Tim Cook, monopolist

If a platform is a railroad, as the House antitrust subcommittee argues, the App Store may be a goner.

From Mike Peterson’s “US House approves report accusing Big Tech of monopolistic behavior” posted Thursday on AppleInsider:

The U.S. House Judiciary Committee has formally approved its report that accuses Big Tech companies of engaging in anticompetitive practices to maintain market power.

After a monthslong investigation into market power in the technology industry, the House Judiciary antitrust subcommittee released its report in October 2020. The report called the power of Big Tech “monopolistic” and recommended sweeping changes.

On Thursday, the House Judiciary Committee voted 24-17 along party lines to formally approve the report, according to Reuters. As a result, the more than 400 pages will become an official committee report and a blueprint for legislative action.

From that report (as quoted last October by AppleInsider):

It concluded that “although these four corporations differ in important ways, studying their business practices has revealed common problems.”

First, each platform now serves as a gatekeeper over a key channel of distribution. By controlling access to markets, these giants can pick winners and losers throughout our economy. They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them. Second, each platform uses its gatekeeper position to maintain its market power. By controlling the infrastructure of the digital age, they have surveilled other businesses to identify potential rivals, and have ultimately bought out, copied, or cut off their competitive threats. And, finally, these firms have abused their role as intermediaries to further entrench and expand their dominance. Whether through self-preferencing, predatory pricing, or exclusionary conduct, the dominant platforms have exploited their power in order to become even more dominant…

Apple and Amazon were examined for their marketplace dominance. The subcommittee found that both exerted monopoly power in their respective online marketplaces — Amazon’s retail site, and Apple’s App Store— and introduced rules meant to squash competition in those marketplaces.

“To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons,” the panel said. “Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price.”

My take: Saw this one coming.

CORRECTION: An earlier version of this item presented the AppleInsider report from last October as if it were today’s.

See Apple 3.0’s antitrust archives. 

24 Comments

  1. Lalit Jagtap said:
    This reminds of antitrust saga from 2000 Microsoft va Government en.m.wikipedia.org/wiki/United_St…. It seems now common citizens will have to support technology companies like Apple, Google or Amazon which has made it possible to have so many things in life and specially in pandemic.

    4
    April 15, 2021
    • Kirk DeBernardi said:
      Hey PED.

      On your photo tag line. Shouldn’t the apologies be going to TIm Cook?

      2
      April 16, 2021
  2. John Konopka said:
    So will Costco have to give the Kirkland brand? No more Safeway Select?

    6
    April 15, 2021
  3. David Emery said:
    The railroad analogy is interesting!

    1. A lot of the trustbusting was not against a single railroad, but rather against coalitions of railroads to divide traffic between them and/or to set rates for traffic. This was the specific mechanism that Rockefeller used. First he captured the refineries. Then he tied up the shippers (railroads, pipelines), a lot of that with secret rebates. THEN he went to the individual producers and said, “Sell out to me, or you’ll have no way to get your product to refineries, and no refineries that will accept your product.”

    2. But ICC did get legal authority to look at what each railroad (in isolation) charged shippers on that line. The key part of that regulation was not price fixing, but price -transparency- (no hidden rebates.)

    The House report assertion of ‘picking winners and losers’ has some serious problems. But Apple’s behavior for its own apps vs others does show some validity for those claims -where Apple competes-. Of course, Apple could be placed under additional restrictions, or even prohibited from competing. (It’s a bit tough to make that argument from a consumer savings perspective if the Apple apps cost $0.)

    5
    April 15, 2021
    • David Emery said:
      Congress could pass laws requiring for example, mobile OS providers to support multiple marketplaces. But that would require -chances- to the law (This is where Epic is flat wrong, nothing in current law prohibits a closed ecosystem.) And I’m not sure how the customers benefit. The argument would have to be for reduced prices, but prices on App Stores are pretty low as it is. The counter argument about the difficulties of maintaining security of the platform would be part of the “who benefits?” debate.

      4
      April 15, 2021
  4. Adam Foster said:
    The hit pieces keep on flowing… click-bait!
    As they say here… nothing to look at.

    4
    April 15, 2021
  5. Gregg Thurman said:
    I struggle with politicians’ continued inference that a monopoly is bad in and of itself. That is patently wrong. Becoming a monopoly is not wrong. It is the leveraging of that monopoly that is wrong.

    If Apple’s business practices are wrong, then they were wrong when Apple established the App Store more than 10 years ago, especially as it relates to Apple’s pricing.

    Apple’s App Store is dominant not because of its practices, but because of the consumers it targeted. The CONSUMER made the choice to buy an iPhone, a product priced significantly higher than the competing smartphones that came AFTER it. They bought, not because of the price, but because of the benefits competing smartphones could not duplicate.

    Apple’s business and business model is vastly different from the businesses and business models Congress has lumped together with Apple.

    If, and I say IF a Congressional ruling results in an anti-trust complaint against Apple, this will go to the Supreme Court.

    7
    April 15, 2021
    • David Emery said:
      Congress doesn’t issue “rulings”, they make laws (usually after a lot of non-legislative bloviating….) An action to indict or sue Apple for anti-trust provisions would normally come from the Justice Department. Now (as we’ve seen in some recent cases against Trump) individual members of Congress can sue, but the courts are the mechanism for anti-trust enforcement.

      Now Congress can make a patently -unfair law-, but that doesn’t make it Unconstitutional. And the Supreme Court’s basis for invalidating laws is Unconstitutionality (not “fairness”.)

