apple monopoly case study

The Epic-Apple app case reveals monopoly power and the need for new regulatory oversight

Subscribe to the center for technology innovation newsletter, mark maccarthy mark maccarthy nonresident senior fellow - governance studies , center for technology innovation @mark_maccarthy.

June 2, 2021

Epic Games’ private antitrust lawsuit that concluded last week revealed the extent of Apple’s power over its own mobile app infrastructure. The company controls the mobile operating system that runs apps on iPhones and iPads and operates the only store where users can obtain apps that work on their Apple devices. The 30% cut Apple takes for apps purchased through its App Store is only one manifestation of its durable control over this mobile app infrastructure.

The trial judge promised that neither party to the case would like her decision, which is not a surprise. Antitrust law as currently understood and practiced provides few resources to rein in the kind of durable monopoly power Apple possesses. Only a supervisory agency tasked with overseeing the mobile app infrastructure, which would include the similar system operated by Google, can protect the public and app developers from abuse by these dominant companies.

The problem is finding an adequate remedy under existing antitrust law. As commentators have observed , Epic Games was consistently vague about the remedy it wanted. But several remedies are possible.

One possibility is a court-mandated price for Apple’s service to app developers, say 15% instead of 30%. But price regulation of a digital service is not self-enforcing. If a monopoly company faces a price cap, it can respond by changing the level, structure, or quality of its service. For Apple, this might mean that an app developer that receives regular treatment will pay the regulated price of 15%, but one that wants a privileged place in the store will have to pay the full 30%.

Regulators in infrastructure industries like railroads, telephones, and energy utilities have known for generations that they must be able to define the structure and quality of the service provided if price regulation is to be effective. The same is true of price caps in the mobile app infrastructure. To be effective, price regulation in the app industry would require an ongoing supervisory regulator that understands the app business well enough to both set prices and define service quality levels.

A second possible remedy is a ban on Apple’s anti-steering rule, which prevents app developers from telling potential customers that they can pay for the app outside the App Store. Apple put that rule in place so that it can get a higher return on its intellectual property investment in the App Store. But the court might find that it is anti-competitive and ban it.

To do so would require distinguishing this case from an earlier Supreme Court decision that upheld Amex’s similar anti-steering rule, which prevented merchants from urging customers to use a cheaper payment method. But this might not be all that hard. The Amex decision was restricted to the transactions market where Amex cardholders received a tangible benefit from the anti-steering rule in the form of rewards for using the card. It is hard to see how the app consumer benefits from Apple’s anti-steering rule.

But a court mandate that Apple abandon its anti-steering rule is also not self-enforcing. Evasion could take the form of Apple communication with potential app purchasers offering discounts or other rewards for using Apple’s own payment system. True, this tactic would cut into Apple’s current level of monopoly profits from the App Store, estimated at $72.3 billion in 2020, but it is not clear that the new circumstances would improve matters all that much for app developers.

If one objective of abolishing the anti-steering rule is to bring a tangible benefit to app developers, then an industry regulator must supervise the market to prevent this kind of evasion, while still allowing Apple and Google the flexibility to improve the service they offer to consumers and app developers through their control of the operating system and the app markets.

Farhad Manjoo concludes his analysis of the Apple “tax” with a call for legislative action if the courts fail to “police” Apple’s monopoly power. But the courts cannot effectively act as an ongoing constraint on Apple’s power. Neither the courts nor the generalist law enforcers at the antitrust agencies are equipped to play this role. They have too few staff, little industry expertise, and no authority to write and enforce rules to protect the public.

Congress will have to do the job. It should consider legislation to set up a new digital regulatory agency or authorize an existing one to oversee mobile app infrastructure. The goal of such an entity would be to serve the public good and protect consumers, app developers, and competitors.

This agency should also be given authority to regulate the conflict of interest between Apple’s role as platform manager and its role as competitor in the app marketplace itself. This issue is part of the European Union’s charges against Apple in connection with its treatment of Spotify, which competes with Apple Music. The new mobile infrastructure agency should have authority to write rules to manage this conflict, enforce them on an ongoing basis, and update them as market and technological conditions evolve.

The new law must respond to the possibility that a regulatory structure like this would inhibit innovation. It could do this by explicitly requiring the agency to promote technological and business process innovation, perhaps, by forbearing from regulation while industry players try out new features and quality improvements.

The new law must also respond to the possibility that such an agency would serve the interests of the regulated industry rather than the public. Several legislative measures are possible to prevent this regulatory capture. Attracting and retaining qualified people with the expertise to regulate the industry means that agency salaries and incentives must be competitive with industry standards. Revolving-door restrictions must be put in place to keep the judgment of the agency focused on the public interest. Perhaps, the agency should be led by a career government official who would have a long-term interest in effective management of the agency rather than be directed by temporary political appointees looking for their next position.

The Epic-Apple case reveals the monopolization of the mobile app infrastructure. But the remedies to this problem are beyond the resources of antitrust law. Congress needs to step in with a regulatory solution.

Apple is a general, unrestricted donor to the Brookings Institution. The findings, interpretations and conclusions in this piece are solely those of the authors and not influenced by any donation.  

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Apple is facing a new antitrust lawsuit that could dethrone the iPhone

Does Apple have a monopoly on smartphones? The Justice Department thinks so.

by Nicole Narea

The Biden administration filed a sweeping antitrust lawsuit against Apple Thursday that targets a product that has long been the major revenue driver for the company’s $2.76 trillion business: the iPhone.

The Department of Justice, joined by 16 state attorneys general, accused Apple in a New Jersey federal court of maintaining a monopoly on the US market for smartphones, of which the iPhone makes up 65 percent . The complaint alleges that Apple has deliberately thwarted apps, products, and services that would make it easier for users to switch from the iPhone to other smartphones and lower costs for consumers and developers. 

The company responded in a public statement Thursday that the lawsuit sets a “dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”

Apple was one of the last remaining big tech companies that had yet to be hit with an antitrust suit of this magnitude: There are also pending suits against Facebook parent Meta , Amazon , and Google . 

“Antitrust has changed and is essentially back in an FDR-style,” said Tim Wu , a professor at Columbia Law School and architect of the Biden administration’s antitrust policies . “I think a signature of the FDR-style antitrust was that they didn’t play around the edges. If they thought an industry was anti-competitive, they sued everybody, including the largest monopolists, for stuff that was core to their business.” 

What the lawsuit says

At its center, the lawsuit is “really a story about innovation, and interfering and controlling the path of innovation to preserve an existing monopoly,” said Fiona Scott Morton , a professor at Yale School of Management and former chief economist at the DOJ’s antitrust division. 

The lawsuit cites five examples of how Apple has allegedly suppressed technology that would have improved competition in the smartphone market:

• It has restricted “super apps” that provide a wide array of functionalities — such as e-commerce , food delivery, transportation , financial services, social networking, and more — because it makes users less dependent on Apple’s ecosystem.
• Until recently , in the Apple App store, it limited the availability of cloud-gaming apps that can be played without expensive hardware, like the iPhone — the idea being that if consumers are going to become attached to a game, Apple wants it to be one that requires an advanced phone like theirs. 
• It has prohibited third-party messaging apps from sending or receiving SMS messages through a phone carrier network (rather than through data networks) and made them “worse generally” compared to Apple’s native messaging app. 
• It has prevented third-party smartwatches from having access to key functions when paired with an iPhone.
• It has denied users access to digital wallets that work across smartphone platforms and have enhanced features.

The complaint cites internal communications and messages from Apple executives, including emails and meeting transcripts, to show that the company was aware that its App Store policies would have the effect of discouraging competition. 

The lawsuit says that all of this has harmed the market for “performance” smartphones, defined as smartphones with “higher quality cameras, better battery life, wireless charging, and advanced biometrics such as face scanning,” as well as for smartphones generally. 

“They’re saying Apple has monopolized this one kind of market — the most lucrative market — and I think that market definition will be very important to the success of the case,” Wu said. 

The main challenge for the government, however, is that we’ll never know for certain what other products might have been developed in the absence of Apple’s alleged anticompetitive practices, Scott Morton said. 

Still, a recent Federal Trade Commission case against Illumina, a producer of gene-sequencing machines, suggests that the government might have a chance, she said. The FTC argued Illumina’s acquisition of the fledgling cancer test developer Grail would discourage innovation and increase prices for consumers. But Illumina said that argument was merely speculative because it’s impossible to predict what cancer tests will be invented in the future. 

The FTC won the case, forcing Illumina to divest in December. The same could happen in Apple’s case.

“When you’re dealing with innovation competition, there is this difficulty of pointing to specifics,” Scott Morton said. “But at the same time, that innovation is hugely valuable to consumers. So they’re very important markets to protect.”

Apple’s most likely defense is that users simply prefer their devices, and that the choices outlined by the DOJ were made in the service of user privacy, Wu said. Indeed, Apple is an industry leader in user privacy protection . 

