Why we support app store antitrust investigations

Proton launches the Coalition for App Fairness

We updated this article on Sept. 25, 2020, to provide more context about why Proton is joining the Coalition for App Fairness.

In recent months, regulators in both the US and Europe have begun looking into app store policies. These investigations are not only centered on Apple, but are also looking at Google Play and app stores in general. Proton has long been supportive of these efforts, as we have stated in our first public statements on the matter.

Antitrust is a complex topic and often misunderstood. In supporting antitrust action, we seek to remedy the following problems:

First, app store operators utilize their monopoly power to eliminate competition on mobile payments, forcing all transactions to go through in-app purchases. This lack of competition leads to an artificially high fee of 30%, which is unavoidable. The result of this is higher prices for the consumer. As an example, a business that has a profit margin of 15% would have to raise prices on customers by at least 15% in order to break even, leading to consumer harm through higher prices. It also results in less innovation. If Apple’s fee was just 10%, for example, ProtonMail would have 20% more resources to develop more features and improve our product faster.

Second, these app store policies create an unbalanced playing field in favor of business models that abuse privacy. Notably, the 30% fee does not impact “free” apps (like Gmail), which instead monetize through abusing user privacy. Conversely, apps that leverage a subscription model in order to protect user privacy are subject to these fees. This dramatically unequal treatment has resulted in an internet economy that favors the exploitation of user data as opposed to the protection of privacy.

Third, through self-preferencing (such as Google bundling Gmail on all Android devices, setting it as the default, and requiring a Google account to be created in order to use Android), app store operators which also control the operating system have created an environment that makes it very difficult for competing services to gain traction. This naturally creates the conditions where there are fewer viable competitors, reinforcing the existing monopolies, and leading to less customer choice.

There are, of course, also benefits to the app store model, which Apple will be quick to point out. But app store policies are not a zero-sum game. Addressing the structural issues listed above does not imply the loss of the benefits of the existing apps ecosystem. It is therefore right for European and US regulators to ensure that app store policies also benefit the public interest, and not just the interests of tech giants. We are happy to note that the European Union has taken a promising step toward curbing anti-competitive tactics with its latest proposed legislation, the Digital Markets Act.

Proton is not alone in calling for reform. This week we announced the formation of a new coalition whose goal is to ensure that large app stores receive an appropriate amount of scrutiny and comply with competition laws. While many members of the Proton community have expressed agreement with our objectives, some have questioned our decision to associate with companies like Epic and Spotify. These are real concerns that were indeed factored into our decision. Therefore, we would like to candidly share some of our reasons for becoming a founding member of the Coalition for App Fairness (CAF).

Why we joined the Coalition for App Fairness

First, to be clear, our mission at Proton is to foster an open, free, private, and secure internet. We exist today because a large community of people agree with these goals and support our work. Helping to found CAF does not in any way signal a deviation from these core values. Proton will always remain fiercely protective of our independence in order to put user interests first.

In a perfect world, Proton would only work with companies that are fully aligned with our values, but the reality is that we live in an imperfect world. We genuinely believe that app store reform (both Apple and Google) is essential to our vision of a better internet that puts people first. Regulators around the world have already started taking action leading to increased discussions about reform.

We believe that Proton, with our unique values and community, has a lot to contribute to this discussion. As a company that is entirely dependent on the user community to thrive, we are uniquely positioned to advance the interests of the broader internet community in the upcoming discussions. Helping to found CAF gives us a seat at the table and the ability to impact what happens in DC and Brussels in the coming years, which will determine the future of the internet.

Our purpose for joining CAF is not about advancing the goals of Spotify and Epic, but about making sure that you, our community, have a voice in this important debate.

We believe antitrust efforts create a better internet and a better society, for all the reasons we have mentioned above. And as always, our goal is to inform, educate, and discuss with all of you, and use what we learn to inform our advocacy efforts. With this in mind, we welcome all comments from the community, and look forward to engaging with you further on this highly important topic.

