Subscribers to iCloud claim Apple misrepresents its service, hides that parts of its storage are on Amazon, Google, and Microsoft’s cloud
Are iCloud subscribers getting premium, exclusive service backed by the Apple brand? That’s the question at the heart of a lawsuit filed in the U.S. District Court of Northern California by two subscribers that claim Apple misrepresents and unfairly prices the cloud service when their data – or at least part of it – ends up in Amazon Web Services, Google Cloud, and Microsoft Azure’s infrastructure. Essentially, the lawsuit alleges that Apple is a stealthy cloud reseller that improperly conceals the source of its branded services.
The Lowdown: The lawsuit – filed by Florida resident Andrea Williams and California resident James Stewart – raises several interesting issues relative to the way hybrid cloud services are operated and marketed to consumers and businesses.
The two iCloud subscribers say Apple breaches the California False Advertising Law and Unfair Competition Law by utilizing and charging for undisclosed third-party services. Apple brands itself as a provider of premium cloud services when it’s actually charging higher prices for more competitive products without customers having a choice, the lawsuit says, stating that no customer would choose to pay the premium price for an Apple-branded service that’s powered by – in whole or in part – by a less expensive and equally good competitor.
The plaintiffs make the additional claim that they never gave Apple permission to transfer their data to third-party cloud providers. They believe that Apple marketed a service delivered on Apple-hosted clouds. They point to Apple’s iCloud service in China as evidence of the difference, as China requires Apple to host subscriber data in local data centers and disclose associated service providers.
Apple is not commenting on the lawsuit. Apple does disclose in its iOS Security Guide that it does use third-party cloud services to supplement the iCloud service. All data placed in third-party clouds are encrypted, with Apple controlling the encryption keys.
The Details: The plaintiffs claim Apple’s marketing and contractual practices are deceptive and unfair given that they’re promoting a premium service with higher prices than competing offers. In the lawsuit, the plaintiffs point to Apple offering 5GB of free storage in iCloud when competing offerings utilized by Apple offer higher volumes of free storage. Given that consumers have numerous choices for their mobile and cloud storage, the plaintiffs claim they would never pay Apple’s premium pricing if they knew the service relied on lesser-priced support partners.
The Impact: The lawsuit seeks repayment of the premium-priced services and unspecified damages. While only two people filed the claim, the lawsuit leaves open the potential for becoming a class action open to all iCloud subscribers.
Channelnomics Point of View: The iCloud case opens a number of issues in the cloud era that affect consumer and commercial businesses alike. Do cloud service providers have a responsibility to disclose the source of their infrastructure? Do resellers have a right to establish premium prices when using less expensive supporting services? Or must cloud service providers maintain pricing parity when utilizing third-party services? And does premium brand value translate into premium pricing regardless of the source or quality of the underlying service? What looks like a trivial consumer lawsuit against Apple has the potential to open a huge can of pricing and disclosure worms for cloud vendors, cloud resellers, and managed service providers that utilize cloud service providers.