Apple's Backup Plan to Stop Antitrust Legislation

Apple CEO Tim Cook was personally lobbying Congress last week on privacy and antitrust. He's got a backup plan to beat back the biggest threat to his monopoly.

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Last week, Apple CEO Tim Cook was walking in the halls of Congress, trying to push back against the biggest threat to his firm’s business model - bipartisan antitrust legislation that would crack open the app store to competitors. Perhaps even more important than the substance is the confidence passing such legislation would give to members of Congress that they actually can govern. A taste of power is a dangerous thing to let someone try, if they have authority over your excessively profitable industry.

Cook sat down with Senators from both sides of the aisle to persuade them to oppose antitrust legislation that would bar self-preferencing by dominant tech firms, as well as legislation to open up app stores. He met with Senator Roy Blunt of Missouri and Jon Tester of Montana, as well as a group of Republican Senators, spending his personal time to show how important it is to his firm.

Cook’s goal is to block the antitrust legislation any way that he can, joined as he is in this pursuit by Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai. The campaign against these bills goes far beyond a personal touch. There are now tens of millions of dollars being spent on negative ads against the proposed bills. The antitrust scholar world is horrified at the legislation, as is the American Bar Association. Billionaire Michael Bloomberg editorialized against it. Larry Summers, the Inflation It Girl who moonlights as a critic of antitrust enforcement, used the military strength argument, talking about the need to “be prudent in our application of antitrust” because of its impact on “a range of US national security values.”

But straight lobbying from a powerful CEO and hostility from status quo actors isn’t the whole plan. Apple is quite sophisticated, and has been also working on a secondary level to muck up Senate procedure so that the tech antitrust bills never get a vote.

The strategy is to put forward a separate tech bill around Federal privacy, and get that to the Senate floor at roughly the same time as the tech antitrust bill. The idea is to have some Senators saying that we need to deal with both privacy and antitrust matters, and so both parts of the legislation should go together.

And whaddya know, a week and a half ago this story came out.

The leaders of the relevant committees in Congress have agreed in principle on a draft bill to establish a Federal privacy law. This sounds like a good thing. Many advocates are pleased, as are scholars, and even tech companies. Here’s a statement of support from a big tech firm trade association.

“We’re more hopeful than we have been in years that a bipartisan privacy bill can make its way to the president’s desk this Congress,” Carl Holshouser, senior vice president of TechNet, a lobbying group that represents Google, Meta and Amazon, said in a statement.

And why wouldn’t it be a good thing? Over the last thirty years, we’ve heard a lot about the need for privacy and data rules, that Europe has standards and the U.S. doesn’t, that businesses can do whatever they want with YOUR data, and so on and so forth. This law would seem to solve this kind of problem. But largely these kinds of rules, whether put forward in California or Europe, tend towards creating annoying clickthrough agreements on websites, and not much more. Why?

The reason is fundamental, the intellectual core on top of modern privacy policy is rotten. ‘Regulating data’ isn’t a coherent concept. Data is everywhere, it’s in everything, and trying to regulate all data as if there’s some guiding principle makes no sense. Consider the following different scenarios.

• If I have a car and the car crashes, information about the crash is useful for public safety.

• If there’s a pandemic and public agencies are testing municipal sewage to track outbreaks, that’s using data.

• If someone in a business knows a customer’s name and talks to their colleague about that customer, that’s using someone’s data without their permission.

None of these situations are remotely similar to one another.

Trying to regulate data or privacy writ large, is like trying to regulate wheels. On first glance, it might sound reasonable. There are wheels in a lot of things, after all. Airplanes have wheels, so do cars and wheelbarrows and industrial machinery and surgical tools and toys. Wheels are everywhere and there are no Federal rules for wheels! That’s crazy! We must regulate them!

Of course, that’s insane, and obviously so.

We regulate by lines of business or industry sector. Cars have one regulatory schema, wheelbarrows another, toys another. That’s how we should think about data and privacy.

