Thought Starters

Dear Apple: Here’s How to Stop the Antitrust Investigations

A Five-Step Guide from the Developers You Sherlocked

Big tech has been in a slow boil. After wild west growth and lawlessness, Silicon Valley is finally getting the scrutiny it’s avoided for years — and it seems that everyone has been feeling disillusionment towards Amazon, Apple, Google, and Facebook. Following our experience of  getting sherlocked (where Apple copied our product and included it as a free OS feature), we’re here to jump in with our own perspective on getting antitrust laws up to speed. 

We’re Astropad — a small, bootstrapped startup with products for creative pros like Astropad Studio and Luna Display. In June 2019, Apple announced a new feature in macOS Catalina, called Sidecar, that closely copied our product lines. For our team of just 13 people, it was devastating news. Watching Apple present Sidecar to the world was like seeing years of hard work flash before your eyes while someone else took the credit for it. 

Through grit and nimble maneuvering, we’ve been lucky enough to survive the blow. If you’re curious about what the aftermath was like, we wrote a whole post about what to do when you get Sherlocked by Apple. To sum it up, we’ve learned some tough business lessons, are working on rewriting cross-platform code for Windows, and are on track to make a comeback as a stronger company than before we were sherlocked. 

In a rare bipartisan effort, the government is doing its part to reconsider how effective our monopoly laws are working to protect consumers and capitalism. Politico reported that the Trump administration has announced a 71% budget increase in the Department of Justice’s antitrust division to investigate big tech monopolies. 

It’s in Apple’s best interest to be proactive and tackle the antitrust problem itself rather than waiting for the government to step in. To help Tim Cook get ahead of the scrutiny, we’ve compiled some reasonable suggestions for Apple that don’t require government regulation. The idea here is that Apple would probably want to tackle the problem itself instead of having the government step in to break apart the platform (we’ll dive deeper into that later). We want to see the App Store level the playing field for third-party developers and promote a rich app economy for consumers, and we’re ready to offer our own post-sherlocked wisdom on how to do that.  

#1: Enable users to set default app preferences. 

As consumers, we love the App Store because it gives us the freedom to choose the apps that are best suited for us. But it’s a shallow freedom because Apple has the ultimate control over how we can interact with those apps.

Apple has a smug way of prioritizing its own apps over those of third-party developers, forcing users to take a few extra steps to get the experience they want. If you’re a Google Maps user, you’ve probably felt annoyed when you tap an address and your iPhone automatically pulls up directions in Apple Maps. Or, if you’re a Spotify user, you can’t just ask Siri to play Grimes’s new album, because unless you have it downloaded in Apple Music, Siri won’t be able to find it. 

In an era of declining hardware sales, this allows Apple to keep users tethered to the Apple ecosystem — a strategy that is being looked at with increasing scrutiny. Earlier this year, Bloomberg Technology reported emerging rumors that Apple is considering loosening restrictions to allow users to set third-party apps as their default— a move no doubt catalyzed by the pressure of recent antitrust probes. 

If Apple’s playbook sounds familiar, it’s because Microsoft did the same thing back in the 90s. In the early days of the internet, Microsoft (arriving late to the browser wars) decided to aggressively bundle Internet Explorer with Windows. This move sucked the life out of rising Silicon Valley superstar Netscape and consolidated the internet market, ultimately slowing down innovation and giving consumers fewer options. If Apple continues playing by the same aggressive rules, their own App Store will begin to suffer from lack of innovation and consumers will feel the blow. 

#2: Open up alternate payment mechanisms… without the Apple tax. 

Right now there’s only one way to buy an iOS app or make an in-app purchase, and that’s via the App Store. When a third-party developer sells an app on the App Store, 30% of the sale automatically goes to Apple in what’s known as the “Apple tax.” As a small startup, it’s a big cost to stomach. 

Within an app, developers aren’t allowed to offer alternate payment mechanisms or even hint at other ways of purchasing. Have you ever wondered why you can’t buy audiobooks in the Audible app, or sign up for a Netflix or Youtube subscription on your iPad? That’s because Apple taxes 30% of the purchase price, aggressively cutting into a company’s profits. If you’re a mega-company like Netflix, Amazon, or Google, you’re strong enough to sidestep the Apple Tax and push users to make payments outside of the App Store. But most smaller third-party developers don’t have the clout to reroute payments around the App Store to avoid Apple’s tax; this means that the developers often have to include the cost of that tax in app prices in order to sustain their businesses. 

Apple is using its control of the platform to impose this “tax,” when it should really be competing for the tax based on merit. What if consumers were given the choice to choose between different payment mechanisms, like PayPal or Amazon Pay? If App Store purchases are more seamless for consumers than using PayPal, that’s fine! Just let the consumer make that choice instead of forcing it on them. Not only does this solution give consumers more freedom, but it also sets higher standards for competition across payment systems. Suddenly, in-app purchases will compete on the merit of their ease of integration with the app experience. 

