After spending more than 25 years in the technology space — including 17 years in San Jose, in the heart of Silicon Valley — few things flabbergast me. Then came Thursday. announcement Apple’s antitrust suit against the Department of Justice.
It still makes me feel sick. I’m still stunned by the lack of logic. The DOJ’s expansive nature of this antitrust complaint is based on archaic data — as if Ma Bell still operated as it did up to the early 1980s. It’s difficult to imagine that the Justice Department could win against Apple using these largely false arguments.
Let me express my opinion.
Who are the victims of the war?
The biggest alleged Apple victims, if you view the lawsuit at a higher level, are IT and banking titans. The lawsuit is clearly intended to force Congress into reforming antitrust laws that it has not authorized. In this lawsuit, the extent of harm to consumers is not clear.
The DOJ claims Apple uses a smartphone monopoly to lock people into its closed system and undercut competitors — a credible theory that discernibly deserves inspection. Apple controls a massive 55% of the U.S. market for smartphones, giving it an enormous app ecosystem. There is no doubt about that.
The DOJ has claimed that Apple’s monopoly hinders tech innovation. How can it explain, then, that the number of paid developers in Apple’s App Store grew 374% over the past decade to 5.2million? Apple introduced AirPods and Vision Pro headsets. Apple Watch also has health features such as an ECG monitor and a fall detector. Apple’s closed-ecosystem hasn’t stopped non-Apple innovators from bringing new products to market.
Apple Responds
Apple responded to the DOJ lawsuit with vigor and addressed the majority of the complaint as soon as the DOJ announced it.
Merrick Garland stated that Apple iMessages’ “restrictiveness” was responsible for the terrible image quality often seen on Android smartphones after receiving messages sent by an iPhone. He doesn’t seem to be aware of any news about the issue or who is responsible for the bad quality of SMS/MMS messages between Android users and iPhone owners. It’s not Apple.
Apple’s public announcement that it would adopt the RCS format in order to improve the message experience for non-iPhone customers seems to be overlooked. Where’s the harm?
The DOJ is oblivious to this issue. It instead blasts messaging applications. The DOJ stated that Apple made third-party iPhone apps for messaging worse. Apple Messages: The DOJ asserts that Apple’s messaging application prevents third-party applications from sending or receiving messages from carriers, knowingly and intentionally lowering quality, security and privacy for iPhone users as well as others.
The statement is absurd and devoid of logic. Apple users are not the only ones using messaging services. Most of them also have iPhone apps.
It’s actually almost the exact opposite. WhatsApp is the most popular messaging service in the world. Its user base wouldn’t be as large without Apple or iPhone. Apple isn’t to blame for low-quality photos and video sent from Android to iPhone. Apple’s Messages app tries to fix the outdated and primitive SMS/MMS format.
Apple’s Ecosystem is Terrible for Customers
According to the DOJ, Apple is violating section two of Sherman Antitrust Act when it restricts third-party access hardware and software features that it exploits. DOJ has concerns about Apple’s claim that it denied competing firms access the iPhone’s NFC chips. Since its launch two years ago companies have been using it to replace their hardware.
The DOJ claims that Apple Watch has similar problems with its preferential treatment for iPhone. The lawsuit claims that rival smartwatches are limited in terms of software and hardware.
Android watches are compatible with Android smartphones, which makes this claim more difficult. Android Watches can often only work partially or not at all with iPhones. Apple has opened GymKit to allow the Apple Watch health features to interact with Peloton fitness equipment.
Apple does not have to create apps for third party smartwatch connections. Integrators decide. Google and Samsung, two of the largest integrators, declined to participate for reasons that are unknown. In this context, the DOJ’s claims in the lawsuit appear biased and nonsensical.
Apple Watches are the most popular smartwatches for other reasons than the fact that Apple has made it impossible to use Android watches with iPhones. In 2022 the iPhone was expected to hold half of U.S. smartphone sales, and it currently holds 62%.
Apple chose not to make its Apple Watch Android-compatible as it was their prerogative. Media reports claim that Apple has worked on fixing product issues for years without compromising its quality.
