Apple vs the “free market”
Meet the new boss, worse than the old boss.
I’m coming to BURNING MAN! On TUESDAY (Aug 27) at 1PM, I’m giving a talk called “DISENSHITTIFY OR DIE!” at PALENQUE NORTE (7&E). On WEDNESDAY (Aug 28) at NOON, I’m doing a “Talking Caterpillar” Q&A at LIMINAL LABS (830&C).
Every artist, performer and creator on Patreon is about to get screwed out of 30% of their gross revenue, which will be diverted to Apple, the most valuable company on the planet. Apple contributes nothing to their work, but it will get to steal a third of their wages:
https://news.patreon.com/articles/understanding-apple-requirements-for-patreon
How is this possible? Enshittification:
https://pluralistic.net/2024/01/30/go-nuts-meine-kerle/#ich-bin-ein-bratapfel
Enshittification starts with companies being good to their end users. In this case, Apple made a high quality product — the Iphone and Ipad — and carefully tended to its App Store. That lured in a lot of customers, many of whom made owning an Apple device part of their very identity, as though buying a popular brand of consumer electronics made them part of an oppressed religious minority:
https://pluralistic.net/2024/01/12/youre-holding-it-wrong/#if-dishwashers-were-iphones
At the same time, Apple was locking those users in, selling them media that they couldn’t play on non-Apple devices and tying their use of a mobile phone to their email, two-factor authentication, family photos, working files and consumer credit. Apple also avidly participated in the expansion of “IP law,” which is to say, “laws that let Apple control the conduct of its customers, critics and competitors”:
https://locusmag.com/2020/09/cory-doctorow-ip/
In particular, Apple fought for a bizarre and expansive understanding of Section 1201 of the 1998 Digital Millennium Copyright Act. That’s a law that makes it a felony to help someone jailbreak a device, even if this doesn’t lead to a single instance of copyright infringement. Once removing a digital lock becomes a crime, then Apple can make anything into a crime — if Apple designs your device so that doing something you desire requires disabling a lock, and then doing that thing becomes illegal.
For example, Apple designs its phones so that they won’t accept new parts without a manufacturer-supplied unlock code. That means that even if you install an Apple part in your Apple phone, it won’t work unless you get Apple’s permission (not cheap!) to activate that part. This is called “parts pairing” and it’s pure rent-seeking, and Oregon just outlawed it:
The reason Oregon had to ban parts-pairing is that bypassing parts-pairing is a felony under DMCA 1201, punishable by a five-year prison sentence and a $500,000 fine. That means you can’t just buy a tool that some clever reverse-engineer made that fakes the parts-pairing code — not because this is technically impossible, but because it is very, very illegal.
DMCA 1201 gives Apple broad latitude to control how you can use your $1,000 phone. DMCA 1201 is why you can’t just grab a little $0.99 dongle in the Walmart checkout line that jailbreaks your phone and lets you install a different app store. It’s not against the law for an app author to sell you an app without Apple’s blessing. It’s not illegal for you to run an app you buy on your phone without Apple’s blessing. But the technical step needed to let you run software you buy on a gadget you own is a felony, so all those activities become de facto felonies.
Jay Freeman calls this “felony contempt of business model” — but you could also call it “private law.” In passing DMCA 1201, Congress said to companies like Apple, “Just add a digital lock to anything you make, and then you can create felonies out of thin air, which the US courts will prosecute on your behalf.”
This is the Bizarro-world version of “Chevron deference,” the idea that expert agencies, deputized by Congress to fairly and neutrally enforce the law, should have latitude to interpret Congressional intent. So, for example, even if Congress never specifically banned putting rat poison in kids’ breakfast cereal, the FDA should still be allowed to make a “no strychnine in the Fruity Pebbles” rule. This is a common-sense proposition, but back in July, the Supreme Court killed it:
https://prospect.org/justice/supreme-court-stages-coup-against-government-regulation/
So regulators are no longer allowed to regulate, but, thanks to DMCA 1201, corporations can just make up rules out of thin air and give them the force of both criminal and civil statute. The government can’t govern, but corporations can.
The fact that it’s a felony to get your Iphone apps from anyone except Apple means that whatever policies Apple makes for the app store have the force of law. Apple’s pristine execution of stage one of enshittification — luring in users, then locking those users in — mean that businesses can’t survive without reaching Apple customers, and they can’t reach Apple customers without abiding by the app store’s rules.
Remember when Tumblr banned pornography? It was a bizarre shitshow, especially given how important non-heteronormative, non-vanilla porn had been to Tumblr. To many Tumblr users, this looked like a rehash of the old pattern: get big by courting adult performers and sex workers, then kick the people who built your platform to the curb once you’ve attained scale.
There’s a lot of truth to that: under Yahoo and Verizon’s ownership, Tumblr clearly didn’t give a damn about its users, especially the sex workers (and that went double for the world of queer sex). But even after Tumblr was bought by Wordpress, and even after Wordpress did its best to restore some adult content to the platform, Tumblr still remains heavily moderated and heavily censored. Why? Because Apple kept kicking Tumblr out of the App Store on the basis that it contained sexual material, and without Apple users, Tumblr was dead in the water:
https://pluralistic.net/2022/09/29/go-nuts-show-nuts/#chokepoints
This is Apple’s “private law” — Apple is using its “IP” (DMCA 1201, which lets it prevent its customers from choosing rival app stores) to reach beyond the walls of its own offices and into the offices of Tumblr, dictating Tumblr’s standards for sexually explicit material. Apple claims this is merely a matter of “editorial standards,” no different from a bookstore deciding not to shelve pornography. The difference is that in this case, Apple can block you from patronizing another bookstore, by forcing you to forfeit the $1,000 you spent on your device and potentially many thousands more in media and data and other switching costs.