There will always be some friction in taking out a credit card or logging into PayPal. So for customers wanting to avoid that friction with Apple Pay, 30% of their purchase can be awarded to Apple. But if a developer wants to build a really smooth PayPal integration into their app, let them do it! The fee (usually around 3% for companies like Paypal) will be passed on to whichever payment mechanism the consumer chooses. 

#3: Allow sideloading of iOS apps. 

If you want to download an iOS app today, the only way to do it is through the App Store; getting your app up on the App Store involves a rigorous review process by Apple. Apple claims that this is the only way to protect the security and privacy of iOS users — but that’s not exactly true. In fact, it would be possible to allow users to download apps outside of the App Store (also known as sideloading), while still maintaining security. 

Outside of App Review, Apple has sophisticated mechanisms to shut down malware apps from ever making it onto a phone. Apple could still use its notarization system for sideloaded apps, giving it the ability to remotely “kill” malware apps that are being distributed outside of the App Store. This gives consumers choices and security — and it’s exactly what Apple does with Mac apps!  

The issue with the current App Review process is that it leaves lots of room for Apple to abuse its power to reject apps without explanation. Take, for instance, our plan to introduce the Camera Button to Luna Display back in 2018. The Camera Button was an innovative new feature that turned the iPad’s front-facing camera into a button: simply tap the camera to bring up Luna’s user interface. The new feature got a lot of attention among our users and in the press, but Apple wasn’t feeling it. Before we even had a chance to submit the update, we were warned by Apple not to submit because the update would be rejected. 

With sideloading, if Apple wants to reject the Camera Button but some users still want it, those users would have the option of pursuing the app outside of the App Store. Had we let it, our Camera Button rejection could’ve stifled our hunger to innovate. With the fear that our hard work on new features would be rejected from the App Store, why push the limits?

Unfortunately, we’re not the only ones feeling frustrated by this. In an open letter to Apple last November, the founders of BlueMail app begged Tim Cook to put its app back on the App Store after it was suddenly removed. Digging deeper, Wired reported that BlueMail was removed just days after Apple announced its new “Sign In With Apple” feature that infringed on patented technology in BlueMail’s app. And earlier in the year, The New York Times investigated a similar story of Apple removing parental control apps from the App Store after announcing its own competing parental control feature. 

Sideloading for iOS apps would enable developers to innovate without the fear of getting rejected from app updates — or worse, kicked off of the App Store entirely. And ultimately, sideloading empowers users to choose the apps that best suit their needs. 

#4: Give third-party developers equal access to APIs. 

Private APIs have been a long-time frustration for us, as Apple has the ability to lock developers out of building on and utilizing some OS functions. This means that when Apple decides to “sherlock” an app, it has an insider advantage of using OS functions that third-party developers don’t have the same access to. 

In a Bloomberg investigation into unfair API practices, Mark Gurman points to dozens of instances where this is the case. Notable examples include mobile payments, where payment mechanisms like Google Pay aren’t able to access the iPhone’s near-field-communication chips for in-store purchases; and navigation apps, where apps like Google Maps are unable to display directions on the iPhone’s lock screen. 

In our own situation, Apple’s debut of Sidecar revealed that it was running on private APIs with faster peer-to-peer networking — private APIs that we had been requesting access to for Luna Display for years. This was a hard lesson we learned through getting sherlocked, and we have a lot to say about our experience building a business on Apple’s APIs. Astropad cofounder Giovanni Donelli points out that “competition in the App Store is a good thing, as long as we all have the same tech building blocks to compete on.”   

This uneven playing field has created an environment where Apple is competing against third-party developers with unfair insider knowledge, which ultimately slows down innovation across the entire app ecosystem. If developers have access to better APIs, developers will build more innovative apps with more comprehensive integration with Apple’s hardware. And ultimately, consumers get better products! 

#5: Stop sherlocking third-party developers.

At first, encouraging Apple to acquire its small competitors might seem counter-intuitive. Most antitrust legislation discourages a large and powerful company like Apple from swallowing up its competitors to gain market share. 

But the current problem is that instead of acquiring third-party developers, Apple is copying them. When Apple runs out of ideas for updates to include in the next OS release, Apple “sherlocks” from a pool of top-grossing apps. 

If you’re unlucky enough to get sherlocked by Apple, finding a path forward for your company to survive will be difficult. When Apple decides to copy a third-party developer and bake a feature into the free OS, one of two scenarios usually plays out: 

  1. Getting sherlocked will be such a devastating blow that the company will be forced to move quickly into other markets or platforms, no longer prioritizing Apple. This is the scenario that we fell into.
  2. Or, in a worse but more common scenario, there is no viable path forward, and the developer will be forced out of business.

Both scenarios are not only devastating for the little guy, but consumers suffer too. In our case, we were never looking for an exit or acquisition opportunity, as we have a long-term vision to continue growing Astropad. However, Apple’s announcement of Sidecar had a significant impact on our sales. We’ve been lucky enough to weather the storm, but imagine a hypothetical scenario where Apple had put us out of business. We believe that our products Luna Display and Astropad are much more powerful alternatives to Sidecar because of Luna’s flexible mode options (mac-to-iPad, mac-to-mac, and headless mode), and Astropad Studio’s rich palette of customizable features. 