According to the DOJ, the specific claim about the smartphone industry meets the legal criteria of 70% or more. This implies monopoly. According to an acceptable market definition for smartphone users, almost as many Android users could enjoy a non Apple experience.
The Choice of the Consumer at Risk
It’s hard to react to a federal lawsuit that includes the language without scoffing: “To protect its smartphone monopoly — and the extraordinary profits that monopoly generates — Apple repeatedly chooses to make its products worse for consumers to prevent competition from emerging.”
I doubt that I could find three people within a radius of 50 miles from my house in Silicon Valley, who would say Apple’s approach to the ecosystem prevents them considering non-Apple products.
Apple may have a valid objection to one of DOJ’s major concerns. Apple could restrict super apps, which are described by the DOJ as “multiple functions in one app”.
WeChat, the Chinese super app, is most well-known. China’s most popular chat, social media, and payment app. It is most popular because it is on iPhones and other devices. Apple created a WeChat Store instead of blocking the app.
Facebook/Meta iPhone app: It’s great because it allows you to manage social media, payments, sales and communications in one place. This is confusing to me because “super apps” are not banned (a term that I find meaningless).
Legal Challenges to Proving Injury
It is true that this antitrust madness was started by the Trump administration, and not Biden. But it quickly became the cornerstone of Biden’s first Big Tech promises.
It will take many years to resolve this case, as with all antitrust suits. The political winds could also change. It may not survive under Trump, but it may survive after a second Biden tenure.
Silicon Valley attorneys who are familiar with the case told me the DOJ has to prove that there was customer injury. This is difficult.
There is no real justification for the price hikes. Other smartphone vendors have increased their hardware and services prices over the past four years due to supply-chain concerns. Android vendors offer devices at much higher prices, so proving harm to customers from a $1500 iPhone would be more of a Clarence Darrow-esque legal feat.
The DOJ should also reconsider its belief in the right of developers to work unrestrainedly on Apple platforms. Costco has a right or not to sell its products at Walmart? Toyota can demand that Chrysler dealers sell its products.
The United States Supreme Court repeatedly ruled corporations have the right to choose their partners and prices. They can also decide on terms and conditions. Does the DOJ recognise that?
Chilling Effect on Innovation
Apple’s changes or improvements may have been prompted by the fear of DOJ investigation. Apple has become a much better company as a result of the investigation. This lawsuit, however, has a tremendously destructive potential. Companies that are discouraged from improving products for consumers’ benefit will be hurt by competitors who prefer to keep things the same.
I’m also astonished that a few industry observers are rooting publicly for the DOJ to prevail against Apple, regardless of the actual — or lack of — case from a merits standpoint, as it could dull the company’s competitiveness. If we believe that the best and most innovative solutions are what should be dominant in any given market, then this could prove to be very dangerous.
The DOJ, sadly, will appeal and waste even more taxpayer money once it loses face, and most likely, in my opinion, the case. Apple’s PR could suffer a serious blow if countless emails are revealed as a result of the lawsuit. They may be embarrassing but not illegal.
The DOJ’s aggressiveness in the lawsuit is a tactic to get Apple to settle for a settlement that it will not accept.
Not Perfect, Not Illegal
Apple isn’t perfect and there are no angels in the ranks of its executives. The company makes some product decisions — mainly from an end-user upgrade standpoint — that annoy me and force me to pay higher prices. I don’t like the fact that I cannot access my iMessages from a Windows PC.
Apple is not guilty of monopolistic behavior. If I were to make those decisions in order to maximize its ecosystem’s power and product margins, I might have done the same.
Apple has been a huge success, but there have also been some stumbles. Apple’s electric and autonomous vehicles have been a failure, and its AI efforts are behind. Artificial intelligence’s unpredictable and rapid growth could upend IT companies and markets. Apple will have to provide stronger evidence if it has taken part in deliberate and harmful anti-competitive acts that have hurt consumers.
Apple’s dominance could look just as outdated by the end of the suit as IBM did when it dominated the PC market in the 1980s and 90s before selling the business to Lenovo in the year 2005.
These lessons are important for the DOJ.
