Apple boss Tim Cook says tech industry regulation ‘inevitable’

Free market approach not working amid series of data privacy scandals

Regulation of the tech sector is inevitable, Apple boss Tim  Cook has said, as free market has not worked to rein in data privacy abuses. Photograph:  Kimihiro Hoshino /AFP/Getty Images

Regulation of the tech sector is inevitable, Apple boss Tim Cook has said, as free market has not worked to rein in data privacy abuses. Photograph: Kimihiro Hoshino /AFP/Getty Images

 

Apple’s chief executive Tim Cook said new regulations for the tech industry are “inevitable” in the wake of a series of scandals, rejoining a debate that is intensifying along with political pressure on the company’s rival, Facebook.

Mr Cook said “the free market is not working” and politicians will step in.

His comments come amid simmering tension between Apple and Facebook. Earlier this week, Facebook was accused of using underhand tactics as it struggled to contain the fallout from Russian interference on the social network and controversy over the leak of user data to Cambridge Analytica, the research firm.

Facebook’s actions, reported by the New York Times, included contracting with Definers, a Republican-leaning consultancy, which attempted to smear competitors and opponents on its behalf.

In an interview with the Axios website taped before those revelations, which were broadcast on HBO on Sunday night, Mr Cook said the tech industry should embrace regulation.

“Generally speaking, I am not a big fan of regulation,” he said. “I’m a big believer in the free market. But we have to admit when the free market is not working. And it hasn’t worked here.

“I think it’s inevitable that there will be some level of regulation . . . I think Congress and the administration at some point will pass something.”

‘Unsavoury practices’

A Definers’ affiliate called NTK Network posted dozens of articles blasting Apple and Google for “unsavoury business practices”, including calling Mr Cook hypocritical for criticising Facebook over privacy, it was reported.

Definers told the NYT that their work on Apple was funded by a different technology company. Facebook has denied it paid Definers to smear anyone and cancelled its contract with the company.

Facebook was also reported to have told employees to ditch their iPhones for Android alternatives. Facebook said this was because Android is the largest global operating system.

Mr Cook has tried to put clear water between Apple, which makes most of its money from selling hardware, and advertising-based tech platforms, particularly Facebook, on the issue of privacy.

“This is not a matter of privacy versus profits, or privacy versus technical innovation. That’s a false choice,” he said.

During the interview, Mr Cook was forced to defend Apple’s acceptance of payments from Google – estimated at billions of dollars a year – to be the iPhone’s default search engine.

“One, I think their search engine is the best,” he said. “But two, look at what we’ve done with the controls.”

He pointed to the iPhone’s options for private web browsing and blocks for online trackers, which are used by marketing networks to target ads. “It’s not a perfect thing, but it goes a long way in helping,” Mr Cook said.

US politicians have been discussing how to regulate tech companies for the last two years on issues that vary widely, including privacy, political advertising and competition concerns.

Tech companies have been gradually getting behind broad federal privacy legislation, in part as an effort to undermine more stringent rules passed in California. Some, including Facebook, have also put their weight behind the Honest Ads Act, which extends the regulation that currently covers political ads on television to also cover social media.

Scandals

But the companies are eager to head off concern that recent scandals are the result of their dominance of the industry, something that could open the door to action on competition grounds.

After the NYT investigation was published, David Cicilline, the Democratic congressman who will soon be chairman of the House of Representatives’ antitrust subcommittee, said Congress should enact new laws “to hold concentrated economic power” to account.

Mr Cook previously made pointed criticism of Facebook after the revelations of the massive Facebook data leak to Cambridge Analytica, the data analytics firm that worked for the Trump campaign.

“The truth is, we could make a ton of money if we monetised our customer – if our customer was our product. We’ve elected not to do that,” he said in March.

Facebook did not respond to a request for comment on the new interview. The social network said on Thursday that Mr Cook has “constantly criticised our business model” and that Mark Zuckerberg, Facebook chief executive, has been “equally clear he disagrees”.

Democratic senators said on Friday that they were “gravely concerned” about the latest allegations against Facebook.

“Both elected officials and the general public have rightfully questioned whether Facebook is capable of regulating its own conduct,” senators Amy Klobuchar, Mark Warner, Chris Coons and Richard Blumenthal said in a statement.

– Copyright The Financial Times Limited 2018