Here’s the House Antitrust Committee’s strongest case against Apple

The full text of staff report (here) fills 404 heavily footnoted pages, not counting the Appendices. The Apple section runs 45 pages.

Before we go there, however, I should mention that Apple comes up a lot in “Section III BACKGROUND,” which makes the case that each part of the iOS-Android duopoly is, in fact, a monopoly and should be regulated as such.

If that doesn’t stop you, zoom right ahead to p. 329, Apple as a “Dominant Online Platform.”

I skipped the familiar complaints about side-loading and Apple’s 30%-15% fees.

The section I read most closely dealt with how Apple competes with third-party apps on an Apple-controlled platform. The broad allegation is that Apple is taking illegal advantage of its iOS monopoly. Here’s a sample, starting on page 352:

Apple pre-installs about 40 Apple apps into current iPhone models. Several of these apps are set as defaults and are “operating system apps” that are “integrated into the phone’s core operating system and part of the combined experience of iOS and iPhone.” According to Apple, users can delete most of these pre-installed apps. Apple does not preinstall any third-party apps.

Consumers are more likely to use the apps that are pre-installed on their smartphones. Consumers will download apps that compete with pre-installed apps only when there is a noted quality difference, and even then, lower-quality apps will still enjoy an advantage over third-party apps…

Apple’s public APIs default to Apple’s pre-installed applications. As a result, when an iPhone user clicks on a link, the webpage opens in the Safari Browser, a song request opens in Apple Music, and clicking on an address launches Apple Maps. With some exceptions, users are unable to change this default setting;

Like setting advantageous defaults and pre-installing its own apps, Apple is also able to preference its own services by reserving access to APIs and certain device functionalities for itself. ACM and technology reporters have both noted that “private APIs have the potential to give Apple apps a competitive advantage,” and that “Apple has for a long time favored its own services through APIs. For example, from the release of iOS 4.3 until iOS 8, “third-party developers had to rely on the UIWebView API to render web pages in iOS apps, while Apple gave its own apps access to a private, faster API,” and as a result, “Google’s mobile version of Chrome for iOS could not compete with Apple’s mobile version of Safari in terms of speed.”

There’s more along those lines, but you get the idea. For my money, this is where Apple could be vulnerable to a classic antitrust charge. Your mileage may vary.

11 Comments

  1. David Emery said:
    It will be interesting to see how the committee drafts language to define “markets”. The definition of ‘market’ would have to include enough scope to define when a ‘big tech’ component would “illegally compete” with alternative applications. But it would also have to avoid overreach to, for example, not prohibit store brands.

    0
    October 6, 2020
    • Gregg Thurman said:
      A horse designed by committee is a camel.

      I wouldn’t trust any committee, consisting of several varying levels of education, market forces and/or political aspirations/agendas developing anything practical through a series of compromises.

      3
      October 6, 2020
      • David Emery said:
        Well, remember these committees draft ALL of the laws passed by Congress. But in many cases, committees are given proposed language, by their staff lawyers, by executive branch experts, or by lobbyists.

        1
        October 6, 2020
  2. Jerry Doyle said:
    The House Judiciary subcommittee on antitrust releases its findings and recommendation on reforming laws to fit the digital age. Republicans quickly voiced objections to the bolder proposals in the report such as imposing structural separations. Let it be known, this is a majority Democratic Congressional staff report of findings and recommendations for changes to the antitrust laws and enforcement relative to Big Tech companies like spinning off or separating parts of their respective businesses or making it harder to buy smaller companies. The Democratic report found that the four tech companies enjoy monopoly power in their respective domains.

    Most all the punitive recommendations come from the Democratic staffs. PED already did some degree of summation, but the Democratic staff report alleges Apple controls its OS & App Store thus creating and enforcing barriers to competition and discrimination against (including exclusion) of rivals while Apple preferences its own offerings. Apple uses its market powers to exploit app developers through misappropriation of competitively sensitive information and charges app developers supra-competitive prices within the App Store.

    Continue….

    2
    October 6, 2020
  3. Jerry Doyle said:
    Continue…. The Democratic report goes on to say that in the absence of competition, Apple’s monopoly power over software distribution to iOS devices has resulted in harms to competitors and competition, reducing quality and innovation among app developers, and increasing prices and reducing choices for consumers.

    Apple has “listeners” in the Oval Office. Tim Cook has a strong working relationship with those listeners. It all is such an oxymoron in reading the denigrating comments of those Oval Office leaders from the previous PED’s article, when now those very same listeners in the Oval Office are needed. Trust me, Joe Biden may try to run toward the middle, but he never will be able to govern from there with the current Democratic Party composition of leaders. Apple, could even lose the App Store under a Biden administration.

    2
    October 6, 2020
    • Gregg Thurman said:
      The Democratic report goes on to say that in the absence of competition, Apple’s monopoly power over software distribution to iOS devices has resulted in harms to competitors and competition, reducing quality and innovation among app developers, and increasing prices and reducing choices for consumers.

      That is a warped point of view, especially The “reducing quality and innovation” part of the argument.

      If Apple were selling iOS Apps for less than cost (a la Amazon’s book store), depriving competing platforms of the oxygen needed to survive, I would agree with the argument. But it isn’t, to the contrary, Apple sells apps at prices set by the developer and takes a percentage fee for setting, and enforcing, quality standards and any number of other benefits to both the consumer and the developer.

      As to reducing choice and driving up, the consumer made his/her choice when they bought the most expensive consumer electronic products on the planet.

      Anticompetitive would be lowering the cost of Apple’s hardware to Android levels. The result of that act would drive all smartphone and tablet manufacturers out of business, excepting maybe Samsung and Chinese subsidized manufacturers.

      There isn’t anything wrong with our anti-trust laws. What’s wrong is the warped new age interpretation of those laws.

      4
      October 7, 2020
  4. Fred Stein said:
    A couple of countervailing points.

    1) The number of Apps, App developers, their increasing revenue plus the revenue (six times as large) that is not subject to the Apple’s fair and reasonable fee, undermines the ‘stifling’ issue.

    2) The number of voters who own Apple or Alphabet directly and more who own it indirectly undercuts the political angle. The indirect group includes many pension funds for labor and academia and more.

    2
    October 6, 2020
  5. Arthur Cheng said:
    Do you think Nancy Pelosi will really allow much of this to actually take place? it is aimed right at her backyard.

    0
    October 6, 2020
    • Jerry Doyle said:
      @Arthur Cheng: It is extremely unlikely Arthur that Nancy Pelosi will be the next Speaker of the House should the Democrats controlled the House. There’s even talk of the octogenarian’s retirement. Even if she remains in politics, her days as Speaker are over.

      2
      October 6, 2020
  6. Ralph McDarmont said:
    Well, Apple can always take its ball and go home. App Store is a nice profit line, but far from crucial. Developers make a lot more money compared to Apple, which keeps the developers alive. Do not bite the hand that feeds you. Maybe Apple needs to trash the App Store. Then they can sell their apps without any bs. Like selling iPads etc. Let the app developers find their own multi-million (billion) customer list. Apple can thrive Very well with or without app commissions.

    1
    October 6, 2020

Leave a Reply