecosystem. “But also, at the same time, using that dependency for its own purposes alone—that becomes the problem.”

Product Quality

Regulators are increasingly viewing privacy as one key aspect of product quality and something consumers would choose in a competitive market, antitrust and privacy researchers say.

The Federal Trade Commission, in its antitrust lawsuit against Meta Platforms Inc. filed in 2020, argued social networking platforms compete for users on a variety of factors, including options for privacy protection. Facebook’s acquisition of messaging provider WhatsApp degraded user privacy, the FTC claimed.

WhatsApp’s focus on the protection of user privacy “would offer a distinctively valuable option for many users,” the FTC said in its complaint. The DOJ’s lawsuit against Apple builds on the privacy arguments presented in the FTC’s case against Meta.

“Increasingly, for tech products, you have to look at the quality of the products,” Sharma, of Consumer Reports, said. “Privacy is a very key way to measure quality of goods and services, so I think privacy should be a big factor in this case and other cases going forward.”

Privacy protection is a “core dimension” of product quality, said John Davisson, director of litigation at the nonprofit Electronic Privacy Information Center. And it’s an aspect of quality that has been given short shrift for many years, Davisson added, in part because of the limited number of privacy-protective options available to users.

“Meaningful privacy protection is something that comes from robust and well-enforced rules of the road, and a competitive and efficient marketplace—and not from the choices of a few dominant platforms,” Davisson said.

The case is United States of America v. Apple Inc, D.N.J., No. 24-cv-04055.