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Is Apple a Monopoly?
In a landmark antitrust case, the Justice Department sued Apple, claiming that the iPhone maker has a monopoly over the phone market at the expense of consumers, developers, and rival companies.
U.S. Attorney General Merrick B. Garland said at a news conference that Apple has gained its monopoly power “not by making its own products better — but by making other products worse.”
He said Apple does so through two methods.
“First, Apple imposes contractual restrictions and fees that limit the features and functionality that developers can offer iPhone users,” said Garland. “Second, Apple selectively restricts access to the points of connection between third-party apps and the iPhone’s operating system, degrading the functionality of non-Apple apps and accessories.”
The complaint alleges Apple’s anticompetitive course of conduct has taken several forms, including:
- Blocking super apps: By imposing contractual restrictions on apps and withholding key access points, developers are blocked from creating 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 — including gaming apps — that would enable users “to enjoy high-end functionality on a lower priced smartphone.”
- Excluding cross-platform messaging apps: Apple has made the quality of cross-platform messaging “worse, less innovative, and less secure” for non-iPhone users to incentivize customers to keep buying iPhones.
- Diminishing the functionality of non-Apple smartwatches: Apple’s smartwatch is only compatible with an iPhone, while technical and contractual controls make it harder for someone with an iPhone to use a non-Apple smartwatch.
- Limiting third-party digital wallets: Apple prevents third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.
Beyond the iPhone and Apple Watch businesses, the DOJ claims Apple’s anti-competitive practices extend to its “web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more.”
The DOJ charged that the result has led to Apple commanding a share of more than 65% of the U.S. smartphone market and being able to charge up to $1,599 for an iPhone and commission rates up to 30% for app purchases. Garland added at the conference, “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.”
The government hasn’t ruled out structural remedies in its lawsuit, which could include a break up of Apple’s business, but also suggests other methods of restoring competition.
In response, Apple argued the lawsuit would lead to government overreach that would restrict the company’s ability to freely design its technology. Apple’s statement read, “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. 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.”
Discussion Questions
Does Apple have a monopoly on smartphones?
What do you think would be the best outcome from the lawsuit for consumers?
What’s the likely outcome?
Poll
Loading …BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Joel Rubinson
President, Rubinson Partners, Inc.
While I respect the DOJ’s judgement to bring forward charges based on the evidence it acquires, as an iPhone user of many years, I do not feel like Apple has a monopoly on smartphones. With Google and Samsung as major competitors, it’s perplexing to me how anyone could conclude that Apple has a monopoly in the smartphone market. Consumers do have choice, and if they don’t want to pay $1,500+ for a smartphone, they have plenty of alternatives. Ultimately, these charges will be a distraction for Apple leadership, a stain on their brand and cost the company and taxpayers a lot with very little benefit to end consumers.
Apple has a proprietary tech advantage on all its products, but I find it difficult to agree they have a monopoly on smartphones.
The best outcome for consumers is for the lawsuit to be dropped or modified to address real pain points consumers have with the company.
No, it is not. Apple is a big and powerful company, but it has attained that position by giving consumers what they want and securing their voluntary custom. There is one, and only one, monopoly: the government. It is the only body that can impose its will on people via the threat of force, and if necessary, the use of force. No private company has that power.
Is this what the DOJ chooses to use its anti-trust might against? With all the blind eyes they have operated with for the past four decades, choosing Apple is laughable.
As BrainTruster Mark Ryski noted, he chose an iPhone over others. Did he pick it because he didn’t have a choice? I don’t see how that is even a question. I just bought a new phone. I wasn’t forced to buy an iPhone. I purchased a Samsung Flip.
While most ignored monopolies indeed hurt innovation, this one does not. The smartphone category is perhaps the most innovatively competitive in the world. Yes, the iPhone has a 60%+ share of the market in the U.S., which is the choice of U.S. consumers. Globally, Android has a 70%+ share of the market. Competition is technology knows no borders.
This is the government punishing successful entrepreneurship which can only florish under capitalism. Punishing Apple for its success also punishes all of its shareholders which includes anyone with a retirement account. As to the merits, Samsung products are pretty good too. The market share of mobile phones is based on consumer preferences for brands so the government is also ready to punish all consumers who prefer an iPhone. As Tom Hanks said in the movie “Punchline” “and how about those idiots who broke up the phone company?”