So, if Apple drove us out of business, our users might be forced to use Sidecar instead, which has limited functionality and features. Apple is also known for scarcely updating and improving on features once they’ve been shipped — whereas our entire business is built around continuously improving on Astropad and Luna Display. In the scenario where we’ve been put out of business by Apple, it’s easy to see how consumers are worse off: instead of having the freedom to choose the software that best suits them, they’re forced into Apple’s solution, which won’t be innovated on over time. 

As more and more companies are sherlocked, the incentives to innovate on Apple’s platform disappear. Why build products for a platform that might betray you? Drawing lessons from his years of app development, Astropad cofounder Matt Ronge warns that “Apple’s treatment of the App Store has stifled the iPad — ten years later and it’s still not a complete PC replacement like many had hoped. You can make an easy case that a lack of killer apps available for the iPad are to blame for stunting the iPad’s potential. Who’s going to want to build one in an environment like this?” 

But if there was a higher likelihood that Apple would purchase your hard work instead of steal it from you, there’s suddenly a huge incentive to build the best possible product, with the most cutting-edge technology and richest set of features. Changing Apple’s acquisition strategy means that developers are more motivated to innovate, consumers get better technology, and Apple gets to fold better tech into its products. Everyone wins! 

Why existing monopoly laws aren’t effective for big tech

In 2020, we’re trying to apply the same antitrust laws of the industrial revolution to an era of big tech. When monopoly laws were first defined in the 1890s (a time of heavy manufacturing and moving commodities via railroads), the standards for consumer welfare focused on price. But in modern day, this is a narrow-minded understanding of the ingredients of modern, healthy consumerism. Antitrust laws force us to turn a blind eye to the variety, quality, and innovation that consumers demand in a sophisticated tech market. 

Through the lens of the App Store, we know that consumers aren’t completely satisfied by the cheapest (free) apps that come baked into iOS. When it comes to apps, Apple customers want:

  • Variety – or the freedom to choose between multiple options for different use cases; 
  • Quality – because while not everyone needs top-tier apps, they’re available to the people that want it, and;
  • Innovation – because if app innovation was left entirely up to Apple, the utility of Apple products would move at a much slower pace. Instead, third-party developers push the boundaries of Apple’s hardware, and bring rich features and utility to consumers in the process. 

Small app development companies, like Astropad and thousands of others, infuse immense vibrancy into Apple’s products. And when that vibrancy is dulled by aggressive monopolistic behavior like sherlocking, it threatens the overall value of products available to consumers.

A more aggressive approach: Breaking apart platform utilities

Every suggestion we’ve offered to fix the App Store has an unfortunate catch-22 — these changes rely on Apple’s own integrity to fix the problem. If that reality seems unlikely to you, you’re not the only one thinking that! That’s why a big pool of industry leaders, scholars, and politicians have proposed pulling apart the App Store and Apple into separate businesses. 

Lina Khan, an esteemed antitrust lawyer working with the Department of Justice, has laid out a solid reasoning for a “prophylactic approach” that would ban dominant firms (like Apple) from competing directly with the businesses that depend on it (like Astropad). In Amazon’s Antitrust Paradox, Lina makes the case that a company in “multiple related lines of business” (such as selling hardware and running an App Store, etc) will bubble up big conflicts of interest when “a platform has an incentive to privilege its own business and disadvantage other companies.” 

In other words, Apple owns the App Store, but it also competes on the App Store. Therefore, it has major incentives (and easy access) to push its own apps and suffocate small developers. In her plan to break up big tech, Elizabeth Warren proposes that platform utilities should be “prohibited from owning both the platform utility and any participants on that platform. Platform utilities would be required to meet a standard of fair, reasonable, and nondiscriminatory dealing with users.” 

By separating the App Store, Apple’s apps would be forced to compete with third-party developers on new tenets of consumer welfare — price, variety, quality, and innovation. This raises the bar for all apps, bringing consumers even better value from their Apple products.

Big tech wrote the rules, but they’re not working for consumers 

If Apple’s aggressive approach of sherlocking apps continues, the innovation and richness of the App Store will tap out sooner rather than later. Truly innovative companies that are pushing the boundaries of hardware will lose their incentive to play Apple’s game. In the best-case scenario, third-party developers will turn their efforts to other platforms. In the worst case, small developer innovation will continue to die off altogether. 

Modern technology is the infrastructure that makes our world go around. We all rely on it — software, social networks, apps — to stay connected, get our work done, and be productive members of a capitalistic economy. Technology today is like the railroads of the 19th century or the electrical grids of the early 20th century: they weren’t regulated at first, but eventually, they became so heavily ingrained in our lives that the government decided to step in to make sure that this infrastructure was working for everyone. 

Today, the top 5 companies traded on the S&P 500 are all technology companies: Microsoft, Apple, Amazon, Facebook, and Alphabet. They’re building the infrastructure that our world runs on, yet they’re operating in the wild west where they make their own rules — rules that work well for their bottom lines, but not for consumers. It’s time to rewrite the rules so that they work for everyone.