after a week After Apple finds itself at the end of a landmark lawsuit from the US Department of Justice, it strongly denies any similarities between it and Microsoft of the 1990s. It's a comparison that U.S. Attorney Merrick Garland relied heavily on in a filing last week.
While parts of the United States v. Microsoft case were partially overturned, the Windows maker was ultimately required to modify certain business practices that the government considered monopolistic. Garland and the 16 attorneys general involved in the Apple lawsuit are no doubt seeking a similar outcome to curb practices they believe amount to an unfair advantage for the $2.65 trillion company.
“In 1998, Apple co-founder Steve Jobs criticized Microsoft’s monopoly and “dirty tactics” in operating systems to target Apple, prompting the company to “go to the Department of Justice” in hopes of making Microsoft “play fair.” The lawsuit largely points to hypocrisy on Apple's part. But even then, Apple did not face the same kinds of restrictions it imposes on third parties today; Apple users can use their iPod with a Windows computer, and Microsoft does not charge Apple a 30% fee for each song downloaded from Apple's iTunes store. Likewise, when Apple introduced the iPhone in 2007, it benefited from competition between component makers and wireless carriers.
For its part, Apple cites global iPhone numbers that are nowhere near the 90+% market share that Windows enjoyed before the turn of the millennium. Lawsuits like this represent a rare opportunity to see a large company brag about how few devices it sold compared to the broader market. In fact, with numbers reaching around 20% globally, it is difficult to make the case that the company dominates the competition as Microsoft did a quarter century ago.
It's true that the iPhone is performing particularly well in the domestic market, where it faces less direct competition from many of the low-cost phones that dominate India and China (the first and second markets, respectively). However, Apple points out that the Department of Justice's claim that its “share of the entire U.S. smartphone market exceeds 65%” is misleading, because it refers to revenues, not units sold. Among the latter, the company believes it controls less than half of its domestic market.
The difference between these numbers is due to the unit price. Here the Justice Department suggests that Apple controls 70% of the “performance” smartphone market. Apple devices certainly fall largely into the premium category, a large swath of which the company controls here in the US. The Department of Justice will likely find it difficult to prove that this – in and of itself – constitutes a monopoly.
That's why most of the 88-page complaint focuses on aspects like Apple's strict App Store controls, the Watch's inability to interact with Android devices, and of course, the creepy green bubbles. Overall, the prosecutors who co-authored the lawsuit point out that this evidence proves that the company is using its market position to coerce third parties and generally make life more difficult for Android developers.
Among the most interesting aspects of the lawsuit is the claim that such actions led to the demise of Amazon, HTC, LG, and Microsoft's attempts to compete in the space.
“Many prominent, well-financed companies have attempted and failed to successfully enter relevant markets because of these barriers to entry,” the lawsuit notes. Previous failures include Amazon (which launched its Fire mobile phone in 2014 but was unable to sustain its business profitably and exited the following year); Microsoft (which discontinued its mobile business in 2017); HTC (which exited the market by selling its smartphone business to Google in September 2017); and LG (which exited the smartphone market in 2021). Today, only Samsung and Google remain real competitors in the high-performance smartphone market in the United States. The barriers are so high that Google ranks third after Apple and Samsung despite the fact that Google controls the development of the Android operating system.
Apple actually laughs at the suggestion that such market failures are anyone's fault except the companies behind them. Competitors consulted by the DOJ in preparing the case likely had different opinions about how much of a direct role the iPhone manufacturer played in its inability to gain meaningful market share (and each of the above cases differed significantly from one another). But in the case of the Fire Phone, at least, Amazon should point the finger squarely at itself.
As for why companies like Huawei do not pose a challenge to Apple on its home turf, the US government should take a long, hard look in the mirror.
The smart watch example is interesting. Even a highly paid legal team in Cupertino would struggle to prove that Apple Watch owners aren't hampered by its iOS exclusivity. For its part, the company indicates that technical limitations are the reason behind this. Apple says it spent three years trying to create compatibility between WatchOS and Android, but gave up over security and privacy concerns.
Likewise, while Apple points to the recent announcement that it will support RCS messaging on the iPhone, the company insists that the continued presence of the stigmatized green bubbles is necessary to differentiate encryption and compliance with certain messaging features.
The complaint cites internal emails from Apple executives suggesting that removing the green bubbles would be bad for business.
Ultimately, Apple believes the lawsuit seeks to effectively turn iOS into Android. The company points to the 2008 Supreme Court case, Pacific Bell Corporation v. Link Line Communications Corporation. The court ruled unanimously in favor of Pac Bell, stating that the telecom company did not violate antitrust rules and that it was able to decide which companies it chose to work with.
When the time comes for Apple to make its arguments, the company will likely argue that it's not Apple's job to support competitors.
“If you succeed [the lawsuit] “It would hamper our ability to create the kind of technology people expect from Apple, where hardware, software, and services intersect,” she said in a statement issued shortly after filing last week. “It would also set a dangerous precedent, as it would enable the government to take… Strong in human technology design. We believe this lawsuit is wrong on both the facts and the law, and we will defend it vigorously.”
To learn more about Apple's antitrust lawsuit, check here:
