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Apple was questioned on its inability to rein in subscription scammers on its App Store during yesterday’s Senate antitrust hearing. The tech giant has argued that one of the reasons it requires developers to pay App Store commissions is to help Apple fight marketplace fraud and protect consumers. But developers claim Apple is doing very little to stop obvious scams that are now raking in millions and impacting consumer trust in the overall subscription economy, as well as in their own legitimate, subscription-based businesses.
One developer in particular, Kosta Eleftheriou, has made it his mission to highlight some of the most egregious scams on the App Store. Functioning as a one-man bunco squad, Eleftheriou regularly tweets out examples of apps that are leveraging fake reviews to promote their harmful businesses.
Some of the more notable scams he’s uncovered as of late include a crypto wallet app that scammed a user out of his life savings (~$600,000) in bitcoin; a kids game that actually contained a hidden online casino; and a VPN app scamming users out of $5 million per year. And, of course, there’s the scam that lit the fire in the first place: A competitor to Eleftheriou’s own Apple Watch app that he alleges scammed users out of $2 million per year, after stealing his marketing materials, cloning his app and buying fake reviews to make the scammer’s look like the better choice.
Eleftheriou’s tweets have caught the attention of the larger app developer community, who now email him other examples of scams they’ve uncovered. Eleftheriou more recently took his crusade a step further by filing a lawsuit against Apple over the revenue he’s lost to App Store scammers.
Though Eleftheriou wasn’t name-checked in yesterday’s antitrust hearing, his work certainly was.
In a line of questioning from Georgia’s Senator Jon Ossoff, Apple’s Chief Compliance Officer Kyle Andeer was asked why Apple was not able to locate scams, given that these fraudulent apps are, as Ossoff put it, “trivially easy to identify as scams.”
He asked why do we have rely upon “open-source reporting and journalists” to find the app scams — a reference that likely, at least in part, referred to Eleftheriou’s recent activities.
Eleftheriou himself has said there’s not much to his efforts. You simply find the apps generating most revenues and then check them for suspicious user reviews and high subscription prices. When you find both, you’ve probably uncovered a scam.
Andeer demurred, responding to Ossoff’s questions by saying that Apple has invested “tens of millions, hundreds of millions of dollars” in hardening and improving the security of its App Store.
“Unfortunately, security and fraud is a cat-and-mouse game. Any retailer will tell you that. And so we’re constantly working to improve,” Andeer said. He also claimed Apple was investing in more resources and technologies to catch wrong-doers and noted that the App Store rejected thousands of apps every year for posing a risk to consumers.
The exec then warned that if Apple wasn’t the intermediary, the problem would be even worse.
” … No one is perfect, but I think what we’ve shown over and over again that we do a better job than others. I think the real risks of opening up the iPhone to sideloading or third-party app stores is that this problem will only multiply. If we look at other app stores out there, we look at other distribution platforms, it scares us.”
Ossoff pressed on, noting the sideloading questions could wait and inquired again about the scam apps.
“Apple is making a cut on those abusive billing practices, are you not?” he asked.
Andeer said he didn’t believe that was the case.
“If we find fraud — if we find a problem, we’re able to rectify that very quickly. And we do each and every day,” he said.
But to what extent Apple was profiting from the App Store scams was less clear. Ossoff wanted to know if Apple refunded “all” of its revenues derived from the scam billing practices — in other words, if every customer who ever subscribed got their money back when a scam was identified.
Andeer’s answer was a little vague, however, as it could be interpreted to mean Apple refunds customers who report the scam or file a complaint — procedures it already has in place today. Instead of saying that Apple refunds “all customers” when scams are identified, he carefully worded his response to say Apple worked to make sure “the customer” is made whole.
“Senator, that’s my understanding. There’s obviously a dedicated team here at Apple who works this each and every day. But my understanding is that we work hard to make sure the customer is in a whole position. That’s our focus at the end of the day. If we lose the trust of our customers, that’s going to hurt us,” he said.
