Apple rejects comparisons to a Microsoft monopoly.

Apple is strenuously denying that it stands at the business end of the same kind of landmark lawsuit in which the United States Department of Justice found Microsoft guilty of antitrust violations in the 1990s. A comparison into which U.S.
Apple rejects comparisons to a Microsoft monopoly.

Apple is strenuously denying that it stands at the business end of the same kind of landmark lawsuit in which the United States Department of Justice found Microsoft guilty of antitrust violations in the 1990s. A comparison into which U.S. Attorney General Merrick Garland leaned heavily in last week's filing.

While parts of United States v. Microsoft Corp. were partially overturned, the maker of Windows was eventually made to alter some business practices the government said constituted monopolistic practices. Garland and the 16 state attorneys general who joined the Apple lawsuit no doubt are looking for similar relief to end practices it believes give the $2.65 trillion company an unfair edge.

In fact, the lawsuit goes so far as to say that in 1998, co-founder of Apple, Steve Jobs publicly attacked Microsoft's monopoly and 'dirty tactics' with regard to operating systems for targeting Apple, causing the company 'to go to the Department of Justice' in hopes of getting Microsoft 'to play fair.'. "But even at that point, Apple did not have the same kinds of restrictions it now imposes on third parties; users of Apple products could attach an iPod to a Windows computer, and Microsoft did not collect a 30% fee from Apple for every song downloaded from Apple's iTunes store. And when Apple launched the iPhone in 2007, it again enjoyed competition among component makers and among wireless carriers."

Apple cites global iPhone numbers that are nowhere near the 90+% market share Windows enjoyed before the turn of the millennium. Lawsuits like this are an unusual opportunity to witness a large corporation boasting about how few devices they've sold compared with the broader market. Indeed, with numbers near 20% globally, it's hard to argue that the firm is entirely dominating its competitors the way Microsoft was a quarter of a century ago.

It's true the iPhone does particularly well in the home market, where it is exposed to less direct competition than much of the low-end phones that dominate India and China (the No 1 and No 2 markets, respectively). Apple insists, though, that the assertion by the DOJ that its "share of the entire U.S. smartphone market exceeds 65%" is misleading because that is based on revenue, not on units sold, and of the latter, the company claims it commands less than half of its home market.

The distinction between these is the per-unit cost. It is here that DOJ points out that Apple accounts for 70% of the "performance" smartphone market. To be sure, it's also true that Apple's products fall within the premium category, which Apple dominates a significant share of here in the US. It will be an uphill battle for DOJ to prove this, alone, constitutes a monopoly.

And so much of the complaint, which runs 88 pages, focuses on these topics: Apple's heavy-handed control of its App Store; that the Watch cannot connect to Android devices and-needless to say-the cringe-worthy green bubbles. Combining all this evidence, the attorneys general coauthors of the complaint appear to argue that it supports the contention that the company is using its market power to compel third parties as well as generally make life more complex for Android developers.

But perhaps the most intriguing features of the complaint are its claims that such practices led to the collapse of Amazon, HTC, LG, and even Microsoft's own foray into the space.

"Many prominent, well-financed companies have tried and failed to successfully enter the relevant markets because of these entry barriers," the complaint notes. "Past failures include Amazon (which launched its Fire mobile phone in 2014 but could not keep the business profitable and dropped out the next year); Microsoft, which ended its mobile business in 2017; HTC, which got out of the market entirely by selling its smartphone business to Google in September 2017; and LG, which was out of smartphones by 2021. Today, only Samsung and Google remain as meaningful competitors in the U.S. performance smartphone market. Barriers are so high that Google is a distant third to Apple and Samsung despite the fact that Google controls development of the Android operating system."

Apple is effectively laughing at the suggestion that such market failures were the fault of anyone but the companies behind them. The players that the DOJ consulted while putting together its case certainly have views ranging from point A to Z on exactly how direct a role the iPhone maker played in their inability to capture meaningful market share-and each of the above examples is decidedly different from one another-but in the case of the Fire Phone, at least, Amazon should be pointing its finger squarely at itself.

As to why companies like Huawei do not pose any challenge to Apple in the former's back yard, it is time for the U.S. government to look deep into the mirror.

The smartwatch is an excellent example. Even Cupertino's well-paid legal team would be stretching it too far to say that Apple Watch customers are not really being hindered simply because of their exclusive iOS. The company, however, tends to talk about technical reasons to rationalize this. According to Apple, it spent three years trying to work out WatchOS/Android compatibility before dropping the matter, citing security and privacy reasons.

For example, while Apple talks about its new decision to permit RCS messages on iPhone, the company argues that the ongoing existence of those stigmatized green bubbles is necessary to preserve differentiation around encryption and compatibility with particular features in Messages.

The complaint quotes internal Apple e-mails from executives claiming that removing green bubbles would "be bad for business".

Ultimately, Apple says this is a lawsuit that tries to essentially make iOS look like Android. For starters, the company invokes a Supreme Court case from 2008-Pac Bell Co. v. LinkLine Communications. The court ruled in unanimity for Pac Bell. According to it, the telecom company did not commit an offense with its antitrust rules and was indeed allowed to decide which companies they would collaborate with.

When it's time for Apple to present its case, the company will likely argue that it is not for Apple to be a font of life for its competitors.

"If successful, it would prevent us from bringing that kind of technology to market, and prevent us from making the kinds of devices people expect from Apple—at the intersection of hardware, software, and services," it said in a statement it issued shortly after the filing last week. "It would also set a dangerous precedent, empowering government to take a heavy hand in designing people's technology. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it."

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2024-10-21 19:31:43