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Apple Might Finally Address This Long-Standing Antitrust Criticism

By Evan Niu, CFA - Feb 21, 2020 at 8:00AM

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iPhone users may soon be able to change their default apps.

As antitrust scrutiny of major tech companies continues to mount, Apple (AAPL 0.63%) is reportedly considering making a major concession: allowing users to set third-party apps as the default for certain functions on iOS. That capability has long been available on the company's MacOS operating system, but Apple has never permitted iOS users to do so. That's attracted criticism that Apple is undermining competition by favoring its own first-party apps.

The House Judiciary Committee had sent Apple a letter last September seeking information regarding "Apple's policy regarding whether iPhone users can choose non-Apple apps as default apps." In the case of Apple's mobile browser, Safari, the company responded to lawmakers and defended the policy: "Safari is one of the apps that Apple believes defines the core user experience on iOS, with industry-leading security and privacy features."

Various apps in the App Store

Apple's App Store has attracted considerable antitrust scrutiny. Image source: Apple.

Apple has also pointed to the mere existence of competition as a defense, but that argument doesn't address how Apple competes.

Opening up to the competition

Bloomberg reports that the Cupertino tech giant is considering loosening those restrictions around default apps in iOS 14. That would allow users to set competing apps as the default for categories like web browsers, maps, email, and more. It may seem like a minor inconvenience for users that prefer third-party apps, but the importance of convenience should not be understated.

For instance, Alphabet (GOOG 0.19%) (GOOGL 0.33%) subsidiary Google pays Apple billions of dollars per year to be the default search provider in Safari, a high price for the associated convenience. Google would also be among the biggest beneficiaries of the potential change, as Google offers a broad portfolio of online services and apps that are widely considered to be superior to Apple's, including Gmail, Google Maps, and Google Chrome. Google and other developers have been able to circumvent the restrictions by having apps link directly to other third-party apps on an app-specific basis, an imperfect solution.

Additionally, Apple may add support for competing music-streaming services like Spotify (SPOT -0.83%) to HomePod. Users can stream Spotify wirelessly to HomePod via Bluetooth or AirPlay but lack the convenience of direct integration and voice control with Siri. Spotify, which has the largest paid subscriber base in music streaming, filed an antitrust complaint against Apple last year.

"Apple also routinely blocks our experience-enhancing upgrades," Spotify CEO Daniel Ek wrote in a blog post explaining the move. "Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch." Apple finally opened up Siri to Spotify last fall in iOS 13, with the only caveat that people have to specify to play music "on Spotify."

Apple's argument around mobile Safari is also undermined by the fact that the company requires all third-party browsers on iOS to use the same underlying rendering engine, WebKit. "The purpose of this rule is to protect user privacy and security," according to Apple.

In other words, third-party iOS browsers are merely wrappers for the same engine, and as such, all browsers have comparable privacy and security capabilities -- forcing Safari to be the default browser doesn't necessarily improve either. "By requiring use of WebKit, Apple can provide security updates to all our users quickly and accurately, no matter which browser they decide to download from the App Store," the company told the committee.

Apple details the next major versions of its operating systems every year at its Worldwide Developer Conference (WWDC) in June.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple and Spotify Technology. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Spotify Technology. The Motley Fool has a disclosure policy.

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Apple Inc. Stock Quote
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Alphabet Inc. Stock Quote
Alphabet Inc.
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