When Kirsten Daru took a job as general counsel at Tile, she hadn’t thought she’d still be using her background in antitrust — but less than a year into her new job, she was talking to Congress about U.S. competition policy… and telling them something was very wrong.
Daru once defended companies in antitrust class-action lawsuits, but when she joined Tile in early 2019 her more recent focus had been on privacy. Her company allows users to find lost items through physical tags that pair electronically with smartphones, meaning it deals in plenty of sensitive user data. Apple itself even touted Tile’s offerings as the kind of add-on service that made an iPhone attractive to customers, and so Daru hadn’t imagined her new company was facing competition concerns with the tech giant, according to a person familiar with her thinking.
Soon after Daru started, though, Apple made it difficult for Tile’s hardware to get permission to work on iPhones. Tile saw that change, among some others, as attempts to squash its success. The phone-maker cited privacy and security concerns — even as it developed and launched AirTags, a similar offering. In response, that fall, Daru quietly briefed the staff of the House antitrust subcommittee, which was probing the competitive behavior of tech giants. Soon after the panel urged her to go public.
At the time, it was rare for app developers, even large ones, to criticize Apple aloud. Yet both Daru and Tile CEO CJ Prober, who early in his career had focused on mergers and acquisitions at Silicon Valley’s premier antitrust law firm, decided to tell their side of the story for all to see. So in January 2020, while Congressional staff dealt with light bulbs and Washington-based reporters monitored a coming snowstorm, Daru appeared publicly at a field hearing in Boulder, calling repeatedly for Congress to create “a level playing field” for America’s software entrepreneurs.
Since Daru’s testimony, Apple has faced increased scrutiny and pressure from both lawmakers and the public over its competitive behavior — more than at any other time in its modern history. On Wednesday, a federal appeals court stayed a ruling that ordered the company to begin allowing apps to tell customers how to use alternative payment options, which in turn allows developers to avoid giving Apple the 30% cut it charges for many transactions on iOS. Despite the setback for developers, the decision, which could still go into effect pending an appeal, shows just how close they have come to dismantling a policy Apple defended for years.
Certainly, Apple’s hit hard — in court, in statehouses and with millions in lobbying spending. But developers who rely on the App Store to reach customers fought back with savvy strategy, a tangled web of blue ribbon hires and a keen eye on the international vogue for antitrust scrutiny of Big Tech firms to begin prying apart Apple’s grip on their businesses.
Sticking to principles
The Boulder hearing was an early but important moment of mounting pressure on the company. Testimony from Tile and software developer Basecamp inspired more developers to go public, according to several people familiar with the matter, and helped persuade some key Republicans to put bipartisan pressure on Apple.
Daru also encouraged other companies to join the Coalition for App Fairness, a group Tile launched alongside Basecamp, Epic Games and others in September 2020. The group, which now boasts 60 members large and small, has become a nerve center of activity by the most ardent foes of the Google and Apple app stores.
“There was one thing that really unified us,” said Jurgita Miseviciute, public policy and government affairs lead at Proton, a privacy-focused mail app that helped found the coalition. “We all were completely dependent on the App Store … This was really our gateway to our customers, and Apple, with pretty much one click, could really destroy our business.”
By May 2020 Epic was already planning to spend "$80K - $100K" to launch the coalition, according to documents Apple included as part of its lawsuit with Epic. Epic’s goal, according to those filings, was to overcome its status as a “not sympathetic” big player by working with other, often smaller organizations. Lane Kasselman, an Uber and AT&T communications veteran who had experience working for the manager of Obama’s 2012 campaign, presented a strategy vision to Epic’s lawyers that included the coalition. Forbes Tate, one of Washington’s top 10 lobbying firms by revenue, now runs the coalition, known as CAF.