For what it’s worth, Eleftheriou wasn’t buying it.
“Apple’s non-answers to Senator Ossoff’s great questions in yesterday’s hearing should anger all of us. They did not offer any explanation for why it’s so easy for people like me to keep finding multimillion-dollar scams that have been going on unchecked on the App Store for years. They also gave no clear answer to whether they’re responsible for fraudulent activity in their store,” he told TechCrunch.
“Apple appears to profit from these scams, instead of refunding all associated revenues back to affected users when they belatedly take some of these down. We’ve been letting Apple grade their own homework for over a decade. I urge the committee to get to the bottom of these questions, including Apple’s baffling decision years ago to remove the ability for users to flag suspicious apps on the App Store,” Eleftheriou added.
Apple did not provide a comment.
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Senator Ron Wyden (D-OR) has proposed a draft bill that would limit the types of information that could be bought and sold by tech companies abroad, and the countries it could be legally sold in. The legislation is imaginative and not highly specific, but it indicates growing concern at the federal level over the international data trade.
“Shady data brokers shouldn’t get rich selling Americans’ private data to foreign countries that could use it to threaten our national security,” said Sen. Wyden in a statement accompanying the bill. They probably shouldn’t get rich selling Americans’ private data at all, but national security is a good way to grease the wheels.
The Protecting Americans’ Data From Foreign Surveillance Act would be a first step toward categorizing and protecting consumer data as a commodity that’s traded on the global market. Right now there are few if any controls over what data specific to a person — buying habits, movements, political party — can be sold abroad.
This means that, for instance, an American data broker could sell the preferred brands and home addresses of millions of Americans to, say, a Chinese bank doing investment research. Some of this trade is perfectly innocuous, even desirable in order to promote global commerce, but at what point does it become dangerous or exploitative?
There isn’t any official definition of what should and shouldn’t be sold to whom, the way we limit sales of certain intellectual property or weapons. The proposed law would first direct the secretary of Commerce to identify the data we should be protecting and to whom it should be protected against.
The general shape of protected data would be that which “if exported by third parties, could harm U.S. national security.” The countries that would be barred from receiving it would be those with inadequate data protection and export controls, recent intelligence operations against the U.S. or laws that allow the government to compel such information to be handed over to them. Obviously this is aimed at the likes of China and Russia, though ironically the U.S. fits the bill pretty well itself.
There would be exceptions for journalism and First Amendment-protected speech, and for encrypted data — for example storing encrypted messages on servers in one of the targeted countries. The law would also create penalties for executives “who knew or should have known” that their company was illegally exporting data, and creates pathways for people harmed or detained in a foreign country owing to illegally exported data. That might be if, say, another country used an American facial recognition service to spot, stop and arrest someone before they left.
If this all sounds a little woolly, it is — but that’s more or less on purpose. It is not for Congress to invent such definitions as are necessary for a law like this one; that duty falls to expert agencies, which must conduct studies and produce reports that Congress can refer to. This law represents the first handful of steps along those lines: getting the general shape of things straight and giving fair warning that certain classes of undesirable data commerce will soon be illegal — with an emphasis on executive responsibility, something that should make tech companies take notice.
The legislation would need to be sensitive to existing arrangements by which companies spread out data storage and processing for various economic and legal reasons. Free movement of data is to a certain extent necessary for globe-spanning businesses that must interact with one another constantly, and to hobble those established processes with red tape or fees might be disastrous to certain locales or businesses. Presumably this would all come up during the studies, but it serves to demonstrate that this is a very complex, not to say delicate, digital ecosystem the law would attempt to modify.
We’re in the early stages of this type of regulation, and this bill is just getting started in the legislative process, so expect a few months at the very least before we hear anything more on this one.
