The Apple Inc logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S. File picture: Reuters/Mike Segar
The Apple Inc logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S. File picture: Reuters/Mike Segar

Apple expected to be accused of worsening its bullying tactics

By The Washington Post Time of article published Apr 22, 2021

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By Cat Zakrzewski

One of Apple's most outspoken rivals plans to argue that the iPhone giant's alleged anti-competitive behavior has only worsened since the company has come under Washington's microscope.

Tile, the maker of devices that help people track their wallet or keys, was one of the first small companies to publicly accuse Apple of alleged bullying tactics in a high-profile congressional hearing 15 months ago. It will up the ante in another hearing Wednesday before the Senate Judiciary Committee, where lawmakers want to focus on competition in app stores.

Kirsten Daru, Tile's general counsel, will testify before Congress again just a day after Apple unveiled a new product called AirTags, which will directly compete with Tile in helping people track their items. The AirTags release "paints the perfect picture of precisely how Apple uses its ownership and dominance over the entire ecosystem to disadvantage competition," she told The Washington Post in an interview. Daru contends Apple is giving its own trackers advantages on the iPhone that other device makers don't enjoy, which makes their finding capabilities more precise and the devices easier to set up.

Tile's testimony puts a personal face on the long-running Washington criticisms that technology giants have become too powerful, and it was cited in last year's House antitrust investigation concluding that Apple wields "monopoly power" over how software is distributed to Apple devices. Daru plans to tell senators the investigation's conclusions have "seemingly done nothing" to deter Apple's behavior and accuse the company of continuing to exploit its power to Tile's detriment.

Sen. Amy Klobuchar, D-Minn., who chairs the Senate Judiciary subcommittee hosting Wednesday's hearing, called Apple's product launch "exhibit A" as lawmakers seek evidence of competition problems in the app store ecosystem.

"It's timely given this is the kind of conduct we'll be examining at the hearing, and Apple and Tile will both be in the room," she said during an interview.

Apple has pushed back on claims of anticompetitive behavior, arguing that more high-quality services from outside developers working with its phones and tablets make them more valuable. Apple argues its ecosystem has contributed to the growth of Tile's business.

"We have always embraced competition as the best way to drive great experiences for our customers, and we have worked hard to build a platform in iOS that enables third-party developers to thrive," Apple spokesman Fred Sainz said in a statement.

Tile's testimony highlights a fundamental challenge with Washington's current antitrust moment. Tech giants are known to move fast, constantly releasing new products and services directly competing with rivals, or acquiring smaller start-ups. Meanwhile, efforts to craft and pass changes to antitrust laws or bring lawsuits against companies frequently consume multiple years. The Justice Department brought an antitrust lawsuit against Google in October 2020, for instance, but it isn't expected to go to trial until at least late 2023.

Daru hopes that by speaking out publicly, she will compel lawmakers to move quickly to pass legislation preventing large tech companies from using their dominance to give their own products and services an upper hand over rivals.

"We are hopeful that we will see legislative reform, and the sooner the better," Daru said. "We're already seeing all of these known abuses affect industry and innovation in this country, and in effect consumer choice. The longer we wait, the bigger and more powerful Apple is going to become and it's just going to be harder."

Klobuchar says lawmakers recognize the urgency of the competition issues in the tech industry, and that's why she's trying to pass legislation "very soon" to better fund agencies doing antitrust enforcement. She said lawmakers are trying to break up antitrust proposals into smaller bills focused on issues with bipartisan support and a better chance of passing Congress.

In the case of AirTags, Daru argues Apple's new product will allow users to automatically connect to their phones without requiring them to open an app, making it easier to use versus rivals. Tile users, meanwhile, must go through a more clunky process to enable their trackers on iPhones, making changes deep in their phone settings.

Apple also says AirTags will use ultra-wideband technology, which is available on newer iPhones and permits users to get more precise details about the location of lost items. Tile devices currently rely on Bluetooth signals, which can tell users which room a lost object is in; with the ultra-wideband technology, Apple goes further by identifying the precise location of users' lost objects. Apple says the new tech will allow people to see the distance to their AirTags, and in what direction they need to head to find them.

Tile is also developing a new product using ultra-wideband technology, according to a person familiar with the plans who was not authorized to speak publicly about them. But Apple has not yet given Tile access to a chip allowing the company to access this technology on iPhones, despite repeated requests for access since 2019, Daru said. That's been a significant impediment to Tile's product development. Apple has said it will allow device makers to access the chip later this spring.

The new AirTags are just one of Tile's many grievances with Apple that it's speaking publicly about for the first time. Daru also plans to home in on the Find My program, which recently launched and was seen as an olive branch allowing developers to use Apple's vast network of signals from hundreds of millions of iPhones, iPads and computers to track devices. E-bike companies, headphone makers and even Chipolo, a company that makes tags similar to Tile's, have joined the program to use Apple's network to help people keep track of their belongings.

But Daru will paint a starkly different picture of the Find My program. She says for Tile's devices to work with Apple's network, it would have to abandon its own network and app, and instead direct people to use Apple's Find My app. She said that would have negative consequences for Tile users who access the service through Google's Android or Amazon Alexa.

She explains for companies to take advantage of the program, they have to agree to terms giving Apple "unprecedented control" over their businesses. Tile did not disclose the specifics of what controls it would have to hand over to Apple due to a nondisclosure agreement, she said.

"One of Apple's strategies is to create an ecosystem that's really hard for consumers to leave," Daru said.

Apple argues the Find My network is a private and secure way for people to keep track of important belongings, and that Tile is free to join the program at any time. The company says its work on finding lost items began more than a decade ago, when it first launched a feature to help people locate and wipe clear missing Apple products.

Tile also plans to criticize the 30 percent fee Apple takes for purchases made in its app, arguing that under Apple's current guidelines, it should be exempt from paying it. Spotify and Match have also criticized this fee, and it's one of the top issues in a lawsuit brought against Apple by Epic Games, the maker of Fortnite. Apple has defended the fees, and under pressure, it cut its commission rate to 15 percent for software developers with less than $1 million in annual sales on its platform.

Daru will also tell lawmakers that Apple has not followed through on commitments to make changes to settings on phones making it easier for people to set up their Tile devices.

Tile is not alone in its criticism of Apple's business practices. Officials from other Apple foes, including Spotify and Match Group, are scheduled to appear at the hearing, as well as from Apple and Google. Spotify plans to criticize Apple's requirement that developers exclusively use its payment system for in-app purchases, according to excerpts of the company's testimony reviewed by The Post.

"Without immediate help and specific rules, Apple and other gatekeepers will entrench their monopolies and control innovation in adjacent markets for decades to come," Spotify head of global affairs Horacio Gutierrez will say in his testimony.

Klobuchar hopes that people walk away from Wednesday's hearing with an understanding of how "widespread" the competition concerns about app stores are.

"I don't want it to take away from the fact that we have a major problem beyond that with the exclusionary conduct," she said. The Tile complaint "just one example."

The Washington Post

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