CAF, though, has rejected the implication that it’s a litigation vehicle. People familiar with the group say the founding members, as they hashed out the details and prepared to go public, were eager to combat the notion they only did the bidding of Epic. The baker’s dozen of founders decided the solution was laying out principles for competition and fairness in the app ecosystem. Companies beyond Epic saw the opportunity to rally together and tout the principles, keeping up public and lobbying pressure on Apple.
Since CAF went public, there have been occasional splits between the member companies that want to be more aggressive and those who want to go softer, said a person familiar with the group’s internal workings. The coalition often functions by parceling out roles to member companies based on their existing expertise, such as strategizing, communications or relations with international governments or states.
CAF’s lobbying work, alongside that of some of its individual members, now forms a spearpoint in the offensive against Apple’s App Store policies. Arizona State Rep. Regina Cobb told Protocol earlier this year, for instance, that a lobbyist for both CAF and Match first approached her with the idea for her bill, which would require device makers to let app developers use third-party payment systems. The lobbyist, Ryan O’Daniel, had run one of late Arizona Sen. John McCain’s reelection campaigns, and served as top staffer to the campaign of Arizona Gov. Doug Ducey. (Apple and Googlehelped defeat the measure with their own lobbyists.)
Arizona wasn’t alone, though. In New York, lobbyists for Match, with ties to both former Gov. Andrew Cuomo and his father, who also served as governor, disclosed they’d pushed for the “intended introduction of legislation related to Apple & Google app stores” and also lobbied on another bill on the topic. CAF’s lobbyists also disclosed work on Rhode Island’s version of an app store bill, and the coalition also worked in Georgia.
Though no state has yet passed an app store bill, the coalition has also supported a bipartisan federal bill that would force Apple and Google to let mobile apps communicate with users about fees and would protect users’ ability to install apps that don’t come from the official app stores (known as sideloading).
The group’s reach extends internationally too. In November, CAF announced a partnership with an Indian tech association and helped convene a conference in South Korea, where lawmakers in August passed a landmark bill regulating mobile app stores. The speaker of the Korean National Assembly, that country’s legislative body, addressed the gathering in Seoul, as did CAF’s executive director, Meghan DiMuzio, and Epic CEO, Tim Sweeney.
“We all know that gatekeepers do not let go of power easily,” DiMuzio said in her speech. “Thankfully there are efforts across the globe to follow Korea’s example and to take on this urgent challenge.”
Art of the state
Developers, though, started much closer to home. CAF and its members worked to generate or promote app store bills in Arizona, New York, Georgia and other states. Although no states have yet adopted such laws, the move to state capitals played on Big Tech’s weakness, kept up pressure on Apple (and Google) and set the stage for a federal effort.
In some ways, Apple was ripe for rivals’ lobbying attack, particularly in states. Late CEO Steve Jobs had famously disdained Washington, and even years after his death the company was proud of its quieter, more defensive style of engagement rooted in Apple’s positive reputation. Although the company spent nearly $7 million on federal lobbying in 2020 and CEO Tim Cook has cozied up to the White House, Washington insiders still think of Apple’s lobbying shop as the kind that may sign on to an existing effort on an issue it cares about — but would rarely organize a new one.
Unlike Google or Amazon, Apple also doesn’t make financial contributions to candidates or political parties. Since 2012, its donations to ballot initiatives went to just four measures — all relating to Cupertino schools, and totaling less than $40,000.
While CAF’s focusing efforts in states may seem like they’re shooting for 1/50th of the federal prize, lobbying expenditures can go further in Phoenix, Providence and other capitals. Even a failed push in a statehouse may terrify companies that worry about “patchworks” of regulation, while also putting pressure on Congress to step in, which has made the pivot to states a strategic play in recent years for those hoping to hobble Big Tech.
“In the states you can spend a little bit more, cover a lot of ground,” said a person familiar with Apple’s lobbying operation, who said its lack of political giving made it vulnerable.
People involved in the coalition deny they thought of states as Apple’s soft underbelly. They note Apple’s a tremendously better-resourced foe and say it threatens those that speak up and has successfully shot down popular state efforts In Georgia, Apple reportedly threatened to abandon economic development plans and leveraged the state attorney general’s office against the legislature in response to an app store bill.