But the complaint tries to preempt the notion that privacy can be used as a blanket defense to accusations of anticompetitive behavior, saying that Apple “selectively compromises privacy and security interests when doing so is in Apple’s own financial interest.” For example, text messages sent from iPhones to Androids are unencrypted and could easily be made encrypted.

“There are less anti-competitive ways of achieving privacy much of the time,” Scott Morton said.

Will this lawsuit dethrone Apple as the king of smartphones?

The government hasn’t ruled out structural remedies in its lawsuit, and that could include something as drastic as breaking up Apple’s business or, on the less intense end of the spectrum, other methods of restoring competition in the app distribution market. The lawsuit demands that Apple be prevented from undermining super apps and cloud-streaming apps on the App Store, as well as from using private APIs (tools to communicate with other software) to thwart third-party messaging, smartwatches, and digital wallets.

Wu said he expects that the government won’t settle easily. 

“One thing I think has been totally different about this administration is they’re not willing to take 20 cents on the dollar,” he said, comparing the Biden administration to the Bush and Obama administrations. 

On Thursday, Apple stock was down more than 4 percent. But the company’s core business is a behemoth: the iPhone is the most expensive smartphone on the market, going for as much as $1,599 for the priciest model, and its market share has only grown in recent years , edging out challengers like Samsung and Huawei. 

As Scott Morton said, however, it’s hard to tell in the long run what might happen to Apple — or any new innovators who enter the market — if the company is made to stop some of the practices that have allowed it to claim a fifth of the world’s smartphone sales and counting. 

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Justice Department sues Apple, alleging it illegally monopolized the smartphone market

The Justice Department announces an antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation.

Attorney General Merrick Garland accompanied by New Jersey Attorney General Matthew Platkin and Deputy Attorney General Lisa Monaco, speaks during a news conference at the Department of Justice headquarters in Washington, Thursday, March 21, 2024. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation. (AP Photo/Jose Luis Magana)

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FILE - iPhone 15 Pro phones are shown during an announcement of new products on the Apple campus in Cupertino, Calif., Sept. 12, 2023. The Justice Department announced a sweeping antitrust lawsuit Thursday, March 24, 2024 against Apple, accusing the tech giant of having an illegal monopoly over smartphones in the U.S. (AP Photo/Jeff Chiu, File)

FILE - iPhone 15 phones are shown during an announcement of new products on the Apple campus in Cupertino, Calif., Sept. 12, 2023. The Justice Department announced a sweeping antitrust lawsuit Thursday, March 21, 2024 against Apple, accusing the tech giant of having an illegal monopoly over smartphones in the U.S. (AP Photo/Jeff Chiu, File)

FILE - The Apple logo is shown on a screen during an announcement on the Apple campus Sept. 12, 2023, in Cupertino, Calif. The Justice Department announced a sweeping antitrust lawsuit Thursday, March 21, 2024 against Apple, accusing the tech giant of having an illegal monopoly over smartphones in the U.S. (AP Photo/Jeff Chiu, File)

Acting Associate Attorney General Benjamin Mizer, speaks as Attorney General Merrick Garland listens during a news conference at Department of Justice headquarters in Washington, Thursday, March 21, 2024. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation. (AP Photo/Jose Luis Magana)

Deputy Attorney General Lisa Monaco speaks as Attorney General Merrick Garland listens during a news conference at Department of Justice headquarters in Washington, Thursday, March 21, 2024. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation. (AP Photo/Jose Luis Magana)

Assistant Attorney General Jonathan Kanter, of the Antitrust Division, speaks during a news conference at Department of Justice headquarters in Washington, Thursday, March 21, 2024. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation. (AP Photo/Jose Luis Magana)

Attorney General Merrick Garland speaks during a news conference at Department of Justice headquarters in Washington, Thursday, March 21, 2024. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation. (AP Photo/Jose Luis Magana)

Assistant Attorney General Jonathan Kanter, of the Antitrust Division, from second left, speaks as New Jersey Attorney General Matthew Platkin, Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco, listen during a news conference on antitrust complaint agains Apple at Department of Justice headquarters in Washington, Thursday, March 21, 2024. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation. (AP Photo/Jose Luis Magana)

WASHINGTON (AP) — The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple , accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors, stifles innovation and keeps prices artificially high.

The lawsuit, filed in federal court in New Jersey, alleges that Apple has monopoly power in the smartphone market and leverages control over the iPhone to “engage in a broad, sustained, and illegal course of conduct.”

“Apple has locked its consumers into the iPhone while locking its competitors out of the market,” said Deputy Attorney General Lisa Monaco. Stalling the advancement of the very market it revolutionized, she said, it has “smothered an entire industry.”

Apple called the lawsuit “wrong on the facts and the law” and said it “will vigorously defend against it.”

The suit takes aim at how Apple allegedly molds its technology and business relationships to “extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.”

That includes diminishing the functionality of non-Apple smartwatches, limiting access to contactless payment for third-party digital wallets and refusing to allow its iMessage app to exchange encrypted messaging with competing platforms.

It specifically seeks to stop Apple from undermining technologies that compete with its own apps -- in areas including streaming, messaging and digital payments -- and prevent it from continuing to craft contracts with developers, accessory makers and consumers that let it “obtain, maintain, extend or entrench a monopoly.”

The lawsuit — filed with 16 state attorneys general — is just the latest example of aggressive antitrust enforcement by an administration that has also taken on Google, Amazon and other tech giants with the stated aim of making the digital universe more fair, innovative and competitive.

“The Department of Justice has an enduring legacy taking on the biggest and toughest monopolies in history,” said Assistant Attorney General Jonathan Kanter, head of the antitrust division, at a press conference announcing the lawsuit. “Today we stand here once again to promote competition and innovation for next generation of technology.”

Antitrust researcher Dina Srinavasan, a Yale University fellow, compared the lawsuit’s significance to the government’s action against Microsoft a quarter century ago — picking a “tremendous fight” with what has been the world’s most prosperous company.

“It’s a really big deal to go up and punch someone who is acting like a bully and pretending not to be a bully,” she said.

President Joe Biden has called for the Justice Department and the Federal Trade Commission to vigorously enforce antitrust statutes . While its stepped-up policing of corporate mergers and questionable business practices has met resistance from some business leaders — accusing the Democratic administration of overreach — it’s been lauded by others as long overdue.

The case seeks to pierce the digital fortress that Apple Inc., based in Cupertino, California, has assiduously built around the iPhone and other popular products such as the iPad, Mac and Apple Watch to create what is often referred to as a “walled garden” so its hardware and software can seamlessly offer user-friendly harmony.

The strategy has helped Apple attain an annual revenue of nearly $400 billion and, until recently, a market value of more than $3 trillion . But Apple’s shares have fallen by 7% this year even as most of the stock market has climbed to new highs, resulting in long-time rival Microsoft seizing the mantle as the world’s most valuable company.

Apple said the lawsuit, if successful, would “hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect” and would “set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”

“At Apple, we innovate every day to make technology people love — designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users,” the company said in a statement. “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets.

iPhone 15 Pro phones are shown during an announcement of new products on the Apple campus in Cupertino, Calif., Sept. 12, 2023. (AP Photo/Jeff Chiu, File)

Apple has defended the walled garden as an indispensable feature prized by consumers who want the best protection available for their personal information. It has described the barrier as a way for the iPhone to distinguish itself from devices running on Google’s Android software, which isn’t as restrictive and is licensed to a wide range of manufacturers.

“Apple claims to be a champion of protecting user data, but its app store fee structure and partnership with Google search erode privacy,” Consumer Reports senior researcher Sumit Sharma said in a statement.

The lawsuit complains that Apple charges as much as $1,599 for an iPhone and that the high margins it earns on each is more than double what others in the industry get. And when users run an internet search, Google gives Apple a “significant cut” of the advertising revenue those searches generate.

The company’s app store also charges developers up to 30 percent of the app’s price for consumers.

Critics of Apple’s alleged anticompetitive practices have long complained that its claim to prioritize user privacy is hypocritical when profits are at stake. While its iMessage services is sheathed from prying eyes by end-to-end encryption, that protection evaporates the moment someone texts a non-Apple device.

But Will Strafach, a mobile security expert, said that while he believes Apple needs reigning in, he’s concerned that the Justice Department’s focus on messaging may be misplaced and could weaken security and privacy.

“I am quite glad that access to SMS messages is restricted,” said Strafach, creator of the Guardian Firewall app.

He notes that a number of apps, ostensibly for weather and news, on iPhones have secretly and persistently sent users’ GPS data to third parties. Strafach said he is concerned weakened Apple security “could open the door to stalkerware/spouseware, which is already more difficult to install on Apple devices compared to Android.”

However, prominent critic Cory Doctorow has complained that while Apple has blocked entities like Facebook from spying on its users it runs its “own surveillance advertising empire” that gathers the same kinds of personal data but for its own use.

“Apple has a history of clandestine deals with surveillance giants like Google, and (CEO) Tim Cook gave Uber a slap on the wrist instead of an app store ban when (the ride-sharing company) built a backdoor to spy on iPhone users who had already deleted Uber’s app,” noted Sean O’Brien, founder of Yale’s Privacy Lab.

