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Apple sued by DOJ on antitrust charges

I love Apple products. They’re some of the best designed consumer devices ever produced. They look great, work great, and are easier to use than the alternatives. I also love Apple’s support system that makes it easy to get help by phone or in one of their stores, and get products quickly serviced. Their stores set an example of treating their customers with respect. The question is whether Apple’s success is the result of their own doing or because they used their dominance to harm its competitors through anti-competitive practices. The DOJ is suing Apple believing much of their success is a result of the latter.

It is true that Apple has another, more onerous side. It’s their ability to create a walled garden around their iPhone ecosystem and guard against the least bit of encroachment. They limit how other companies’ software and hardware are allowed to work with the iPhone, restrict how they sell their software to Apple customers, and take a big cut of every transaction.

Apple insists they’re doing this to create products with a better user experience and to protect us from companies that want to do bad things to us and our products. Such things as adding apps that track us, selling our personal data, or draining the battery too fast. And they claim because of their strategy, people love their products, are willing to pay a premium for them, and they have a growing market share.

The iPhone is not a monopoly, and still faces competition from Android phones, including many selling for under $300. Because of its superiority, Apple has been able to command a much higher price. Apple’s policies have focused on making their products work better together, including the Apple watch, AirTags, and MacBooks, which is something Apple users love and results in purchasing other Apple products. So I think the DOJ will have a difficult time proving this charge.

But Apple can be criticized for another practice that may be anti-competitive. They allow software companies to only sell their apps on the Apple app store and then pay them 30% of sales. That means Apple collects 30% of the cost of the app plus anything purchased through the app, including subscriptions, renewals, or physical products. (In some cases, that drops to 15%, such as on some renewed subscriptions based on company size.)

Apple enforces this by not allowing app makers to direct users elsewhere to make a purchase, such as displaying a link to their website on their app, and prohibit other app stores. Ironically, these policies can sometimes make using an iPhone more difficult and often confusing for users. Want to buy an eBook from Amazon on your phone? Not possible. You need to do it from a computer and then download it into your eBook reader app. Want to buy tickets for a concert from your favorite artist’s app. Not possible because it’s not economical for the artist to give away his profits.

The Department of Justice (DOJ) has accused Apple of violating antitrust laws by undermining non-Apple apps, products and services that, if allowed to work on the iPhone, would reduce our dependency on the iPhone. They accuse Apple of using “monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others. They say Apple purposely makes other phones, watches, messaging services, etc. work less well with an iPhone as a plot to discouraging iPhone owners from switching.

Attorney General Merrick Garland offers this example: “For example, if an iPhone user messages a non-iPhone user in Apple messages, the text appears not only as a green bubble, but incorporates limited functionality. The conversation is not encrypted. Videos are pixelated and grainy, and users cannot edit messages or see typing indicators. As a result, iPhone users perceive rival smartphones as being lower quality because the experience of messaging friends and family who do not own iPhones is worse.”

Two competitive systems not perfectly working together does not seem anticompetitive to me. In fact it seems pretty typical of competitors trying make their product better than the other.

There are other areas where Apple can be shown to be anti-competitive, such as forcing all app makers to sell their products in their own app store. and charging 30% of sales. That does seem onerous because they are using their dominance to force streaming music services to pay 30% of their sales to Apple, while Apple’s competing music service, Apple Music, does not pay.

Yes, Apple can be ruthless, engages in a number of questionable policies that likely violate antitrust laws, especially handicapping competitive software and services. But the lawsuit also gets some things wrong and seems to be overreaching. Apple has been so successful mostly because of their products design and engineering, their ability to make hardware and software work together, and their amazing design skills and support of their customers. Yet the complaint against Apple claims it has maintained its power, not as a result of its innovation and superiority, but because of these unlawful efforts to exclude others in its ecosystem. That seems like an overreach from my experience; Apple has prevailed because of having a better product and a better support system.