But in the 1960s, the consumer rights movement branched out into ‘data’ and ‘privacy’ and turned the space into the incoherent mess that it is today, which is a large group of fancy law professors, nonprofit groups, and compliance lawyers who mostly talk about different ways to do self-righteous busywork. They are mixed in with civil libertarians who dislike government surveillance, except of course when it comes to pandemics or other uses these advocates approve. Which is just another variant of not understanding that talking about data and surveillance as if it can be disaggregated from its basic uses is incoherent. The policy problem we should be concerned about is not about data or privacy, but abuses of power within industry or government. And to discuss constraining such abuses of power, we have to have some sort of limiting principle, and the ‘privacy’ or ‘data’ frame has no such principle.

And this brings me to the ‘privacy’ legislation. I’m not going to go over all the details, because it’s a complex bill with many moving parts. But conceptually what this law does is regulate the online advertising industry, not privacy writ large. And it does so by enlarging regulatory powers of the Federal Trade Commission and state attorneys general, while tossing a bunch of vague terms at the advertising industry and limiting the ability of states to do much on their own. I don’t think this bill will ‘work,’ because it’s not clear to me that the authors of the bill know what they actually want, beyond establishing a Federal privacy bill because that’s what a large chattering class says needs to happen.

For instance, and this is the one substantive part I’ll highlight, the bill will basically allow Google and Amazon to corner the online advertising market. The legislation puts some restrictions on “targeted advertising,” but defines targeted advertising in way that does NOT include anyone with a direct relationship with a customer. That means Google, which everyone uses multiple times a day, and Amazon, which has direct relationships with 200 million+ Americans and millions of businesses, can continue their specific business models, with even less competition from firms that have to rely on third party data brokers. There’s nothing, as far as I can tell, that would protect the ‘privacy’ of third party businesses that must use dominant firms like Google or Amazon, and in doing so, have to hand over their private data to potential competitors. It would likely empower Apple to solidify its business model. There is, in other words, a reason big tech firms largely like this bill, (and have likely helped author it.)

What’s notable is that the committees who organized this legislation - the Senate Commerce Committee and the House Energy and Commerce Committee - have not done a deep dive into the industry they are trying to regulate. The House Antitrust Subcommittee actually did a long and meaningful investigation into the dominance of big tech firms, reviewing millions of documents, during which members of Congress built enough institutional knowledge they could interrogate big tech CEOs effectively and coherently. It’s why TV comedian John Oliver was able to cite a back and forth from a Congressional hearing showing Jeff Bezos being embarrassed by Congresswoman Pramila Jayapal. That kind of effective interrogation takes enormous amounts of work, which is why the antitrust legislation is directed at real problems and is generating massive pushback from industry in the form of tens of millions of dollars of negative ads.

But the privacy-focused committees, while big tech CEOs did testify, had no such illuminating moments. Rather than doing a deep dive into an industry, they kept musing on privacy and data, absent from any understanding that all of this surveillance is financed by hundreds of billions of dollars of ad money. So now, Apple CEO Tim Cook is now walking around Congress saying that of course there is a problem with tech, but we really need to slow down and make sure that antitrust and privacy go together.

Congressional supporters of the antitrust bill know this, and are pushing back.

Some lawmakers say tying the two efforts to ensure passage before the August congressional recess is a bad idea. “This bill stands on its own and we were promised a vote,” antitrust bill sponsor Sen. Amy Klobuchar (D-Minn.) said at a press conference Wednesday. She said more changes could arise and conversations are ongoing, but she wouldn’t allow for a “weak bill.”

So there we go. Will swing Senate votes fall for the procedural ploy? Will they buy that we need Federal privacy legislation, and it must be paired with antitrust? Tim Cook knows that his firm’s market power depends on the answer to these questions.

Thanks for reading!

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cheers,

Matt Stoller