Fears about an antitrust crackdown on Apple’s business model haven’t just contributed to the drop in the company’s stock price, there also is concern it lags behind Microsoft and Google in the push to develop products powered by artificial intelligence technology.

Antitrust regulators made it clear in their complaint that they see Apple’s walled garden mostly as a weapon to ward off competition, creating market conditions that enable it to charge higher prices that have propelled its lofty profit margins while stifling innovation.

“Consumers should not have to pay higher prices because companies break the law,,” said Attorney General Merrick Garland. Left unchallenged, Apple would “only continue to strengthen its smartphone monopoly,” he added.

William Kovacic, a former chairman of the Federal Trade Commission who teaches at George Washington University, said he expects the core of Apple’s defense to be that it is not at all a monopoly in the smartphone market. Justice Department lawyers have built a “high-quality” argument of harm in the 88-page indictment with “impressive excerpts from the firm’s own documents,” he said.

But don’t expect a verdict until 2026 — which means the case could easily drag on with appeals.

The case escalates the Biden administration’s antitrust siege, which has already triggered lawsuits against Google and Amazon accusing them in engaging in illegal tactics to thwart competition, as well as unsuccessful attempts to block new acquisitions by Microsoft and Meta Platforms.

In addition the FTC sued Facebook in 2020 over its acquisitions of Instagram and WhatsApp.

Kovacic predicts antitrust action by the FTC or Justice Department against Microsoft over its relationship with OpenAI is “coming up around the corner,” and “the two agencies are fighting over who will handle that better.”

“They foreshadowed this would be their agenda and they’re filling out the agenda the way they said,” he added. “These are all high-stakes matters, and you can expect an intense and aggressive defense.”

Apple’s business interests are also entangled in the Justice Department’s case against Google, which went to trial last fall and is headed toward final arguments scheduled to begin May 1 in Washington, D.C. In that case, regulators are alleging Google has stymied competition by paying for the rights for its already dominant online search engine to be the automatic place to handle queries on the iPhone and a variety of web browsers in an arrangement that generates an estimated $15 billion to $20 billion annually.

With the Justice Department mounting a direct attack across its business, Apple stands to lose even more.

Liedtke reported from San Francisco.

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Justice Department Sues Apple for Monopolizing Smartphone Markets

The Justice Department, joined by 16 other state and district attorneys general, filed a civil antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act.

The complaint, filed in the U.S. District Court for the District of New Jersey, alleges that Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers. Apple undermines apps, products, and services that would otherwise make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers. Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others. Through this monopolization lawsuit, the Justice Department and state Attorneys General are seeking relief to restore competition to these vital markets on behalf of the American public.

“Consumers should not have to pay higher prices because companies violate the antitrust laws,” said Attorney General Merrick B. Garland. “We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. If left unchallenged, Apple will only continue to strengthen its smartphone monopoly. The Justice Department will vigorously enforce antitrust laws that protect consumers from higher prices and fewer choices. That is the Justice Department’s legal obligation and what the American people expect and deserve.”

“No matter how powerful, no matter how prominent, no matter how popular — no company is above the law,” said Deputy Attorney General Lisa Monaco. “Through today’s action, we reaffirm our unwavering commitment to that principle.”

“When corporations engage in anticompetitive conduct, the American people and our economy suffer,” said Acting Associate Attorney General Benjamin C. Mizer. “Today’s action against Apple sends a strong signal to those seeking to box out competitors and stifle innovation — that the Justice Department is committed to using every tool available to advance economic justice and root out anticompetitive practices, wherever they arise.”

“For years, Apple responded to competitive threats by imposing a series of “Whac-A-Mole” contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets.”

As alleged in the complaint, Apple has monopoly power in the smartphone and performance smartphones markets, and it uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct. This anticompetitive behavior is designed to maintain Apple’s monopoly power while extracting as much revenue as possible. The complaint alleges that Apple’s anticompetitive course of conduct has taken several forms, many of which continue to evolve today, including:

• Blocking Innovative Super Apps. Apple has disrupted the growth of apps with broad functionality that would make it easier for consumers to switch between competing smartphone platforms.
• Suppressing Mobile Cloud Streaming Services. Apple has blocked the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware.
• Excluding Cross-Platform Messaging Apps. Apple has made the quality of cross-platform messaging worse, less innovative, and less secure for users so that its customers have to keep buying iPhones.
• Diminishing the Functionality of Non-Apple Smartwatches. Apple has limited the functionality of third-party smartwatches so that users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones.
• Limiting Third Party Digital Wallets. Apple has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.

The complaint also alleges that Apple’s conduct extends beyond these examples, affecting web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more. Apple has every incentive to extend and expand its course of conduct to acquire and maintain power over next-frontier devices and technologies.

For over a century, the Department has enforced the antitrust laws against illegal monopolies, deploying the Sherman Act to unfetter markets and restore competition. As alleged in the complaint, the Department is seeking equitable relief on behalf of the American public to redress Apple’s long-running, pervasive anticompetitive conduct.

Apple Inc. is a publicly traded company incorporated in California and headquartered in Cupertino, California. In fiscal year 2023, Apple generated annual net revenues of $383 billion and net income of $97 billion. Apple’s net income exceeds any other company in the Fortune 500 and the gross domestic products of more than 100 countries.  

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Thank you, Attorney General Garland and Deputy Attorney General Monaco.

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To Prevail Against Apple, the DOJ Must Show Exclusionary Conduct

To make headway in its antitrust lawsuit against Apple, the Department of Justice must show Apple has monopoly power in the smartphone market, and willfully maintained that power through exclusionary conduct that harmed the competitive process without procompetitive justifications.

The DOJ’s Antitrust Division and several state attorneys general filed a federal lawsuit in the District of New Jersey on March 21, accusing Apple of unlawfully monopolizing the market for smartphones.

At its core, the complaint alleges Apple makes it harder and more expensive for users and developers to switch from its ecosystem to rival smartphones by stifling various apps, products, and services that would otherwise erode the iPhone’s “stickiness.”

The five “competitive threats” are super apps that provide broad functionality across devices, along with cloud-based gaming apps, smartwatches, digital wallets, and messaging apps.

The DOJ’s antitrust enforcers argue that these offerings were capable of chipping away at Apple’s monopoly power; that Apple imposed contractual restrictions, fees, and taxes on app creation and distribution; and manipulated “critical access points in the smartphone ecosystem” to “build and reinforce the moat around its smartphone monopoly.”

Regarding the first prong, monopoly power is the ability to “control prices[,] exclude competition,” or “ force a purchaser to do something [it] would not do in a competitive market.” The government may prove this element directly or indirectly.

Direct proof would show Apple increased the price of iPhones above the competitive benchmark or prevented actual or potential competitors from gaining a foothold in the smartphone market. Indirect proof would require antitrust enforcers to establish that Apple has a significant market share protected by high barriers to entry. Here, the government alleges Apple’s market share is 65-70%, durable, and insulated by network effects and significant switching costs.

Second, the government must show that Apple maintained its alleged monopoly through exclusionary conduct, rather than by competing on the merits and offering a better product than its rivals. That means establishing that any (or all) of the five technologies cited in the complaint “reasonably constituted nascent threats” to Apple’s smartphone monopoly, and that Apple’s conduct in impairing those apps and functionalities was “reasonably capable of contributing significantly” to its monopoly.

It’s important to understand, however, that the government isn’t required to prove that any of these technologies would (or even could) have become a replacement for smartphones. Rather, the antitrust enforcers’ burden is to show that these technologies, absent Apple’s conduct, could have disrupted Apple’s monopoly or enabled other companies to do so.

Finally, if the government establishes these two elements, Apple will have an opportunity to argue that its practices and policies were necessary to achieve procompetitive benefits such as better security, privacy, or functionality. If Apple can articulate a procompetitive justification that is not merely pretextual, the burden would then shift back to the antitrust enforcers to show Apple could have achieved these benefits through conduct that is substantially less restrictive of competition.

We can expect Apple to respond to the government’s allegations by moving to dismiss the lawsuit, arguing: it faces robust competition in the smartphone market; its policies are necessary to protect the security and integrity of its ecosystem for the benefit of users; and it has no duty under antitrust laws to make its products interoperable with any other companies.

The first and second arguments are primarily factual in nature, so they are unlikely to persuade a court to dismiss the case at this early stage. The third argument, however, raises important legal issues that could be dispositive. Antitrust laws generally allow businesses—even monopolists—to unilaterally refuse to deal with their actual or potential competitors, but there are exceptions where a monopolist terminates a prior profitable relationship or executes an exclusionary scheme to obtain or maintain market power.

The government argues that its case “is about freeing smartphone markets” to lower prices for consumers, reduce fees for developers, and preserve “innovation for the future.” Apple has responded that the lawsuit threatens “who we are and the principles that set Apple products apart in fiercely competitive markets.” Over the next several years, this litigation could have massive implications for a diverse range of sectors, including financial services, fitness, gaming, social media, news, and entertainment.