      3
      April 15, 2021
    • Alan Birnbaum said:
      I think that Apple is considered a ‘natural’ monopoly which has different rules than a ‘ purchased’ monopoly. In general, the natural one has more leeway in what it’s allowed to do. Sadly, I agree that this may need to go the the Supremes in the end.

      1
      April 15, 2021
  6. bas flik said:
    all market monopolies are good. the market (7 billion people) made them out of free will. people choose apple to become a monopoly. Google started with zero customers. untill people volunteerd to leave alta vista and yahoo in favour of google. Still find it unimaginable that democratic party will destroy faang while faang exits soly of democratic voters. Selfdestruction. Also EU Russia China would really love this. Instagram also outgrowed USA. its worldwide. They can move out of USA to any country.

    6
    April 15, 2021
  7. Steven Noyes said:
    “ […]by charging exorbitant fees,”

    I see this as an outright lie by the sub committee. They have some points but software has never been cheaper to consumers especially when adjusted for inflation.

    7
    April 15, 2021
    • Fred Stein said:
      Thanks Steven. I wonder, how did they get to ‘exorbitant’?
      1) They like purple prose.
      2) They think that iOS and Android are public commons.
      3) They view App Stores as being like credit card processor who charge 3% not as platforms / market places.
      4) They see iOS and Android much like old (long ago) regulated telephone monopolies.

      The last point is laughable if one recalls their prices for messaging, ringtones, etc.

      3
      April 15, 2021
      • Steven Noyes said:
        Even development is cheaper now than 30, 20 or even 15 years ago.

        In 1987, QB was $100, MS Macro Assembler was $500 and MS C was $700. In 1990, I bought Watcom C for the Amiga for $300. Borland brought some much needed competition but the price of XCode (free), Visual C (free), gcc (free) simply can’t be beat.

        I think people forget Apple uses AppStore proceeds to develop things like XCode, LLVM, Clang and dozens of amazing tools.

        5
        April 15, 2021
      • David Emery said:
        Remember that most Congresscritters are lawyers. They are explicitly trained to exaggerate to achieve maximum effect for their clients in front of a judge and jury.

        2
        April 16, 2021
    • Fred Stein said:
      Back at Steven,

      I just checked ride sharing:
      “Overall, Uber took a 35% cut of rides, and Lyft took 38%. Studying only the receipts sent in by drivers who kept records of all their rides over given time periods, the average takes were 29.6% for Uber and 34.5% for Lyft.”

      No driver will reach $1M annually. Apple takes 15% for revenue under $1M annually.

      4
      April 15, 2021
  8. Fred Stein said:
    Thanks David, especially, and others for your observations. Key words “recommend sweeping changes”.

    The path from recommendations to actually writing and then passing new laws and then tests in courts is long.

    First: How to write sweeping changes that are NOT specific to one company or another?

    3
    April 15, 2021
  9. Jerry Doyle said:
    I believe Apple could mitigate Congressional Oversight by ramping up Developers’ participation & input into the operation of the App Store. Apple should allow Developers to establish among themselves elected representatives from the Developers’ community, elected by representation to sit on the Apple’s App Store Developers’ Advisory Committee. Apple retains authority to run its App Store, but there is an equal number of Developers sitting on the App Store Developers’ Advisory Committee as there are representatives from Apple. This committee could meet 3 times annually where Developers’ and Apple senior managers discuss concerns, problems, issues, ideals, etc. to address. The Developers’ Advisory Committee gives Developers’ opportunity to have input in the running of the App Store & opportunity for consultation & advisement with senior Apple Executives on concerns, problems, issues of which all need to be aware. Developers’ representatives would serve on rotational basis, elected every 2 years. Meetings would take place on the Apple main campus in Cupertino & Apple would pay for travel & per diem expenses for Developers to attend.

    Continue…

    3
    April 15, 2021
  10. Jerry Doyle said:
    Continued….

    What I described above is similar to Bill Clinton’s Labor-management Partnership Council in the federal government where Union representatives worked in “partnership” with federal senior management leaders to address workers’ concerns & issues. It was Congress who established the Labor-management Partnership Councils (LMPC), so I believe a similar arrangement by Apple emulating the federal process may be well received on the Hill.

    2
    April 15, 2021
  11. Some members of Congress are attempting to create a new definition of monopoly, based almost solely on market cap/profits. Apple is no Standard Oil, Ma Bell or even early Microsoft. I can’t even think of any product/market where Apple has the type of monopoly the oil companies, telcos and Windows had/has. Their new monopoly definition has the capacity to ensnare so many businesses that it quickly becomes absurd. One member of Congress recently lit into Eric Schmidt while he was presenting the excellent report by the NSC Committee on AI (Appendix E is a must read). She was clearly channelling her constituent’s rage against all big tech, not just Google. Schmidt basically replied he no longer works there but still holds shares. Many members of Congress hold shares in big technology firms, in one form or another. The economic miracle they desperately need requires technology, and maybe new taxes. Those who howl loudest seem to ‘know not of what they speak (The Bard).’ Another mind-blowing new document came from our spooks: Global Trends 2040, page 58.

    2
    April 16, 2021
  12. Interesting story about John D. Rockefeller:
    Rockefeller used to offer the owners of pipelines, derricks and refineries 2 payment options: stock shares or cash. Those who took the shares (and the risk) became immensely wealthy over time. That’s why I always signed up for ESOPs, even while earning a low salary. My mother taught me that owning even 1 share makes you one of the owners of any public firm. When I started acting like an owner in meetings management loved my perspective and quickly promoted me.

    2
    April 16, 2021

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