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There are about to be a lot of antitrust bills taking aim at big tech, and here’s one more. Senator Josh Hawley (R-MO) rolled out a new bill this week that would take some severe measures to rein in big tech’s power, blocking mergers and acquisitions outright.
The “Trust-Busting for the Twenty-First Century Act” would ban any acquisitions by companies with a market cap of more than $100 billion, including vertical mergers. The bill also proposes changes that would dramatically heighten the financial pain for companies caught engaging in anti-competitive behavior, forcing any company that loses an antirust suit to forfeit profits made through those business practices.
At its core, Hawley’s legislation would snip some of the red tape around antitrust enforcement by amending the Sherman Act, which made monopolies illegal, and the Clayton Act, which expanded the scope of illegal anti-competitive behavior. The idea is to make it easier for the FTC and other regulators to deem a company’s behavior anti-competitive — a key criticism of the outdated antitrust rules that haven’t kept pace with the realities of the tech industry.
The bill isn’t likely to get too far in a Democratic Senate, but it’s not insignificant. Sen. Amy Klobuchar (D-MN), who chairs the Senate’s antitrust subcommittee, proposed legislation earlier this year that would also create barriers for dominant companies with a habit of scooping up their competitors. Klobuchar’s own ideas for curtailing big tech’s power similarly focus on reforming the antitrust laws that have shaped U.S. business for more than a century.
The Republican bill may have some overlap with Democratic proposals, but it still hits some familiar notes from the Trump era of hyper-partisan big tech criticism. Hawley slams “woke mega-corporations” in Silicon Valley for exercising too much power over the information and products that Americans consume. While Democrats naturally don’t share that critique, Hawley’s bill makes it clear that antitrust reform targeting big tech is one policy era where both political parties could align on the ends, even if they don’t see eye to eye on the why.
Hawley’s bill is the latest, but it won’t be the last. Rep. David Cicilline (D-RI), who spearheads tech antitrust efforts in the House, previously announce his own plans to introduce a flurry of antitrust reform bills rather than one sweeping piece of legislation. Those bills, which will be more narrowly targeted to make them difficult for tech lobbyists to defeat, are due out in May.
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After it looked like Apple might no-show, the company has committed to sending a representative to a Senate antitrust hearing on app store competition later this month.
Last week, Senators Amy Klobuchar (D-MN) and Mike Lee (R-UT) put public pressure on the company to attend the hearing, which will be held by the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. Klobuchar chairs that subcommittee, and has turned her focus toward antitrust worries about the tech industry’s most dominant players.
The hearing, which Google will also attend, will delve into Apple and Google’s control over “the cost, distribution, and availability of mobile applications on consumers, app developers, and competition.”
App stores are one corner of tech that looks the most like a duopoly, a perception that Apple’s high profile battle with Fortnite-maker Epic is only elevating. Meanwhile, with a number of state-level tech regulation efforts brewing, Arizona is looking to relieve developers from Apple and Google’s hefty cut of app store profits.
In a letter last week, Klobuchar and Lee, the subcommittee’s ranking member, accused Apple of “abruptly” deciding that it wouldn’t send a witness to the hearing, which is set for April 21.
“Apple’s sudden change in course to refuse to provide a witness to testify before the Subcommittee on app store competition issues in April, when the company is clearly willing to discuss them in other public forums, is unacceptable,” the lawmakers wrote.
By Monday, that pressure had apparently done its work, with Apple agreeing to attend the hearing. Apple didn’t respond to a request for comment.
While the lawmakers are counting Apple’s acquiescence as a win, that doesn’t mean they’ll be sending their chief executive. Major tech CEOs have been called before Congress more often over the last few years, but those appearances might have diminishing returns.
Tech CEOs, Apple’s Tim Cook included, are thoroughly trained in the art of saying little when pressed by lawmakers. Dragging in a CEO might work as a show of force, but tech execs generally reveal little over the course of their lengthy testimonies, particularly when a hearing isn’t accompanied by a deeper investigation.
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