The case is United States et al v. Apple, Inc. , D.N.J., 2:24-cv-04055, 3/21/24.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Henry Hauser is antitrust counsel at Perkins Coie, and was previously an antitrust enforcer with the Department of Justice and Federal Trade Commission.

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To contact the editors responsible for this story: Alison Lake at [email protected] ; Jada Chin at [email protected]

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Why the Apple and Google app store monopoly could soon be over

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New rules on mobile app stores could trigger a wave of creative, cheaper apps with more privacy options for users. Every budding developer dreams of creating an app that goes viral and makes lots of money overnight. The Angry Birds game became a worldwide phenomenon within weeks when it launched in 2009 and made US$10 million (£8 million) in its first year.

But, overall, the numbers make it clear that mobile apps don’t guarantee wealth. A 2021 study showed just 0.5% of consumer apps succeed commercially . Developers have to jostle for attention among the almost 3 million apps and games on Google Play and 2 million apps on the Apple store.

On Apple’s iPhone and iPad platforms, the App Store is the only way to distribute apps. Until recently, Apple and Google’s stores charged a 30% commission fee. But both halved it for most independent app developers and small businesses after lawsuits such as in 2020 when video games company Epic Games claimed Apple has an illegal monopoly of the market.

Epic Games lost but Apple was subject to App stores changes that are on hold. Both Epic Games and Apple are appealing. Epic Games has filed a similar case against Google, which is set to go to trial in 2023. App stores set the rules on privacy, security and even what types of apps can be made.

Third-party stores could set different rules which might be more relaxed and allow developers to keep more of the money from apps they sell.

You have been Sherlocked

Independent developers say they are sometimes being “Sherlocked” by Google and Apple. They develop an app, and not long afterwards the platforms embeds the app’s features in the operating system itself, killing the developer’s product.

FlickType was developed as a third-party keyboard for iPhones and Apple Watches in 2019. Shortly afterwards Apple apparently told the developer that keyboards for the Apple Watch were not allowed , they announced the feature themselves .

It can take between three and nine months to develop one app and can cost between US$40,000 and US$300,000 to build a minimum viable product. Some apps take much longer than this to develop.

In 2021 a group of UK-based developers filed a £1.5 billion collective action suit against Apple over its store fees. The case will be heard in the UK.

The European Commission told Apple it had abused its position and distorted competition in the music streaming industry and its restrictions on app developers prevent them telling users about cheaper alternative apps.

For instance, when Apple builds a music app, rivals such as Spotify argue this is unfair. They have to pay 15% or 30% of the revenues they make via the Apple store to Apple, their rival, which operates the store platform. Until recently , Apple prevented Spotify from telling users about cheaper options (like by subscribing via the service’s website).

A report from the UK’s Competition and Markets Authority (CMA) highlighted concerns that the tech giants are creating barriers to innovation and competition. A key finding was “Apple prohibits all alternatives to the App Store for native app distribution on iOS, giving it a monopoly over native app downloads on its devices.” Their full market study is due to report back in June 2022. The UK government has pledged to introduce new laws “when parliamentary time allows .”

Alternative app stores

The EU’s Digital Markets Act could be in force by Spring 2023 . The legislation is designed to open up mobile platforms by allowing users to install apps from alternative stores , and ensure app store providers don’t favour their own products or services over third-party developers’ offerings.

In February 2022 a US senate panel approved a bill that aims to rein in app stores.

It is possible to install apps from other niche stores on Android hardware - such as the F-Droid store for open source apps. But the Play Store is available on almost every Android phone by default, meaning the apps available on it can reach a much larger number of users .

Both Apple and Google’s app review processes (which looks at developers’ apps before making them available) have been heavily criticised for their lack of transparency, consistency, and general inequality. Independent developers have no real leverage against international billion-dollar companies.

Google has been criticised for failing to provide meaningful clarification when it remove apps from its store.

Users’ privacy

Apple expressed security and privacy concerns about allowing apps from other stores on its devices.

App store review processes can try to ensure that apps follow their privacy policies. Most users don’t read these however, and apps can already access and share a lot more data than users realise .

Third-party app stores are likely to create a trade-off between user freedom and user safety. Some users may prefer Apple and Google’s approach to privacy. Others may prefer a more open experience, where they can install apps from smaller independent developers, who can develop their apps without having to jump through the large app stores’ hoops .

The fact is that it’s possible to give users this choice - evidence from lawsuits shows that Apple originally planned to support running apps from outside its app store. The Digital Markets Act might force Apple to reconsider.

The DMA won’t deliver results for users and developers unless it is properly implemented. The European Commission itself looks set to become a dedicated regulator for the first time. This will take time though, and the commission will need to grow a team large enough to provide meaningful oversight and enforcement.

_This story was updated on June 9 2022. The number of apps on the Apple app store was changed from 4 million to 2 million. A quote from the CMA’s interim report was added. The following sentence was changed from: They have to pay 15% or 30% of revenues to Apple, their rival, which operates the store platform.

_To: They have to pay 15% or 30% of the revenues they make via the Apple store to Apple, their rival, which operates the store platform.

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Apple lawsuit: US accuses tech giant of monopolising smartphone market

• Published 22 March

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Watch: Apple accused of 'creating barriers' to protect iPhone

The US has filed a landmark lawsuit against Apple, accusing the tech giant of monopolising the smartphone market and crushing competition.

In the legal action, the justice department alleges the company abused its control of the iPhone app store to "lock in" customers and developers.

It accuses the firm of taking illegal steps to thwart apps seen as a threat and make rival products less appealing.

Apple has vowed to "vigorously" fight the lawsuit and denies the claims.

The sprawling complaint, filed at a federal court in New Jersey along with the attorneys general of 16 states, marks one of the biggest challenges to date for Apple, which has been fending off mounting complaints about its practices in recent years.

It alleges that Apple used "a series of shapeshifting rules" and restricted access to its hardware and software, in a bid to boost its own profits while raising costs for customers and stifling innovation.

"Apple has maintained monopoly power in the smartphone market not simply by staying ahead of the competition on the merits but by violating federal anti-trust law," Attorney General Merrick Garland said at a press conference announcing the suit.

Apple becomes the latest tech giant under siege

"Customers should not have to pay higher prices because companies break the law."

The 88-page complaint focuses on five areas where Apple allegedly abused its power.

For example, the US alleges that Apple used its app review process to thwart development of so-called super apps and streaming apps, because it was worried such apps would provide less incentive for customers to stick with iPhones.

It also says Apple has made it difficult to connect iPhones to smart watches made by rivals and blocked banks and other financial firms from accessing its tap-to-pay technology, allowing Apple to earn billions in fees from processing Apple Pay transactions.

The complaint also focuses on the way Apple treats messages sent from rival phones, distinguishing them with green bubbles and limiting videos and other features. It says Apple's moves have created "social stigma" that has helped the tech giant maintain its grip on the market.

Apple said customers were loyal because they were happy and that under US law it was free to choose its business partners. It has pointed to privacy and security concerns to justify its rules.

The company said it would ask the court to dismiss the lawsuit, which it predicted would fail.

"We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it," the company said.

The case will hinge on the question of motivation, said Bill Baer, a visiting fellow at Brookings who was an anti-trust official under the Obama administration.

"Anti-trust laws and the courts' interpretation of them suggest that once you're a monopolist," he said, "if you do engage in behaviours that have no legitimate business justification other than to limit competition and cement your monopoly, then that is problematic."

It is the third legal action Apple has faced from the US government since 2009 and the first anti-trust challenge filed against the company under President Joe Biden's administration.

If the government wins its case, it could force Apple to overhaul its current contracts and practices - or even lead to a break-up of the company.

Shares in Apple fell more than 4% as investors digested the implications of the legal battle.

Any potential changes would take years to materialise as the case makes its way through the courts.

Vanderbilt University professor Rebecca Allensworth called the case "a blockbuster", following other lawsuits the justice department has brought against the major tech giants. Google, Meta and Amazon all face similar lawsuits.

She said at its core, it was about increasing functionality between smartphones and making the technology and software more accessible to consumers and other businesses.

"It's not about breaking up Apple into small units or spinning off divisions," she said.

Apple has faced a growing legal backlash over its iOS ecosystem and business practices.

It is engaged in a lengthy legal battle with Epic Games, which makes Fortnite.

Last month, it was fined €1.8bn (£1.5bn) by the EU for breaking competition laws over music streaming.

The firm had prevented streaming services from informing users of payment options outside the Apple app store, the European Commission said.

Competition commissioner Margrethe Vestager said Apple had abused its dominant position in the market for a decade, and ordered the tech giant to remove all of the restrictions. Apple said it would appeal against the decision.

Anat Alon-Beck, a business law professor at Case Western Reserve University in Ohio, said the justice department's new lawsuit was "far more extensive" than its previous legal challenges in the EU.

"It's not just about the 30% app store fee, but about the core unfair practices of Apple," she said, adding that it was "about time" that the DOJ took action.

