Many know and love Apple, and can applaud the company for its major success and innovation throughout the years. Yet the almost $2.75 trillion company may be in trouble as upsets arise about a potential monopoly on its most popular item, the iPhone. The Federal Government has had rising concerns with the major tech companies and wants to include an antitrust lawsuit against Apple, claiming they are responsible for keeping customers reliant on their iPhones, not believing they could easily switch.
The reason Apple has been accused of being a monopoly is how closely it controls the user experience, making it hard to duplicate on another phone. An example of this is ApplePay and the ability to have your iPhone and Macbook/Apple Watch be cohesive. The government in their lawsuit claims this only leads to higher prices and less innovation. Attorney General Merrick B. Garland passionately speaks on how Apple is doing more than just staying ahead of competition, instead they are violating the federal antitrust law and the consumers and developers are the ones suffering. He says that the company itself is relying on exclusionary, anticompetitive conduct.
The Justice Department has been investigating Apple for a while now, building a large case on their entire existence as a company. They additionally have the right under the law to ask for a structural change in the company as the court decides its thoughts on the subject. However, some argue that all companies are allowed to promote and favor what they create, so the government will have to be extra specific for Apple.
Apple is trying to fight back by saying that they have these practices to ensure security, yet many are skeptical. The lawsuit will ask the company to stop engaging in the current practices of blocking cloud-streaming apps, undermining messages across smartphone operating systems (creating the green bubbles when texting someone with an Android), and preventing digital wallet alternatives. Many fear that this may hinder Apple's reputation, and stop them from making what people expect them to. Apple is attempting to file a motion to dismiss the case in the next 60 days and continues to argue that people chose not to switch phones out of their loyalty. Additionally, Apple is trying to defend itself by highlighting how many new businesses were able to open from their App Store.
In Econ, we have recently learned a lot about monopolies and the barriers of entry that come with them. I agree that many people do believe there is no comparable phone companies, which isn't true, especially with how advanced technology is. Also, with Apple creating the price points and making them so high, many consumers believe they have to pay for great quality.
This isn't the first time this has happened, and in the past the government has felt the need to put government regulations on other big tech companies such as Microsoft, making sure they don’t have too much market power. So, what do you guys think is Apple creating a Monopoly?
Sources:
https://www.nytimes.com/2024/03/21/technology/apple-doj-lawsuit-antitrust.html?ugrp=u&unlocked_article_code=1.eU0.QC5G.v0IcFUfnMIDz&smid=url-share
https://www.cnn.com/2024/03/21/tech/america-apple-monopoly/index.html
https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets
6 comments:
I think Apple engages in a lot of practices that are suspiciously geared towards eliminating competition, and, to that end, could be much less beneficial for consumers. For example, Apple runs their own iOS operating system, and requires all third-party apps to run through their App Store (from which they take a 30% cut of profits, costs that might be passed on to the consumers). They also actively engage in many practices to keep consumers to their own products, as mentioned in the post.
Also, in terms of hardware, Apple has historically pretty consistently pushed the limits of the "right to repair" -- for example, when repairing apple screens, it requires a special piece of machinery to "validate" the screen (that is expensive and only sold to those who agree to Apple's licensing terms). Furthermore, the EU is also cracking down on Apple's practices -- they've already required Apple to switch to standardized charging cords.
Lastly, I think one of the huge downsides to Apple's ecosystem (because there are still pros, like ease of use between Apple products) is the lack of innovation. Every new iPhone iteration is essentially the same as the previous one, and when compared to phones from companies like Samsung and Google, tend to be equal at best and worse off in many cases. Yet, Apple has no incentive to innovate, because they know that most people, especially younger generations, will choose to buy their products anyways.
I agree with Rachel's argument that Apple does seem to be engaging in many anti-competitive behaviors, especially regarding third-party developers and apps being restricted to their App Store. One interesting story I came across while annotating the Antitrust reading is that several decades ago, the government sued Microsoft for bundling Internet Explorer with Windows 95. The government argued that this action was an example of a tying contract with Microsoft illegally requiring computer manufacturers who wanted to use the Windows operating system to include Internet Explorer on their machines. I thought this somewhat connected to Apple forcing all IOS devices to install the Safari web browser. I am curious if the FTC will argue that this action is also a tying contract or if this scenario is different because only Apple manufactures devices that use IOS.
I agree with everybody else who commented that Apple appears to be a monopoly, both structurally and behaviorally (especially by making their products as incompatible as possible with products of other brands to force customer "loyalty"). I also think their successful monopolization has led to a clear drop-off in innovation and creativity, because they know they can stay highly profitable just by slightly modifying their existing product line and focusing on doing whatever it takes to eliminate the competition.
I also agree that Apple seems to be a monopoly. As Rachel mentioned, the past few phones that Apple has produced don't seem very different from the previous one, but Apple can get away with this because they know they have loyal buyers and customers. Moreover, Apple used to have lighting charging cables that were only compatible with Apple products, which is another anti-competitive behavior Apple seems to engage in.
I’ve done some reading on this, and I agree with the above comments that Apple seems to be a monopoly, or at least the most monopolistic member of an oligopoly on smartphones. There are a good many practices they’ve done that I disagree with — like right to repair opposition, like Rachel mentioned, even if Apple has pivoted somewhat in the last year, is one instance, with Apple’s famous pentalobe screws that nobody used to be able to unscrew easily, or their software locking of parts (check the parts to see if the serial number has been paired to the phone and give warnings / remove functionality if not, like with the screens Rachel mentioned) — but I think some of their interoperability impediments are more easily prosecutable as anticompetitive.
For instance, Apple Watches are the only smartwatches that can interact with the iPhone fully — other smartwatches can, but are specifically denied features like notifications; the DOJ’s complaint actually cites this instance along with an Apple manager’s admission that the Apple Watch “may help prevent iPhone customers from switching.” On a totally different front, we have Apple not only stopping a service, Beeper Mini, that allowed Android users to communicate with iPhone over the iMessage protocol (and thus have end to end encrypted communications, a good thing from the viewpoint of privacy) but later limiting a feature available to Mac owners, texting over iMessage on their computer, once this was used as a bridge for Android phones to communicate over iMessage. In other words, in an attempt to stop better texting between Apple and non-Apple phones, Apple removed functionality from certain users’ Apple computers.
In any case, I think some of these approaches might be the ones that could hold Apple accountable, even if Apple is lounging about a bit too luxuriously with their majority of the market share.
https://www.justice.gov/opa/media/1344546/dl?inline
https://www.nytimes.com/2024/01/26/technology/apple-messaging-crackdown-beeper.html
Whether or not Apple's actions are monopolistic behavior, I think that from a economical standpoint, their marketing methods are genius. Almost no other industries making singular products have the level of customer loyalty that Apple has. While I do agree that things like the iOS operating system and Lightning charging cables (and the fact that every new iPhone model nowadays only has a slightly better camera and battery without any other differences, for the most part) certainly classify as anticompetitive behavior, I have to applaud Apple as a business for discovering and exploiting loopholes in the economic system to build their brand. It may be risky and borderline unethical, but it's smart.
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