But that’s not the end of Apple’s ability to regulate the market. Apple doesn’t enforce its ban on adult content equally. If Tumblr allows adult content, it gets kicked out of the app store. But Apple chooses not to enforce its sexual material ban against Reddit or Twitter, where the policy is “go nuts, show nuts.” Apple’s choosing the winners and the losers here, creating the “market distortion” that conservatives warn us against.
Which brings me back to Patreon. Apple’s content-based rules are mere ornaments on Apple’s core market-structuring activity. The main event is Apple’s 30% App Store Tax. Apple skims a 30% vig off the price of the apps you buy, and everything you buy in them:
This is a shocking payment processing fee. For comparison, the highly concentrated credit-card sector charges 2–5% to process a payment — a tenth of Apple’s charge. What’s more, that 2–5% credit card fee is considered to be extremely high (it’s gone up 40% since covid started). Apple backstops this payment rule with more content-based rules: app vendors may not send customers to the web to complete their payments through a regular website with a 2–5% fee. Users have to figure this out for themselves.
Again, Apple picks winners and losers in this market. Not every app has to pay this fee — for example, Uber is exempted from it. But smaller ridehailing apps — say, one created by a driver co-op — gets soaked for the full amount, meaning that it can’t possibly compete against Uber. Apple is effectively crowning Uber the perpetual overlord of ride-hailing apps.
Apple also uses this market regulating power to scoop up parts of the market for itself. Apple directly competes with many of its vendors, selling books, music, videos, audiobooks and other digital media, as well as email, mass storage, photo storage, etc. Apple’s rivals have to kick a 30% vig up to the Apple Crime Family, but Apple exempts itself from those fees. Again, Apple is picking the winner in the market — itself.
It’s not just businesses that compete with Apple that get wiped out by Apple’s position as de facto supreme planner of the economy. Many businesses simply can’t exist in a world in which 30% of their revenue is creamed off by another business. For that matter, Apple couldn’t survive under that regime. As Slashdot’s theodp writes, Apple netted $97b on revenues of $383b last year. If Apple had to pay a 30% app store tax on that gross revenue, it would be down $115b, for a net loss of $18b:
Here we have Apple as the fully unfurled regulator of the digital economy. Apple decides what kinds of businesses are prohibited, based on three criteria:
- Does Apple want to compete with them?
- Do they carry sexually explicit material without being Twitter or Reddit?
- Are they an otherwise viable business that doesn’t have an extra 30% margin they can afford to give away to Apple?
Apple doesn’t oppose regulation; Apple loves regulation, so long as they’re the ones doing the regulating. They want to be able to shape and define the digital market, backed by the power of the state, but without any input from the state. In modern corporate orthodoxy, the state is an enforcer for corporate will.
That’s the animating force behind “binding arbitration” waivers, the now-ubiquitous contract terms that require you to give up your right to sue no matter what the other party does to you. These waivers are in your phone contract, your employment contract, your travel tickets, your concert tickets, your doctor’s office forms, and the terms for most services:
https://pluralistic.net/2022/06/12/hot-coffee/#mcgeico
By forcing you to click “OK” to a binding arbitration waiver, corporations transform the courts from entities that interpret and enforce the law to entities that force the public to surrender every right and protection Congress ever gave them, in favor of the unilateral decisions of a corporate arbitrator paid by the company that wronged them.
This is more private law — the state existing as an enforcer for the whims and fiat of corporate strategists. It’s a terribly neat illustration of Wilhoit’s law, “Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect”:
https://crookedtimber.org/2018/03/21/liberals-against-progressives/#comment-729288
Just like the digital locks lurking in your Iphone, you are subject to thousands of unseen and unsuspected binding arbitration waivers buried deep in fine print you have never read. You will only discover the existence of these waivers when you are horribly wronged, whereupon the company that hurt you will produce the waiver and force you to surrender your legal right to redress.
The latest example of this is the viral story of a lawsuit brought against Disney by the widower of a doctor who died at Walt Disney World after being fed a meal containing allergens that she had been assured would not be present in her food:
Disney has filed a motion seeking to have the widower’s case dismissed because he signed up for a free trial of the Disney+ streaming service, and in so doing, “agreed” to permanently give up his right to sue Disney for anything:
This is every bit as much market-structuring conduct as Apple’s insistence that only Patreon performers who have an extra 30% in their monthly payments can go on making art. Liability rules — like a rule that makes corporations liable if they kill you by feeding you allergens they’ve promised not to feed you — are a key part of how we structure markets. By allowing customers who’ve been wronged, cheated or harmed to seek financial compensation in civil court, Congress created a system of incentives designed to shape the conduct of firms (the alternative is the prohibitively expensive prospect of having on-site round-the-clock inspectors, a measure reserved for a few sensitive industries like meat-packing plants, and, in a wildly imperfect fashion, Boeing).
When a company unilaterally removes your ability to access the courts — while preserving its own right to have the courts force you to seek justice from its arbitrators — they incinerate every regulation, every law, and replace it with “whatever we feel like.” The law protects them, it binds you.
We live in the felony contempt of business model dystopia, where multinational corporations decide which laws apply and when; and where they get to decide who can be in business, and what kind of business they can do.
Community voting for SXSW is live! If you wanna hear RIDA QADRI and me talk about how GIG WORKERS can DISENSHITTIFY their jobs with INTEROPERABILITY, VOTE FOR THIS ONE!
If you’d like an essay-formatted version of this post to read or share, here’s a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2024/08/15/private-law/#thirty-percent-vig