"Apple systematically excludes rivals from the Apple ecosystem. By doing that, Apple is hurting so many startup businesses, stakeholders, customers and, in my opinion, its shareholders," she said.

According to the justice department, Apple's share of the US smartphone market exceeds 70%, and its share of the broader smartphone market exceeds 65%.

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• United States

More on this story

• Published 21 March

Apple fined €1.8bn for breaking streaming rules

• Published 4 March

Apple pays out over claims it slowed down iPhones

• Published 8 January

Apple halts some Watch sales in the US

• Published 18 December 2023

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U.S. Sues Apple, Accusing It of Maintaining an iPhone Monopoly

The lawsuit caps years of regulatory scrutiny of Apple’s wildly popular suite of devices and services, which have fueled its growth into a nearly $3 trillion public company.

Garland Accuses Apple of Violating Federal Antitrust Law

Attorney general merrick b. garland said that apple has employed a strategy that relies on exclusionary anti-competitive conduct that hurts both consumers and developers..

Over the last two decades, Apple has become one of the most valuable public companies in the world. Today, its net income exceeds the individual gross domestic product of more than 100 countries. That is in large part due to the success of the iPhone, Apple’s signature smartphone product. But as our complaint alleges, Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. Consumers should not have to pay higher prices because companies break the law. We allege that Apple has employed a strategy that relies on exclusionary, anticompetitive conduct that hurts both consumers and developers. For consumers, that has meant fewer choices, higher prices and fees, lower quality smartphones, apps and accessories, and less innovation from Apple and its competitors. For developers, that has meant being forced to play by rules that insulate Apple from competition. And as outlined in our complaint, we allege that Apple has consolidated its monopoly power, not by making its own products better, but by making other products worse.

By David McCabe and Tripp Mickle

David McCabe reported from Washington, and Tripp Mickle from San Francisco.

The federal government’s aggressive crackdown on Big Tech expanded on Thursday to include an antitrust lawsuit by the Justice Department against Apple, one of the world’s best-known and most valuable companies.

The department joined 16 states and the District of Columbia to file a significant challenge to the reach and influence of Apple, arguing in an 88-page lawsuit that the company had violated antitrust laws with practices that were intended to keep customers reliant on their iPhones and less likely to switch to a competing device. The tech giant prevented other companies from offering applications that compete with Apple products like its digital wallet, which could diminish the value of the iPhone, and hurts consumers and smaller companies that compete with it, the government said.

The Justice Department’s lawsuit is seeking to put an end to those practices. The government even has the right to ask for a breakup of the Silicon Valley icon.

Read the Lawsuit Against Apple

The antitrust suit is the federal government’s most significant challenge to the reach and influence of the company.

The lawsuit caps years of regulatory scrutiny of Apple’s wildly popular suite of devices and services, which have fueled its growth into a nearly $2.75 trillion public company that was for years the most valuable on the planet. It takes direct aim at the iPhone, Apple’s most popular device and most powerful business, and attacks the way the company has turned the billions of smartphones it has sold since 2007 into the centerpiece of its empire.

By tightly controlling the user experience on iPhones and other devices, Apple has created what critics call an uneven playing field, where it grants its own products and services access to core features that it denies rivals. Over the years, it has limited finance companies’ access to the phone’s payment chip and Bluetooth trackers from tapping into its location-service feature. It’s also easier for users to connect Apple products, like smartwatches and laptops, to the iPhone than to those made by other manufacturers.

“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” the government said in the lawsuit, which was filed in the U.S. District Court for the District of New Jersey. It added that the company’s practices resulted in “higher prices and less innovation.”

Apple says these practices make its iPhones more secure than other smartphones. But app developers and rival device makers say Apple uses its power to crush competition.

“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” an Apple spokeswoman said. “If successful, it would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”

Apple is the latest company the federal government has tried to rein in under a wave of antitrust pressure in recent years from both the Justice Department and the Federal Trade Commission, to which the Biden administration has appointed heads sharply focused on changing the laws to fit the modern era. Google, Meta and Amazon are all facing similar suits, and companies from Kroger to JetBlue Airways have faced greater scrutiny of potential acquisitions and expansion.

The lawsuit asks the court to stop Apple from engaging in current practices, including blocking cloud-streaming apps, undermining messaging across smartphone operating systems and preventing the creation of digital wallet alternatives.

The Justice Department has the right under the law to ask for structural changes to Apple’s business — including a breakup, said an agency official, who spoke on condition of anonymity. The official declined to identify what additional action the agency could request in this case but any demands would be tied to how a court rules on the question of whether — and how — Apple broke the law.

It’s unclear what implications the suit — which is likely to drag out years before any type of resolution — would have for consumers. Apple plans to file a motion to dismiss the case in the next 60 days. In its filing, the company plans to emphasize that competition laws permit it to adopt policies or designs that its competitors oppose, particularly when those designs would make using an iPhone a better experience.

Apple has effectively fought off other antitrust challenges. In a lawsuit over its App Store policies that Epic Games, the maker of Fortnite, brought in 2020, Apple persuaded the judge that customers could easily switch between its iPhone operating system and Google’s Android system. It has presented data showing that the reason few customers change phones is their loyalty to the iPhone.

It also has defended its business practices in the past by highlighting how the App Store, which it opened in 2008, created millions of new businesses. Over the past decade, the number of paid app makers has increased by 374 percent to 5.2 million, which Apple has said is a testament to a flourishing marketplace.

Every modern-day tech giant has faced a major federal antitrust challenge. The Justice Department is also pursuing a case against Google’s search business and another focused on Google’s hold over advertising technology. The Federal Trade Commission filed a lawsuit accusing Meta, which owns Facebook, of thwarting competition when it bought Instagram and WhatsApp and another accusing Amazon of abusing its power over online retail. The F.T.C. also tried unsuccessfully to block Microsoft from acquiring Activision Blizzard, the video game publisher.

The lawsuits reflect a push by the regulators to apply greater scrutiny to the companies’ roles as gatekeepers to commerce and communications. In 2019, under President Donald J. Trump, the agencies opened antitrust inquiries into Google, Meta, Amazon and Apple. The Biden administration has put even more energy behind the effort, appointing critics of the tech giants to lead both the F.T.C. and the antitrust division of the Department of Justice.

In Europe, regulators recently punished Apple for preventing music streaming competitors from communicating with users about promotions and options to upgrade their subscriptions, levying a 1.8 billion-euro fine. App makers have also appealed to the European Commission , the European Union’s executive arm, to investigate claims that Apple is violating a new law requiring it to open iPhones to third-party app stores.

In South Korea and the Netherlands , the company is facing potential fines over the fees it charges app developers to use alternative payment processors. Other countries, including Britain, Australia and Japan, are considering rules that would undercut Apple’s grip on the app economy.

The Justice Department, which began its investigation into Apple in 2019, chose to build a broader and more ambitious case than any other regulator has brought against the company. Rather than narrowly focus on the App Store, as European regulators have, it focused on Apple’s entire ecosystem of products and services.

The lawsuit filed Thursday focuses on a group of practices that the government said Apple had used to shore up its dominance.

The company “undermines” the ability of iPhone users to message with owners of other types of smartphones, like those running the Android operating system, the government said. That divide — epitomized by the green bubbles that show an Android owner’s messages — sent a signal that other smartphones were lower quality than the iPhone, according to the lawsuit.

Apple has similarly made it difficult for the iPhone to work with smartwatches other than its own Apple Watch, the government argued. Once an iPhone user owns an Apple Watch, it becomes far more costly for them to ditch the phone.

The government also said Apple had tried to maintain its monopoly by not allowing other companies to build their own digital wallets. Apple Wallet is the only app on the iPhone that can use the chip, known as the NFC, that allows a phone to tap-to-pay at checkout. Though Apple encourages banks and credit card companies to allow their products to work inside Apple Wallet, it blocks them from getting access to the chip and creating their own wallets as alternatives for customers.

The government said that Apple refuses to allow game streaming apps that could make the iPhone a less valuable piece of hardware or offer “super apps” that let users perform a variety of activities from one application.

The government’s complaint uses similar arguments to the claims it made against Microsoft decades ago, in a seminal lawsuit that argued the company was tying its web browser to the Windows operating system, said Colin Kass, an antitrust lawyer at Proskauer Rose. He added that the most compelling allegation — and the one that brings it closest to the Microsoft case — is that Apple could be contractually preventing rivals from developing apps that work with other app providers, as “super apps” could.

Other legal experts noted that companies are legally allowed to favor their own products and services, so the government will have to explain why that is a problem with Apple.

“This case is about technology,” Mr. Kass said. “Can the antitrust laws force a company to redesign its product to make it more compatible with competitors’ products?”

Apple has defended itself against other antitrust challenges by arguing that its policies are critical to make its devices private and secure. In its defense against Epic Games, it argued that restraining the distribution of apps allowed it to protect the iPhone from malware and fraud. The practice benefited customers and made the iPhone more attractive than competing devices with Android’s operating system.

The government will try to show that the effect of Apple’s policies was to hurt consumers, not help them.