Here is just one example of this. My wife signed up for Apple News which is supposed to allow you to share the news feed with 4 other family members. They have made it next to impossible to get this done. Impossible may be too strong a word, but they certainly have not made it easy or less challenging. It should not be this way. I think even Steve Jobs would object to the way they have been handling the way the treat consumers.
(Full disclosure – I work for Microsoft and any views here are exclusively my own). I am amazed that this has taken so long. The EU has been talking about things in this area – the push for move to USB-C on the grounds of reducing eWaste goes back to around 2017 when Apple gained a concession if they sold an adaptor. But even the EU did not grasp the so many other areas that when you look at them with an openness perspective:
The list goes on….
However, the fact that hardware and software is engineered together means these things work really well – perhaps because they do not have to support multiple platforms.
So for an organisation to come out and gesture towards moves like this says a lot – it could be interesting if Apple were to either licence some of their protocols and technology to other manufacturers. This could provide more choices for the consumer….
I’ve long thought Apple was overly muscular and belligerent in how they managed their business and their relationships with suppliers and customers. I’m reminded of how many department stores managed their suppliers back in the day. Muscular and belligerent. Exclusives and margin deals or else. And those margin deals often drove decisions that were not in the best interest of the relationship with the customer. Department stores muscled much of the theater out of the business.
But customers always had choices. Nobody is forced to buy Apple products. Or develop apps for Apple phones. Customers and developers are making informed choices. For some crazy reason customers line up to pay premium prices for Apple. Apple retail stores are always the most crowded store in the mall. There are no padlocked doors holding customers hostage.
I don’t think so, but I also didn’t think the combination of Staples and OfficeMax would create a monopoly. It seems fairly arbitrary
Yeah, the Staples – OfficeMax decision was just odd! Again, the FTC completely misunderstood how the market worked and they failed to define the market properly…
Apple has created an ecosystem of apps that work well across all their devices. If I don’t want to live in the Apple ecosystem, I certainly don’t have to; there are other options.I don’t know that it is incumbent on Apple to ensure that they play well with their competitors. I like security, privacy and confidence that the apps I buy and use, work. As a first-line support agent for my wife’s Android phone, I can tell you with confidence that it’s not a consistent experience on her phone.
I do find some aspects of Apple problematic; their payment scheme and messaging with other platforms should be addressed. It is annoying that I can’t buy media content from non-Apple providers, even though I can use apps on my iPhone to consume the content. But, as opposed to a true monopoly, if I don’t want to accept these terms to use my iPhone (or iPad or Mac), there are other options.
I finally switched to a MacBook three years ago and the premium for the Apple ecosystem AND no longer updating the PC antivirus software is worth the money if that were the only benefit. I agree with those who say we all have choices in a very competitive smartphone and computer market and I believe the government is overreaching.
Also aren’t the high tech companies currently being sued the reason the USA continues to DVR the dominate world economy? So why is the government trying to kill the Golden Goose? The measurement should be monopoly power on a global scale. And as noted Apple’s smartphone market share is much smaller.
It’s important to watch over companies grow so big that they become monopolies. While Apple is big (HUGE), and they may have a commanding market share, consumers still have choices. It’s not like the only utility company in a city where the customer really has no choice. If Apple places too many restrictions and upsets customers, they will migrate to the competitors. Some competitors have features that aren’t available on iPhones. This is called competition. NOTE: I’m not a lawyer, but I do understand the concerns. I’d have to study more than the article to make more informed decisions. And, I look forward to reading the comments from my BrainTrust colleagues. This is a great topic!
Filing the suit gets the manufacturer’s attention. Apple has every right to build an ecosystem that supports their seamless UX/UI. At the same time, excluding “competitors” from the Apple Store “isn’t cricket”. So ultimately, the store will be opened up as a free market. No, Apple does not have a monopoly in this market, they are clearly the leader but customers have choice.
Apple started building their app platform infrastructure, the multi-functional iPhone with a seamless customer experience nearly 20 years ago. At that time, there were several other smartphone manufacturers. Competitors have had since 2004 to do the same with their technology and software. If they’ve failed to maintain or grow marketshare, that’s not Apple’s fault, it’s on them. This is competition.
The DOJ must not have enough on their plate.