DOJ files Antitrust Case Against Apple

How the tables have turned from the 1990s, when Apple’s share of the computer business was so marginal that the DOJ filed an antitrust complaint against Microsoft. Now, the DOJ has filed an antitrust case against Apple alleging that it uses unlawful anticompetitive practices to protect its monopoly in premium smartphones.

United Sates v. Apple, Inc.

Apple fervently believes that any useful activity that happens on its platforms could not exist without its platforms and is entitled to a cut of that activity. Yet some of the same features that Apple uses to provide a good platform experience are also the ones that the company is embracing and extending its control over its platforms for anticompetitive purposes.

But just as Apple believes that it deserves a cut of what developers earn using Apple platforms, the DOJ takes credit for Apple’s success. The iPod succeeded because it was available to Windows users, thanks to the “pathclearing antitrust enforcement case, brought by the United States and state attorneys general, against Microsoft opened the market and constrained Microsoft’s ability to prohibit companies like Apple from offering iTunes on Windows PCs.”

The complaint calls out five situations where Apple has used its control over app distribution or control of access to certain private APIs in iOS to suppress some technologies: *Super apps *Cloud streaming game apps *Messaging apps *Smartwatches *Digital wallets

While these may be the five areas that have the most evidence supporting anti-competitive behavior, these likely are not the areas where consumers and developers suffer the most harm.

Apple offers no benefit to consumers by prohibiting game streaming apps and making it more difficult for other smartwatches to integrate with iOS. Other GPS and smartwatches have second-rate options to integrate with iOS than the Apple Watch.

But it is arguable that Apple actually supports the privacy and security of its customers by controlling access to SMS and NFC hardware. Users who take a phone number from iOS to Android suffer from iMessage continuing to hijack the behavior of messages sent to a registered phone number. Allowing users to let different services take over handling SMS messages could be even more of a mess. Yet, the fact that iMessage is the default makes it difficult for iPhone users to switch to a different cross-platform act and it definitely locks users onto the iPhone to avoid bouncing back to green bubbles.

Requiring all NFC payment transactions to route through Apple Pay instead of letting banks directly access the system hardware does give Apple a part in every tap to pay transaction through iPhones. But as a user, requiring that all payment access flow through the system wallet does feel like a reasonable way to secure those transactions.

But, super apps? Really? Do consumers actually want to interact with bloated, cross-platform apps that may not have strong privacy controls or user experience? Isn’t this just creating future opportunities for anti-trust enforcement against super app platforms?

Two areas where Apple does use its market power and the App Store’s role as a gatekeeper to harm developers and consumers are the anti-steering provisions and the use alternative payment methods for in-app purchases. (The complaint only calls this out with regards to super-apps and other digital wallets, not app developers generally). Developers are prohibited not just from using alternative subscription and payment methods in apps distributed through the App Store, but even prohibited from providing information to direct users to purchase subscriptions on the web, except for the limited category of “reader apps” (in other words, other services with enough market power that Apple needs them on its platforms). Except for the limited exemption to reader apps, developers are not just required to use Apple’s payment processing, but developers cannot even suggest to users how to purchase services on a website.

How many other companies are able to run Oscar-winning film and TV studio/streaming service (and Fitness+) essentially as a front? Do these actually move the needle on services revenue or merely reputation-launder the 30% revenue cut it takes on in-app purchases in iOS apps?

Also, since this was filed in the District of New Jersey, perhaps I’ll get a chance to do some live reporting…

Some actually thoughtful and interesting commentary: Sara Jeong, The Verge United States v. Apple is pure nerd rage “The only thing that’s missing is a tirade on how ever-increasing screen sizes are victimizing me, a person with small hands” (co-sign)

Casey Newton, Platformer, The Department of Justice comes for Apple “The more different experiences an app enables, the harder it is for Apple to evaluate it for security, privacy, and other concerns. Ultimately, I’m not convinced that consumers are harmed by having to download different apps for different purposes.”

Lauren Feiner, The Verge, ‘Even stronger’ than imagined: DOJ’s sweeping Apple lawsuit draws expert praise “Still, the details of the case will be challenging to prove. One key fight will likely be over what the relevant market is — a common area of contention in antitrust litigation.”

John Gruber at Daring Fireball: “Superiority is exactly what made the iPhone what it is — superior hardware, superior software, superior integration. Even a superior retail experience. Not only is the DOJ’s take on the iPhone’s success a complete misunderstanding of the actual market dynamics for phones, it’s flabbergastingly insulting.”

Andy Hawkins, The Verge, Apple CarPlay is anticompetitive, too, US lawsuit alleges “The inclusion of CarPlay, as well as digital key functions through Apple’s Wallet feature, came as a surprise to some analysts, who say that the DOJ may be misunderstanding the utility and functions of the phone-mirroring system.”

Jason Snell, Six Colors, U.S. versus Apple: A first reaction “What happens when that collides with a product that has extremely high customer satisfaction ratings? Those of us in the know are well aware of all the ways that Apple plays hardball, and understand that the company is so powerful that really the only way it will be convinced to change its ways is under threat of government intervention. But will American iPhone users feel like the government is on their side, in taking on an American tech giant that makes a product they actually enjoy using?”

Andrew Raff @andrewraff