“Competition makes devices more private and more secure,” said Jonathan Kanter, assistant attorney general of the Justice Department’s antitrust division. “In many instances, Apple’s conduct has made its ecosystem less private and less secure.”

David McCabe covers tech policy. He joined The Times from Axios in 2019. More about David McCabe

Tripp Mickle reports on Apple and Silicon Valley for The Times and is based in San Francisco. His focus on Apple includes product launches, manufacturing issues and political challenges. He also writes about trends across the tech industry, including layoffs, generative A.I. and robot taxis. More about Tripp Mickle

Apple loses bid to appeal order allowing consumer antitrust class action

Apple has failed to persuade a U.S. appeals court to consider blocking a class action that accuses the company of monopolizing the market for iPhone apps and keeping prices artificially high for tens of millions of customers.

Mike Scarcella for Reuters : ‎

The 9th U.S. Circuit Court of Appeals on Friday rejected, opens new tab Apple’s bid for a pretrial appeal after a California federal judge in February allowed consumers to band together to pursue billions of dollars in alleged damages. U.S. District Judge Yvonne Gonzalez Rogers certified a class of consumers who spent $10 or more on Apple app or in-app purchases since 2008. The lawsuit, filed in 2011, accuses Apple of violating U.S. antitrust law by too tightly restraining how customers download apps. Apple did not immediately respond to request for comment on Tuesday. The appeals court panel denied Apple’s appeal without a hearing.

Support MacDailyNews at no extra cost to you by using this link to shop at Amazon . ‎ MacDailyNews Take: Damages?

How much did it cost developers to have their apps burned onto CDs, boxed, shipped, displayed on store shelves prior to Apple remaking the world for the better for umpteenth time? Apple incurs costs to store, review, organize, surface, and distribute apps to over one billion users. — MacDailyNews, June 10, 2022

The average app price in the Apple App Store as of January 2024 is 79-cents . ‎ Please help support MacDailyNews. Click or tap here to support our independent tech blog . Thank you!

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Previous Post

What does it cost when Appke forbids your app and you have nowhere else to sell it?

What does loss of freedom over your IP cost? A third party ledger is none if Apple’s business and even less so MDN’s.

There is always android. There is no monopoly here.

This kind of logic could be applied to almost anything that can be upgraded at purchase. What about the artificially inflated costs of all the extra features in my new car? (for example)

Really? Android can run the iOS app one develops?

iOS and Android are separate and distinct markets, but only iOS is a monopoly in their app market.

That’s the dumbest thing I’ve read today. So you are saying you wrote the app specifically for an iOS devices. As you say, “separate and distinct markets”. So, why the hell did you write it for iOS devices if you didn’t want to adhere to Apple’s software rules? That’s like you saying you built a part for a Toyota and are pissed that Mercedes won’t change their vehicles to fit your part. Sure, makes total sense…..NOT.

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Article Contents

• I. INTRODUCTION
• II. SETTING THE SCENE
• III. Competition Concerns Raised by the App Store—the Case for Antitrust Enforcement
• IV. Conclusions

The Antitrust Case Against the Apple App Store

Damien Geradin is a Professor of Competition Law and Economics at Tilburg University and a visiting Professor at University College London and the University of East Anglia. He is also the founding partner of Geradin Partners. Dimitrios Katsifis is a Senior Associate at Geradin Partners. The authors advise a variety of app developers, some of which may be adverse to Apple. This paper has been written in full independence. It reflects the view of the authors only.

• Article contents
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Damien Geradin, Dimitrios Katsifis, The Antitrust Case Against the Apple App Store, Journal of Competition Law & Economics , Volume 17, Issue 3, September 2021, Pages 503–585, https://doi.org/10.1093/joclec/nhab003

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The Apple App Store is the only channel through which app developers may distribute their apps on iOS. First launched in 2008, the App Store has evolved into a highly profitable marketplace, with overall consumer spend exceeding $50 billion in 2019. However, concerns are being increasingly expressed on both sides of the Atlantic that various practices of Apple with regard to the App Store may breach competition law. The purpose of this paper is to examine whether this is indeed the case and, if so, how these concerns can be addressed. With these aims in mind, the paper first introduces the reader to the app ecosystem and the Apple App Store, with a focus on Apple’s in-app payment policies and the 30 percent commission charged for in-app purchases. After engaging critically with the distinction between apps selling “ digital ” and apps selling “ physical ” goods or services, we consider such distinction is unclear, artificial, and unprincipled.

The paper then critically reviews several practices of Apple that appear to be at odds with competition law and in particular Article 102 TFEU. We first analyze the issue of market definition and dominance with regard to the App Store. We find that Apple is a monopolist in the market for app distribution on iOS, as it is not subject to any meaningful competitive constraint from alternative distribution channels, such as Android app stores. The result is that Apple is the gateway through which app developers have to go to reach the valuable audience of iOS users. This bottleneck position affords Apple the power to engage in several prima facie anticompetitive practices. A first concern is that Apple may exploit app developers by charging excessive fees for the services it provides and by imposing unfair trading conditions. Second, based on four case studies, the paper illustrates how Apple may use its control of the App Store or iOS to engage in exclusionary behavior to the detriment of rival apps. These practices should be investigated by competition authorities, as they are likely to result in considerable consumer harm, be it in the form of higher app prices, worse user experience or reduced consumer choice. The paper finally proposes a combination of concrete remedies that would address the competition concerns identified.

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Apple Denied Appeal Of Cert. In App Store Monopoly Suit

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Mark Sherman, Associated Press Mark Sherman, Associated Press

• Copy URL https://www.pbs.org/newshour/economy/supreme-court-hears-apple-monopoly-case-on-app-store-pricing

Supreme Court hears Apple monopoly case on App Store pricing

WASHINGTON — The Supreme Court seemed ready Monday to allow a lawsuit to go forward that claims Apple has unfairly monopolized the market for the sale of iPhone apps.

The court heard arguments in Apple’s effort to shut down an antitrust lawsuit. Chief Justice John Roberts was alone among the nine justices who seemed prepared to agree with Apple.

The suit by iPhone users could force Apple to cut the 30 percent commission it charges software developers whose apps are sold exclusively through Apple’s App Store. A judge could triple the compensation to consumers under antitrust law if Apple ultimately loses the suit.

But the issue before the high court at this early stage of the suit is whether the case can proceed at all. Justice Stephen Breyer, who used to teach antitrust law at Harvard Law School, said the consumers’ case seemed straightforward and in line with a century of antitrust law.

Apple argues it’s merely a pipeline between app developers and consumers.

The developers set the prices and agree to pay Apple a 30 percent commission on whatever they sell, the lawyer representing Apple said in the courtroom. If anyone should be able to sue the Cupertino, California-based company, it’s a developer, Daniel Wall said. “There have been plenty of disputes, not one has gone to litigation,” he said.

But Justice Elena Kagan said it appears that consumers have a direct relationship with Apple. “I pick up my iPhone, go to the Apple App Store, pay Apple directly with credit card information I supplied to Apple,” Kagan said.

Justice Brett Kavanaugh said if consumers are paying more than they should, then perhaps they should be able to sue. The relevant federal antitrust law says “any person injured” can sue, Kavanaugh said.

His comments could put him on the side of justices who would allow the suit to proceed. In other cases, the court has ruled there must be a direct relationship between the seller and a party complaining about unfair, anti-competitive pricing.

Consumers can choose from among more than 2 million apps, compared with the 500 apps that were available when Apple created the App Store in 2008. “The phrase ‘there’s an app for that’ is now part of the popular lexicon,” Roberts noted in a 2014 decision limiting warrantless searches of cellphones by police. Apple has trademarked the phrase.

But the company says the popularity of software for iPhones and its App Store shouldn’t obscure that consumers buys apps from developers, not Apple. Developers set the prices, though Apple requires prices to end in .99, Wall said. The Trump administration is backing Apple at the high court.

Representing consumers, lawyer David Frederick said the monopoly Apple has over iPhone apps is unique in the digital age. “Apple can’t point to another e-commerce distributor that does what it does,” Frederick said. Even Apple allows third parties to sell computer software directly to purchasers of its laptop and desktop computers, he said.

A trial court initially dismissed the suit. The 9th U.S. Circuit Court of Appeals revived it.

A victory for Apple could severely restrict consumers’ ability to sue over antitrust violations even though Congress envisioned such suits “would form a central component of enforcement of the antitrust laws,” warned 18 scholars of antitrust law in a Supreme Court filing.

A decision in Apple Inc. v Pepper, 17-204, is expected by late spring.

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Trump ‘has no legal authority’ to make asylum-seekers stay in Mexico

Nation Nov 25

New study shows monopolistic practices of Apple and Google app stores, claims ‘abuse of market power’

The Alliance of Digital India Foundation (ADIF) details monopolistic practices from Apple and Google app stores in a new study . The report, Towards Regulating App Stores, from ADIF and The Quantum Hub, mentions global regulatory actions targeting both tech giants control over the mobile app ecosystem.

According to the study , both Apple and Google charge significant fees for app store services. Additionally, Google is soon prohibiting developers from taking any outside method of payments from customers, hence earning a commission. Indian developers have objected and called Google’s policies unreasonable.

