Apple logo on store showing antitrust probe over privacy rules

Italy Launches Antitrust Probe of Apple’s Potentially “Self-Favoring” Privacy Rules

Ever since Apple began its renewed focus on user privacy, a brand direction that has been in place for about three years now, app developers have criticized it for not applying its series of new privacy rules to itself in an even manner. The company now faces an antitrust probe in Italy over this point, as antitrust agency AGCM issued a statement saying that the system was unfair to third party developers.

Targeted ad industry complaints spark antitrust probe

Apple’s new brand direction puts hardware sales and its own first-party ecosystem ahead of third-party advertising revenues, with privacy rules that were announced in 2020 (and began rolling out in April 2021) greatly restricting how app developers can track and profile users across the internet. But these developers have been quick to point out that Apple does not always hold itself to the same standards with its own apps, something that could potentially give it a competitive advantage in the marketplace. Similar antitrust probes have already been launched by regulators in Germany and Poland.

The AGCM is investigating the alleged dominant market position that the privacy rules provide Apple with, as well as the disparity in “quality of information” that third party developers receive. The potential maximum fines for antitrust violations greatly exceed those of the General Data Protection Regulation (GDPR), allowing for up to 10% of annual turnover to be assessed.

Apple’s App Tracking Transparency (ATT) feature is at the center of the controversy. First implemented in 2021, the new privacy rules require that apps that engage in tracking of personal information for targeted advertising notify the user of this and collect their consent. This must now be done when the app is installed, or for apps that were installed prior to the rule change, when the app is next updated. However, at least for some time, Apple’s own apps were exempt from that requirement.

Apple has since made changes to its own apps that apply the ATT requirements to them more equally, but the antitrust probe opened in Germany last year notes that Apple has access to user data that other developers do not and that information continues to be collected even if the device user opts out of personal data sharing.

A fairly limited amount of Apple’s native apps collect personal information for targeted ads: the App Store, News, and Stocks, among several others. Apple has previously defended its internal exceptions to the privacy rules by claiming that these apps do not pass the personal data to third-party brokers. But the Italian antitrust probe notes that the Apple Ads Attribution tool used for the company’s own internal apps appears to take priority over those using the third-party developer tool SkAdNetwork. Several studies published in 2022 find that ATT boosted Apple’s own internal advertising network to the point that it is now on a similar footing with the titans of the industry (Google and Facebook).

Privacy rules appeal to consumers, but could land Apple in legal hot water

Apple’s tightrope to walk in pitching itself as the privacy-first brand is to avoid so much as an appearance of preferencing its own apps with its privacy rules. This is becoming increasingly difficult for the tech giant, not only because of existing antitrust probes but also due to new rules expected to come online in the EU in the near future.

Apple has already been under the microscope of antitrust probes for years, one of the more recent of which is the European Commission’s investigation into whether Apple privileged its own mobile payment system over other third-party options. But these troubles may come into sharper focus in a hurry under the newly-enacted Digital Markets Act. The Act officially went into effect at the start of May of this year, but the large “gatekeeper” companies it applies to have yet to be formally named. Apple will certainly be on that list, however, and will have until March 2024 to comply with the new rules. The terms of the Digital Markets Act essentially restrict these “gatekeeper” entities from preferencing any of their products on their own platforms, in addition to putting new restrictions on how distinct services or subsidiary companies may combine the personal data they hold.

Apple’s ATT privacy rules were dubbed an “adpocalyspe” by some, and did indeed have a significant initial negative impact on the targeted advertising market (with some players, such as Facebook, hurt much more than others). But two years in the digital advertising industry continues to see overall growth, and the move seems to have shifted ad spend to previously smaller players (such as Amazon). Some industries are also seeing increased success in convincing Apple users to opt-in by offering them some sort of meaningful value, as retail shopping apps have recently almost doubled the average rate of opt-ins.