Best Regards,
The Proton Team

Some thoughts on common opposing viewpoints

There are also detractors to antitrust regulations, and any complete discussion should also consider the opposing viewpoints. Therefore, for completeness, we will also cover the arguments of the other side.

Apple created the App Store; they should be allowed to do whatever they want.

Regardless of whether one agrees with that sentiment, this is actually governed by law. Both the US and the EU, and many other jurisdictions around the world have competition laws. In most countries, it is illegal for dominant market players to use their dominance to prevent fair competition. Such activity is illegal because of well-established economic theory which finds that unregulated monopolies end up harming society through higher prices, less competition, and less innovation. Ultimately, it is for regulators to decide whether app store policies are in compliance with the law, and we participate in this process by answering information requests from regulators so that they can make an informed decision.

Antitrust means that iOS will become just like Android.

This is not necessarily true because regulators are looking at just the subset of issues which harm consumers and competitors. For example, antitrust regulators are not seeking to dismantle iOS’s privacy settings or privacy options. Regulators are also not seeking to prevent Apple from screening and removing malicious apps.

There exist many remedies for the problems we have highlighted that do not undermine the aspects of iOS that some users like. For example, allowing ProtonMail to inform iOS users that it is possible to purchase ProtonMail for 30% less via our website does not undermine iOS security. Nor does allowing credit cards to be used to make purchases on iOS devices for a 30% discount. These changes do not turn iOS into Android, but go a long way toward addressing the problems with the current app store model.

If you don’t like iOS, you can just use Android.

First, it is important to note that antitrust regulators are not only looking at Apple, but they are also looking into Google’s potentially anti-competitive practices with Android, so the existence of Android does not by itself mean there is no problem.

In many markets (such as US or in the EU), Apple’s market share approaches 50%, and developers cannot survive without developing also on iOS. Even if this percentage were lower, that also does not excuse Apple’s behavior because US and EU competition laws do not apply a percentage threshold when determining antitrust violations.

Mobile app stores are also fundamentally different from the grocery stores or gas stations of the 20th century antitrust cases. When it comes to mobile platforms, it isn’t possible to just walk across the street to another store. On iOS, there is only one store. Switching to Android is also not an option for most iOS users because of the money invested into the device itself, and the lock-in from either the mobile provider or the other ancillary services which Apple offers. This high switching cost makes mobile app stores unique from an antitrust perspective, even if the Apple market share is not as high as one would expect from more classical monopoly situations.

Antitrust action is against capitalism and market economics.

Market economies and capitalism thrive on fair competition, whereas a monopoly situation is defined by a distinct lack of competition. In this sense, antitrust action actually strengths capitalism and allows market economics to work. A good example can be seen from Apple 30% fee for in-app purchases. Because it is the only payment option allowed on iOS, Apple is not subject to any competitive pressures and can set the price however it wants. If there were competition (for example, credit card companies charging 2% fees instead), Apple would still be free to charge whatever they want. However, most likely Apple would charge less, so that their payments option was competitive. In this situation, antitrust action allows competition to exist, therefore reducing prices and benefiting consumers.

Why don’t you just stop offering payments on mobile if you object to the fees?

This is not possible. Apple requires paid services or apps to support in-app purchases as a prerequisite to being listed in the app store.

Why don’t you just tell people to upgrade on your website instead if you object to the fees?

This is also not possible because Apple App Store policies forbid communicating with users that there are alternative ways to pay for the app or service.

UPDATE Jan. 26, 2021: This article was updated to include the European Union’s Digital Markets Act.


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About the Author

Andy Yen

Andy is the Founder and CEO of Proton, the company behind ProtonMail and ProtonVPN. He is a long time advocate of privacy rights and has spoken at TED, SXSW, and the Asian Investigative Journalism Conference about online privacy issues. Previously, Andy was a research scientist at CERN and has a PhD in Particle Physics from Harvard University. You can watch his TED talk online to learn more about our mission.