Yet there’s little doubt that some of the smaller players have big-time strategists on their team. Key to the effort to develop principles to help separate CAF from Epic, for instance, was Spotify’s chief legal officer, Horacio Gutierrez, said people who were involved in getting the coalition off the ground. Like Daru, Gutierrez was an antitrust veteran who had nominally entered a new job with a broader portfolio, only to end up as a leader among the tech giants’ public critics on competition issues.
Microsoft and McCain
Gutierrez spent 17 years as a lawyer at Microsoft, eventually becoming the company’s general counsel. He’d been in the thick of what was until recently the great tech antitrust case, when regulators in both the EU and the U.S. took issue with the way Microsoft leveraged its dominance with Windows to boost its proprietary web browser. Gutierrez had spent years in charge of Microsoft’s legal and government affairs in Europe, which was then pursuing an antitrust case against the company that mirrored the Justice Department’s effort to break Microsoft up.
“He is a master at this game,” a person familiar with CAF said of Gutierrez. “He has the scars of the Microsoft antitrust battles and saw what was effective from the other side.” The person called Gutierrez “the MVP, bar none,” of the developers’ fight and said he’d correctly predicted several of Apple’s moves.
Gutierrez joined Spotify in early 2016. Although he wasn’t yet in charge of government affairs, instead dealing mostly with licensing headaches, at the time he came onboard the company was about to pull out of in-app payments after years of clashes with Apple. Spotify had earlier raised its prices in order to cover Apple’s commission, only to see Apple launch its competing Music service — and deprecate Spotify’s app store placement — soon after. Spotify lodged a complaint against Apple with the European Commission in 2019 before turning to CAF’s work in the U.S.
There, Gutierrez helped leverage the developers’ efforts in states to make the argument for a federal app store bill.
“Some state legislatures have begun to recognize the legislative vacuum and have begun debating the need for targeted legislation to address app store abuses,” Gutierrez told U.S. senators earlier this year. As the senators excoriated Apple and Google for their app store policies, Gutierrez urged Congress to “seize leadership on this issue to bring clarity to the market.”
Four months later, almost to the day, three of the senators to whom Gutierrez testified introduced their app store bill.
Gutierrez had help: He’d joined Spotify just weeks after Tom Manatos, who had previously spent almost three years at the top ranks of the Internet Association, a trade group for tech companies such as Google. Manatos also served stints as a staffer for Nancy Pelosi and for the Democratic National Committee, and to this day, he runs a popular eponymous Washington-specific job board. He has long been Spotify’s only publicly disclosed in-house lobbyist, where he has worked on issues including the House’s antitrust reform package.
Other CAF members similarly made major hires, with deep Washington ties, that were crucial to developers’ efforts to fight Apple’s App Store policies. In 2018, for instance, Match Group, which owns several popular dating apps including Tinder, hired Mark Buse as head of Global Government Relations and Policy. Buse, who’d worked on and off for McCain since 1984, held down his office as chief of staff during the 2008 presidential campaign. He had also served as staff director of the powerful Senate Commerce Committee, which oversees much of federal tech policy. Buse lobbied on behalf of Match on the core of the House antitrust package, disclosures show, and he pushed for South Korea’s app store bill, working to allay concerns about trade tensions.
Those close to CAF say there’s more work to do, but the victories they have already racked up have emboldened members to continue speaking out in the hopes that they can have more of a say in the future of competition.
“There’s a bunch of amazing antitrust things going on,” Miseviciute of Proton said. “It’s really the time to … have rules that will also define the next, probably, decade of how the internet functions.”
A MESSAGE FROM PHILIP MORRIS INTERNATIONAL
By scrutinizing facts and including all voices, we can achieve the well-informed collective action required to solve the many challenges our world is facing. This is our shared responsibility and the least we can do to drive positive change.
