Apple, Microsoft, and the End of the iPhone Era: Apple’s iOS Store is a Big Bad Bad, Not the Apple Itself
According to the DOJ, its antitrust case against Microsoft cleared the way for Apple — then teetering on bankruptcy — to launch its breakout success: the iPod. Apple is in the eye of the storm now that it has spent trillions of dollars. And because time is a flat circle, it’s facing an antitrust case built directly on that 1999 case against Microsoft.
One element that can work in the government’s favor is their choice of venue. The DOJ chose to bring the case in New Jersey because it was closer to Apple’s California headquarters.
US Attorney General Merrick Garland acknowledged the resource imbalance the government is up against, facing a company worth trillions of dollars. Garland said that it is important for them to allocate resources to protect the American people from an institution that is harming the economy. Individual Americans don’t have the ability to protect themselves.
There have been disagreements about Apple’s App Store for a long time. The company has faced legal challenges, most notably from Fortnite developer Epic Games, over both its restrictiveness and the fees it charges developers for in-app purchases. The App Store is a focal point of the suit, a key component of the allegedly anticompetitive “moat” the company has built around its products.
According to the government, Apple has interfered in the innovation of streaming services for video games, non-Apple smartwatches, and third-party digital wallet that let users tap-to-pay.
There is a fun way to engage with the legal depiction of nerd rage but there is also a larger narrative the DOJ is trying to push. The Justice Department took pains to call back the complaint at Thursday’s press conference. It’s obvious why, of course. It is more than that it was the last. really big W the feds took home in the world of tech antitrust — the present-day battle over iOS’s closed garden does, in fact, look a lot like the browser wars of yesteryear that sparked the Microsoft antitrust case!
The drawbacks of iMessage, the company’s exclusive software features, make them seem inferior in the eyes of consumers even though Apple conducts business in a similar manner to how other companies do.
Frustration from some users about Apple’s control of iMessage and confinement of messages from people outside Apple’s ecosystem inside green bubbles has grown since. Last November Apple signaled it was ready to make some concessions, saying it would add compatibility with the RCS messaging standard to iMessage. Apple has also long argued that iMessage’s security features are a bar to interoperability, another point of contention with the DOJ.
The complaint includes a quote from Tim Cook at the 2022 Code Conference that made headlines at the time. An audience member told Cook that he couldn’t send his mom some videos. Cook said to buy your mom an Apple product.
The Apple Watch didn’t become a blockbuster like the iPhone, but it was accused of being used to exert leverage on its customers by the DOJ. In 2019, the suit alleges, Apple’s vice president of product marketing for Apple Watch wrote that the device “may help prevent iPhone customers from switching.”
Apple blocked cloud gaming apps that would allow users to have access to desirable apps and content, without needing to pay for expensive Apple hardware, because it was threatening its monopoly power, according to the lawsuit. “In Apple’s own words, it feared a world where ‘all that matters is who has the cheapest hardware’ and consumers could ‘buy[] a [expletive] Android for 25 bux at a garage sale and… have a solid cloud computing device’ that ‘works fine.’”
Apple didn’t want cloud streaming to exist on the iPhone in the first place, the DOJ alleges. Cloud streaming services allow users to play games from a remote server which eliminates the need for powerful hardware to run demanding games. In other words, users could purchase a cheaper Android device or even an older, used iPhone to play stream games on mobile instead of shelling out $799 for a brand-new iPhone 15.
The DOJ & the Super App Store: Apple’s Monopole Power and WeChat, which is all about App Stores and Miniapps
Additionally, the DOJ is also going after Apple’s limitations on super apps, which offer access to a range of different services from a single application and are especially popular in Asia. It is possible to see how WeChat, a huge in China, functions as a messaging, payment, and short-form video-sharing service. It allows users to install programs that are within the app.
This setup is convenient for users and developers, the DOJ argues, as users don’t have to download a bunch of separate apps to gain access to different capabilities. Since the programs run inside an app, developers don’t have to put separate app updates on their phones.
The iPhone maker sees super apps as “‘fundamentally disruptive’ to ‘existing app distribution and development paradigms’ and ultimately Apple’s monopoly power,” the lawsuit reads. That’s why it’s allegedly blocking developers from putting them on the App Store by requiring super apps to display mini programs in a “flat, text-only list” rather than as individual icons or tiles. Super apps can’t display a list of titles from the same developer and can’t categorize mini programs so they can’t show games recently played.