The monopolistic policies of the app stores and their abuse of market power are forcing unfavourable terms on developers, who are left with no choice but to comply.

Apple and Google app stores are scrutinized

Regulators worldwide have their stated concerns regarding the policies of Apple and Google app stores. Presently, Apple is under investigation in the US, Europe, Japan, Australia, and India. Google is also facing proceedings in the US, Europe, and India. Additionally, the Competition Commision of India (CCI) is probing Apple and Google for abuse of market power.

The study scrutinizes policies from the world’s dominating app stores, the effects on the mobile app market, and antitrust regulation. Because of Apple and Google’s market power, the study cites an ‘urgent need’ for fair competition among app stores. This idea of fair competition will also better the choices for developers and consumers; the monopoly over the mobile app ecosystem ignores India’s competition laws and has a harmful impact on its startup ecosystem.

The dominant position enjoyed by the gatekeepers of the app ecosystem can severely hurt competition and innovation in the market, while also adversely affecting the ecosystem in many ways. It’s thus commendable that legislators are taking notice of such issues and actively taking steps to address the anti-competition practices of big players. The need of the hour is a balanced approach. Sijo Kuruvilla George, Executive Director, ADIF

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A Monopoly Market Player: Apple Case Study

A monopoly market player is a firm, which is the only one existent in a market. Monopolization is when a firm has a significant control to set the prices in a multiplayer market.

In 2005, even with more than one player in its market segment, Apple was able to sell a more expensive product and achieve 63% control of digital music players and 83% control of legal digital music download market. Such an achievement was made through leveraging on its ITunes store and stylish status of iPods.

In charging high products, Apple built a premium and exclusives status for its products. Over the long term, this will create a cult like following for its products as long as the firm can keep on developing digital music players with the better technology than that of its competitors.

This will require massive investment in idea and technology generation and development. Low sales numbers can easily lead to the company being bankrupt. In conclusion, charging high prices is a risky but highly rewarding option (Manikw, 2008).

Diagram 1 represents a monopoly market. A monopolist is a price maker because the company does not face any competitors in such a case. Thus, there is a price inelastic demand where marginal cost meets marginal revenues, which represents the quantity for profit maximisation.

The extrapolating the output up to its maximum to meet the average revenue and cost curves, we arrive at the prices P1 and P2. The total cost of production is P1Q1, while the total revenues are P2Q2; the difference is the supernormal profit.

Considering diagram 2, prices decrease from P1 to P3, while quantity sold has an increase from Q1 to Q2. This is due to a different demand pattern brought about by different demographic and physiographic population factors, while a different cost pattern brought about by a change of the tax regime affects the cost pattern resulting in a different price maximizing output and different prices.

First, for price discrimination to take place, it must be performed in different geographical markets. Secondly, market segmentation is based on different demographic and physiographic population factors. Thirdly, inelastic price elasticity of demand ensures the advantage of price discriminators (Manikw, 2008).

Monopolies and oligopolies are vital firms in a country especially if they can work competitively to bring new products to the market, while providing job places.

Secondly, they accumulate large amounts of capital to the benefit of economy. However, consumer and labor groups have no trust in monopolies and oligopolies achieving this economic function without government oversight.

Arguments for intellectual property rights include giving the right of intellectual property to its owner, who can use it for financial gain. The right to own an intellectual property is a result of hard labor and investment in creating it.

Thus, development to humanity would not occur from private entities but only from the government. The socialist and economic growth would follow the government’s agenda. Margins for firms would be thin since it is a price market (Dwivedi, 2002).

Every industry deserves to obtain its intellectual rights, especially considering the economic significance of motivating capital and expertise investment.

In such areas as healthcare, its importance to ensuring human rights observance and proper solutions to human health problems is significant. For such markets, additional control by government authorities is necessary to balance morality and intellectual rights (Perloff, 2009).

Dwivedi, D. (2002). Microeconomics: Theory and Application. India: Pearson education.

Manikw, G. (2008). Principles of microeconomics: a guided tour. Connecticut: Cengage Learning.

Perloff, J. (2009). Microeconomics. London: Pearson/Addison Wesley.

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IvyPanda. (2019, April 24). A Monopoly Market Player: Apple. https://ivypanda.com/essays/a-monopoly-market-player-apple-case-study/

"A Monopoly Market Player: Apple." IvyPanda , 24 Apr. 2019, ivypanda.com/essays/a-monopoly-market-player-apple-case-study/.

IvyPanda . (2019) 'A Monopoly Market Player: Apple'. 24 April.

IvyPanda . 2019. "A Monopoly Market Player: Apple." April 24, 2019. https://ivypanda.com/essays/a-monopoly-market-player-apple-case-study/.

1. IvyPanda . "A Monopoly Market Player: Apple." April 24, 2019. https://ivypanda.com/essays/a-monopoly-market-player-apple-case-study/.

Bibliography

IvyPanda . "A Monopoly Market Player: Apple." April 24, 2019. https://ivypanda.com/essays/a-monopoly-market-player-apple-case-study/.

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Apple Challenges DoJ’s Antitrust ‘Monopoly’ Lawsuit – Requests US Court to Dismiss the Case

• Apple moved a US court and requested it to dismiss a case filed by the DoJ and 15 other states.
• The court is expected to respond to Apple’s letter within the next 7 days.
• In March 2024, a lawsuit was filed against Apple where it was accused of monopolizing the smartphone industry and intentionally hurting smaller companies.

On Tuesday (May 21), Apple announced that it has requested a U.S. judge to dismiss the case filed against it by the Justice Department (DoJ) and 15 other states in March 2024.

The infamous ‘monopoly’ lawsuit claimed that the iPhone maker monopolizes the smartphone market and intentionally hurts the growth of smaller rivals.

The lawsuit also said that Apple drives up prices. To this, the company responded by saying that it does indeed have the ability “ to charge supra-competitive prices or restrict output in the alleged smartphone markets .” However, it pressed upon the fact that this is due to its higher-quality products.

Another reason Apple mentioned as cause for dismissal of this lawsuit is that the whole case is built on a new “antitrust liability” that no court has ever recognized. In short, the company is saying that this case is baseless.

What’s the ‘Monopoly’ Lawsuit About?

In March this year, the DoJ accused Apple of a number of things, including charging too much and making the highest amount of profit when compared to its rivals, imposing various hidden fees on business partners, and loads more.

Here are some of the most grave accusations made against Apple and its business strategy:

• That Apple purposely makes it difficult to connect non-Apple smartwatches to Apple devices such as iPhones and iPads . In a way, Apple forces users to buy Apple smartwatches .
• The company has also been accused of intentionally hurting music streaming apps such as Spotify. In fact, Apple faces a €500 million fine following a complaint by Spotify in 2019, accusing apple of restricting music companies from notifying Apple users about cheaper subscriptions outside the Apple App Store.
• Speaking of the Apple App Store , third-party developers are subjected to much stricter rules , which are also all constructed in a way that makes it difficult for them to leave the platform.
• Staying on the App Store isn’t a good alternative, either, because then they’re subjected to higher platform fees, inadequate resources, and poor security , which in turn affects their user experience. However, Apple cut App Store fees in January this year—a welcome change indeed.
• Apple complicates the process of using its tap-to-pay technology for other banks , forcing users to switch to Apple Pay . The company has allegedly made billions in the form of processing fees using this one simple trick.
• Apple has also been accused of fueling the Apple vs Android debate . For instance, Apple displays the messages sent by an Android in a green bubble. This clearly distinguishes between Android and iOS, and over time, it has been used by Apple to inculcate the fake social prestige of owning an Apple device over an Android.

It’s worth noting that Apple’s displeasure over these accusations isn’t new. The company had clearly expressed its displeasure against the lawsuit as soon as it was filed.

Furthermore, the company also warned that this lawsuit will pave way for too much government control over people’s design rights, which will ultimately stifle innovation in the future.

In March i.e. when the lawsuit first came to be, Apple had promised to go to trial if needed and defend against it with everything it has. It looks like the company is staying true to its words. Stay tuned for further updates —I’ll be updating you when the US court issues a reply to Apple’s request for dismissal.

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Krishi Chowdhary Journalist

Krishi is an eager Tech Journalist and content writer for both B2B and B2C, with a focus on making the process of purchasing software easier for businesses and enhancing their online presence and SEO.

Krishi has a special skill set in writing about technology news, creating educational content on customer relationship management (CRM) software, and recommending project management tools that can help small businesses increase their revenue.

Alongside his writing and blogging work, Krishi's other hobbies include studying the financial markets and cricket.

