aApple’s problems have become transatlantic. Even as the company bickers with the EU over the Digital Markets Act and nervously watches Britain’s passage of the Digital Markets, Competition and Consumers Bill, the company’s biggest fight is now at home, after the US government has launched a likely antitrust lawsuit. of the decade.
From our story:
The lawsuit, filed in federal court in New Jersey, alleges that Apple has monopoly power in the smartphone market and uses its control over the iPhone to pursue “a broad, persistent and illegal course of conduct.” The complaint states that the case is about “liberating smartphone markets” from Apple’s anticompetitive practices, arguing that the company has thwarted innovation to maintain market dominance.
“Apple has maintained its power not because of its superiority, but because of its unlawful exclusionary behavior,” US Attorney General Merrick Garland said at a press conference on Thursday. “Monopolies like Apple threaten the free and fair markets on which our economy is based.”
The case is a collection of allegations, drawn from the vast market that Apple dominates, and is largely intended to prove the most important claim in U.S. antitrust law: consumer harm. Competing against Apple can be frustrating, but if that lack of competition doesn’t result in consumer harm, then this case is a non-starter.
And so the lawsuit extends from Apple’s policy that limits third-party smartwatches from working with the iPhone, while allowing the Apple Watch to easily merge, to the diminished status of Android users’ text messages compared to iMessages from other iPhones, right down to the all-or-nothing nature of Apple’s CarPlay system for drivers.
It preemptively addresses one key response from Apple, namely that the restrictions are necessary to ensure user privacy and security. “Apple cloaks itself in a cloak of privacy, security and consumer preferences to justify its anticompetitive conduct,” the filing says, but it argues that “Apple ultimately deploys privacy and security justifications like an elastic shield that can stretch or contract.” to serve Apple’s financial and business interests.” Deals such as ‘more private and secure app stores’ for governments and certain companies, and the multibillion-dollar deal with Google to make it the default search engine, show how Apple is happy to make compromises in this area, the government argues.
Monopoly in what?
Less convincing in my view is the other fundamental question: what exactly does Apple have as a monopoly? on? The court said the company dominates the performance smartphone market, which excludes cheaper entry-level devices. Eliminating those cheaper phones gives Apple a 70% market share in terms of revenue, which isn’t that bad at all. “Apple’s own documents indicate that it does not view entry-level models as competitors to the iPhone and other high-performance smartphones,” the filing continues.
It’s unsatisfactory. It feels crazy to say that Apple doesn’t have market-shaping power, the kind the Justice Department is trying to disrupt; but does it really have its market-shaping power thanks to dominating ‘performance’ smartphones? The international comparison makes it even starker: outside the US, where high-end Android phones sell much better, there is little evidence of significantly reduced market power for Apple. Perhaps the most visible difference is the greatly reduced penetration of iMessage in markets where WhatsApp, Line or WeChat dominate, but that difference has done little to damage Apple’s overall position.
Another game
Those of us in Europe could be forgiven for raising an eyebrow at this point. If the government has decided to take action against Apple for abusing its monopoly, what is the point of questioning that action? But U.S. antitrust enforcement works somewhat differently than on the other side of the Atlantic: The government must take a case to court and win on the merits.
There is a lot to be said for such a system. Proving that Apple abused its monopoly in a hostile legal system is scrupulously fair and greatly limits the ability of regulators to shift their weight.
But it also makes enforcement an issue with incredibly high stakes. Even the initial case will likely take years to resolve, and it may take years afterward for appeals to be exhausted all the way to the Supreme Court. Even if Apple wins, it will have spent millions in legal fees; if it loses, there is little ground left for negotiation.
The EU, meanwhile, is showing the pros and cons of the opposite approach. On Monday, the bloc announced investigations into Meta, Google and Apple under the Digital Markets Act (DMA), the first formal action since the three companies were designated as “gatekeepers” and given until early March to comply with a stricter set of rules than other companies in the space.
The Apple investigation, along with part of Google’s, focuses on anti-steering provisions – the rules and restrictions the two companies use to, among other things, limit developers’ ability to freely communicate and promote offers and contract directly “, including by imposing various levies.” If either company has violated the DMA in the way they operate their business, the case is largely closed. The right to appeal is much more limited than in the US, although companies can and do overturn fines after decades of wrangling. Intel did so in 2022 for a €1.06 billion fine imposed in 2009.
The dangers of such a regulatory state are obvious, and Apple and its competitors in the US have made their voices heard: such a regulator hardly qualifies as a ‘rule of law’, the criticism goes, and sees EU bureaucrats simply decide for themselves what the Apple customers do. want to. But it feels like the company is ignoring both the positives and the negatives. EU enforcement has been swift and clear. It may not be the solution Apple would prefer, but the process to get there is smoother, cheaper, and far less subject to the vagaries of chance that a legal system inherently brings. As the US case continues, perhaps even Apple will get around to it?
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In the middle of it with you
Meanwhile, as is so often the case, Britain sits somewhere between the two approaches. Until the Digital Markets, Competition and Consumers (DMCC) Bill is passed by Parliament, which is expected to be sometime in the coming months (more on that in a future email), the Competition and Markets Authority (CMA) has no is a special process for big tech, but it still manages to avoid the court-led knockdown battle of the American system.
While the country – well, part of the country – holds its breath awaiting the passage of the technology law, the agency’s main business is mergers. This week it started revving up the engines for the final major investigation, ending the first investigation. phase of its investigation into the merger between Vodafone and Three.
A phase one investigation has a lower burden of proof, requiring only that such a merger is likely to reduce competition in the marketplace, and that finding was not significantly equivocal. But now the ball is in the networks’ corner: they have a week to make commitments that will convince the CMA they can avoid that cut.
If they wish, they can abandon the enforcement process – or they can persist in the more grueling process of a phase two investigation, where the burden of proof the CMA must meet is much higher. If they really want to dig their heels in, the networks can even try to secure a judicial review, although it may only involve questions of law, with the factual findings set in stone by the CMA.
While we sit, as the process does, somewhere in the middle between the EU and US systems, we can confidently predict that the approach is a happy medium, which will cause absolutely no backlash once the DMCC bill replaces the CMA’s mandate expands to cover the same types of cases. ground as the DMA of Europe. Right?
XLs
Time to take a moment to remember Elon Musk, whose lawsuit against the nonprofit Center for Countering Digital Hate concluded Monday. Let’s see what the judge had to say:
Sometimes it is unclear what the cause of a lawsuit is, and only by reading between the lines of a complaint can one attempt to surmise a plaintiff’s true purpose. Other times a complaint is so brazenly and vociferously about one thing that there is no doubt about that purpose. This case represents the latter circumstance. This case is about punishing defendants for their statements.
Judges only do this when they are really upset. In case you couldn’t guess the outcome from the opening paragraphs, the case was thrown out of court.
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