In January, Apple will allow mini apps and games to use the in-app purchase system since they will be allowed to use the in-app purchase system in the lawsuit. The App Store guidelines only mention privacy rules and not the format arguments the DOJ has made in its lawsuits.
Apple is Not the Top of Apple, nor Is It The Evil That Is? Apple’s Antitrust Case Rejoins Google, Amazon and Google
Apple is worth nearly $3 trillion, making it one of the highest valued companies in the world. And its iPhone is one of the most popular phones on earth, dominating the global market, according to market analyst firm IDC. The Justice Department believes Apple was able to keep its place at the top.
An agenda of the Biden administration includes antitrust action in the tech industry with suits brought against both Amazon and Google. “This case demonstrates why we must reinvigorate competition policy and establish clear rules of the road for Big Tech platforms,” Democratic senator Amy Klobuchar told WIRED in a statement.
When asked about the threat the new antitrust lawsuit might pose to Apple’s business, a DOJ official noted that “there are actually examples where companies, after having been charged and had to change business practices because they violated the antitrust laws in the long run, end up being more valuable than they were before.” Thanks to its success in cloud services, Microsoft has become the most valuable company in the world.
The case against Microsoft in the late 1990s accused the company of forcing PC manufacturers and others to use Internet Explorer. The company was slow to embrace the web, falling behind other companies that created web services that were useful and lucrative.
The Apple complaint is well-written and shows the DOJ is learning more about antitrust than they have been teaching, according to an antitrust professor at George Washington University Law School. The government, he says, has probably paid close attention to what happened in Epic’s lawsuit against Apple over the App Store. I think the judge would have seen some weaknesses in the case and so they wrote a complaint that tries to avoid them and add more material so that it isn’t a reprise of the case.
The start of its battle against one of America’s Favorite Companies is a great start because of a degree of lawyerly insight into the human psyche. The complaint speaks directly to the tech aficionados rather than speaking over them and to a federal judge. If you are a fan of the Appleecosystem you will have more opportunities to be annoyed by Apple. The DOJ says that Apple is not to blame for the hundreds of little annoyances. It’s an extremely tempting invitation to come rage with them. Sometimes, the nerds have a point, and so nobody can bring the hate quite as hard as they do.
But while those specific similarities are relevant to a judge, they aren’t as much to the general public. What the DOJ wants is more important than anything else. It wants to tie these two cases together in the popular consciousness and, in doing so, define itself and its role in history. “When Apple began developing mobile consumer devices, it did so against the backdrop of United States v. Microsoft, which created new opportunities for innovation in areas that would become critical to the success of Apple’s consumer devices and the company itself,” the complaint reads.
It goes on to detail how iTunes initially only worked on Mac computers; after the consent decree, Apple developed a version for Windows, and the iPod started going gangbusters. Is the rest history? I don’t believe Apple owes the DOJ a thank you card, but they didn’t have to deal with microsoft’s harassment along the way.
Although the dreaded “middleware” does appear in United States v. Apple, you can barely tell it was written by lawyers. You only have to compare it to the 1998 complaint in United States v. Microsoft to see what I mean. The Apple lawsuit is just trying to be a magazine feature.
“Disintermediation” of PCs is what Microsoft feared, and the DOJ alleges it’s what Apple fears for the iPhone. Microsoft was absolutely right to be afraid — and it seems Apple is, too.
Apple illegally monopolizes the market for app distribution and payments on its iPhones, allowing it to unlawfully condition access to the App Store on the developer’s use of a second product, according to the lawsuit. The ruling was upheld by the appeals court, even though they lost on most of their claims. It’s necessary for Apple to let developers link to outside payment options. (Epic and other developers have recently complained to the district court, saying Apple is not abiding by that requirement, rendering it ineffective.)
Do Consumers Want Apple to Win? John Kwoka: Apple Can’t Win, but It Does Want to Give It Their Own
John Kwoka, a professor of economics at Northeastern University and former chief economist to the FTC, says that the DOJ has stepped back from the details and asked what’s going on. The fact that it is frame in a way that makes clear the core problem is merited.
“The larger theory of exclusion that DOJ is relying on in the Apple case is the effort by the dominant firm to impede the effort of rivals to provide alternatives in a number of instances, seeking to ensure that they never get a foothold in the market,” he says.