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Earth Day Isla Vista – Celebrating Through Music, Nature, and Fun

In photos: men’s basketball: gauchos vs uc davis, art as a weapon against invasion – film reminds us of…, opportunity for all uc office of the president yet to make…, the top boba places in isla vista – a journey into…, getting kozy: isla vista’s newest coffee shop, a call for natural sustainability: the story and mission of the…, tasa night market 2023: fostering community and featuring budding clubs at…, in photos – daedalum luminarium, an art installation, creating characters we love: the screenwriting process in our flag means…, indigo de souza and the best-case anticlimax, a spectrum of songs: ucsb’s college of creative studies set to…, nature in i.v. – black mold, southern california is in super bloom, from love to likes: social media’s role in relationships, the gloom continues: a gray may, the rise of ai girlfriends: connecting with desires and discussing controversy,…, letter to the editor: dining hall laborers have had enough, do…, is studying abroad worth it for a ucsb student, workers at ucsb spotlight: being a writing tutor for clas, apple’s social monopoly: how apple is monopolizing the world.

Natalie Mifflin

Contributing Writer

Apple has become a ubiquitous supplier of phones, computers, and other smart devices that move the world closer to technological advanced ideas of the future. Making personal computers since 1976, Apple has made nothing short of an empire that could easily be considered a social monopoly. 

Apple has maintained its image by emphasizing values of education, environmentally conscious production, inclusion, diversity, and privacy. By partnering with popular and luxury brands for functionality and aesthetics, they maintain social capital and reputation.

Apple owns Beats Electronics along with its strong ties and partnerships with major companies like Adobe , Nike, and the luxury designer Hermès . Associating with such well-known brands helps Apple cater to a growing audience of content creators, athletes, and luxury clients that want a technological edge. This combination of aesthetic appeal and functionality helps Apple drive customer loyalty with their own software and subscription services.

Homepods and Apple Watches are extensions of users’ lives, integrating apps that connect different aspects of life. Some apps promote wellness by prompting users to constantly use their devices to track their day to day activities. Subscription services exclusive to Apple tie consumers to their devices. Especially with the announcement of Apple One which bundles all of them — Apple Music, iCloud, Arcade, News+, TV+, and Fitness+ — at a discounted price. With all these services, Apple can become the sole source of mass media.

Apple’s social monopoly becomes a hole users must dig themselves out of if they decide to try a different company’s products. To switch from an iPhone means any subscriptions and accessories — besides Apple Music and Airpods which are compatible with Android software — become obsolete. 

Leaving Apple means losing access to shows, games, news outlets, and fitness, etc. — leaving users to find new alternatives. Leaving the ecosystem makes you lose access to Facetime — which is universal with Apple users — and substitute it for third-party video call services like Skype, Zoom, or Discord. It also means being called a “green bubble” by Apple enthusiasts and splitting a single group chat into several conversation threads that are impossible to follow if there are any Apple users in the chat.

Apple not only encourages you to stay within its ecosystem, but also as the tech becomes faster and more powerful, the uses for Apple products extends to competitive gaming. In the gaming community — where better graphics and smooth gameplay is a necessity for any gaming console — Apple claims some of its new products can deliver, especially in competitive multiplayer games. 

In Apple’s most recent event in October where it announced the new iPhone 12, it highlighted “League of Legends: Wild Rift” with Michael Chow, the executive producer of Riot Games. Chow claims that the power of Apple’s A14 bionic chip makes competitive gameplay on the iPhone “always responsive and unbelievably smooth” with characters being seen with a “brand new level of fidelity that you can’t find on any other platform.” To make a game with as big of an e-sports presence as “League of Legends” playable on a smartphone could mean securing a whole new community to stay with iPhone as a standard for mobile gaming without being tied down to a computer.

Apple products also play big roles in the entertainment industry. The strategic product placement in movies and TV shows displays Apple as a brand for individuality and tasks as complex as movie espionage. iPhones are used in “Knives Out” but were not allowed to be used by “bad characters;” Elle Woods’ colorful MacBook stands out from her classmate’s drab black laptops in “ Legally Blonde,” and a friendly Apple representative makes light conversation with Steve Rodgers and his “fiancée” in the official “Hacking in the Apple Store” scene from “Captain America: The Winter Soldier.” 

Product placement is so valuable to Apple’s social capital because as one of the only recognizable brands featured in a movie, the product seems popular in the hands of celebrities — almost romanticized. After all, how many interactions with your phone do you have on a daily basis that change your life the way a well-placed profession of love can for a “rom-com” couple? 

In the age of technology, phones and computers have more uses than communication as Apple extends its reach to be part of a lifestyle. Its products and services are great, but without questioning the extent of their use, Apple seems like the fruit of both good and evil in the “Garden of Tech.”

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Judge doesn’t buy Google’s ‘terrifying world of chaos’ argument in Epic case

The search giant will ‘have to pay some penalties,’ but no decision on remedies is expected until after august..

By Jess Weatherbed , a news writer focused on creative industries, computing, and internet culture. Jess started her career at TechRadar, covering news and hardware reviews.

Share this story

After a jury declared the Play Store an illegal monopoly in the Epic v. Google lawsuit last year, both companies faced off in court again on Thursday to decide on the specific changes Google will have to make to rectify the issue, as reported by Reuters and Wired .

Epic is hoping the court approves several remedies it had previously submitted, which Google claims are over the top and would “harm the privacy, security, and overall experience of consumers.” So all eyes are on Judge James Donato, who heard testimony on both sides and offered some hints as to how he’s leaning.

To start with, while Donato said some of the remedies Epic proposed are “open-ended and too vague,” Google will have to make changes it doesn’t like, but perhaps not as many as Epic is hoping for. “I want to be clear: Google as an illegal monopolist will have to pay some penalties,” Donato said during the hearing. “This case is about the opportunity to compete generally. I am not looking for relief that is going to give a helping hand just to Epic. What we are doing is leveling the playing field and lifting the barriers.”

“We are going to be walking on new terrain for a while. That’s just the consequence of breaking the antitrust laws — we have to do things in a different way.”

Donato also took issue with what he said was Google’s attempt to show “a terrifying world of chaos” if the proposed remedies were made to app store markets. “I just don’t buy it,” Donato said, adding, “We are going to be walking on new terrain for a while. That’s just the consequence of breaking the antitrust laws — we have to do things in a different way.”

The judge also had no sympathy for Google’s argument that the proposed changes would be bad for consumers and businesses. “To jump up and down and say the new way is going to be a world no one wants to live in, it’s unfounded,” said Donato. 

In the lead-up to Thursday’s hearing, Epic put forward a 16-page document of suggested remedies it believes Google needs to apply to its business following the antitrust ruling, including banning Google from blocking alternative app stores and billing systems or sharing Google Play revenues with carriers or phone makers. Google has appealed the verdict and argued that the suggested remedies are unnecessary due to Play Store changes it’s already introduced to settle a separate $700 million monopoly suit in December — a case Donato also oversees.

Google and Epic are expected to make their final arguments in August, with Donato anticipating to “promptly” issue penalties soon after.

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What the success of Google Maps on iPhone tells us about Apple and monopolies -- and what the DOJ needs to understand about good products

T here are all manner of navigation apps for the iPhone. Apple Maps is the default choice, and is pretty extensive these days, but it's far from the only option. Just check the App Store. And in the battle to be top map app, Google Maps seems to have nabbed the chequered flag – even on iPhones.

According to this survey by MarketWatch, a whopping 70% of respondents flagged down Google Maps as their go-to navigation copilot. While Waze, Google's other prodigy in the mapping arena, snagged a commendable second place with 27%, Apple Maps trailed with 25%. It's somewhat unexpected that Google Maps is so popular, when Apple Maps comes enabled by default on the best iPhones – the most popular smartphones in the US.

This MarketWatch study wasn't just about counting hands, though; it was a deep dive into the habits of 1,000 US drivers. The study specifically focused on how these mapping applications were used to spot speed traps -- yep, traps on map apps. But it speaks to the popularity of Google's primary navigation app, especially over Apple's default option.

Could it be that good products are more popular?

Despite Apple Maps catching up to Google Maps' feature offerings recently, Google's map app has been a long-time favorite among iPhone owners. Historically, it's offered more features , an integrated experience, and better navigation overall. Plus, you can use it across all Apple devices, most notably CarPlay . In short, it's a good product. Arguably, it's a better product than Apple Maps.

So could it be that Google Maps is more popular because it's a better product? While you'd think that's a simple "yes", the DOJ might disagree with you.

The DOJ  filed a landmark lawsuit  against Apple last week, alleging the company has a smartphone monopoly. In the suit, the government claimed that one of the world's most successful and valuable companies has a stranglehold on phones, and stated bluntly that Apple uses it to extract more money from consumers. "Apple has gone from revolutionizing the smartphone market to stalling its advancement," said Deputy Attorney General Lisa Monaco. You can read the full lawsuit  here .

Google Maps is an interesting case study here, showing that a good product is usually the more popular option. Which is considered by users to be the case with iPhones, even if the tech-averse folks over at the DOJ might disagree.

If anything, this survey showing the popularity of Google Maps goes directly against the DOJ's lawsuit. The DOJ argues that Apple stifles competitors to make it harder for iPhone users to switch away. And I don't know about you, but the popularity of Google Maps on iPhones isn't particularly stifled. And Google is, I don't know, Apple's biggest competitor, perhaps. It's ironic, really.

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