The government will need to show that Apple is able to increase prices or degrade quality without losing customers in order to understand if the market share gives Apple dominance. Is the question of whether users will opt out? Kwoka says. “Will they opt out for degradation of service? And I think, much like the Google case, I think there probably will be evidence of ways that Apple has limited or compromised some service quality without losing anybody at all.” This would go toward showing Apple’s ability to exercise market power.
Apple will be judged on its argument that it had legitimate business reasons for making the decisions that were exclusionary.
On close inspection, the choice seems deliberate. The New Jersey District Court has some pretty good law for monopolization issues according to the Third Circuit Court of Appeals. Kovacic points to a 2005 decision by the Third Circuit in favor of the government in a case called US v. Dentsply. In that case, the appeals court found that the denture manufacturing company violated anti-monopoly law by using “exclusive dealing arrangements to prevent rivals from getting inputs they need to succeed,” according to Kovacic.
“I think a breakup is very unlikely,” Allensworth says. “They don’t seem to be asking for one. They’re asking the court to enjoin, which means to stop doing the stuff that they’re complaining about. They want something similar to what Europe wants Apple to do. The European Digital Markets Act requires Apple to make changes to its products, the commission believes it will create a more competitive environment.
Enforcers usually tell the press that all options are on the table. But DOJ officials who briefed reporters on background Thursday were careful not to address the exact kinds of remedies they would seek. The case will begin with an evaluation of Apple’s liability for the alleged harms.
California Attorney General Rob Bonta, one of the state AGs who has joined in the DOJ lawsuit, tells The Verge that the enforcers “are focused on injunctive relief.”
A Behavioral Remnant: Apple vs. Epic in the Device-to-Device Correspondence, Revisited
Behavioral remedies can be slippery and hard to keep track of, while breakups are decisive and final. But in this case, says Allensworth, “it’s really hard to think about splitting that baby and saying Apple can make handsets, but can’t make an operating system, can’t have the app store, can’t have iMessage.”
The long-distance fight between Apple and Epic over the terms of the behavioral remedy is an example of why behavioral remedies can bring with them their own problems. Apple is able to figure out ways of throwing sand in the gears of the process.
While a district court initially ruled for Dentsply, the Third Circuit reversed this decision and found that the company’s control over its authorized dealers effectively blocked the market for artificial teeth. The DOJ is thought to have an advantage over Apple due to this particular case.
“It was a case — low tech — that involved dentures,” Kovacic says. “But they [the DOJ] won and with an opinion that lays out a view of the law that’s going to be good for them here.”
Dentsply was accused of having a monopoly on the artificial teeth business. Dentsply made and sold artificial teeth to dealers, who then sold them to dental laboratories to make dentures. The policy Dentsply used prevented authorized dealers from Adding more teeth to their product offering. Dentsply could exclude competitors from their network if dealers were unable to sell other brands of artificial teeth to laboratories.
Bonta says that he understood that the anticompetitive conduct and exclusionary conduct of Apple was going to be impacted by the headquarters ofSamsung in New Jersey. The lawsuit lists both Samsung and Google as the two “meaningful competitors” to Apple in the premium smartphone market and specifically points out that Samsung’s US headquarters are “located in this district.”
You can forget this is a lawsuit if you get to page 57, but it is not just observations of a single very motivated poster in the comments section. There, the document suddenly changes voice, finally pivoting into a formal communication to a judge. “Mobile phones,” the complaint reads primly, “are portable devices that enable communications over radio frequencies instead of telephone landlines.”
From cloud streaming games to CarPlay, the DOJ complaint tries to rope in the burning grievances of every kind of nerd and then some. There is a rant about how victims of screen sizes are a person with small hands. At the Thursday press conference, Attorney General Garland did not discuss how Sarah would like to see the SE return to its 2016 size.
There are even a beguiling few paragraphs in which the DOJ compares the need to regularly update AAA video game titles to the onerous process of App Store review and then concludes that “Apple’s conduct made cloud streaming apps so unattractive to users that no developer designed one for the iPhone.” The DOJ does not accuse Apple of why I can’t play games on the phone. but it’s also not not saying that. Is Apple standing between me and my video games??? I wonder, as I unconsciously rummage around for my pitchfork.
A lawsuit is, functionally speaking, a communication between lawyers and a judge. Because it is a specialized missive to a specialized audience, it can become highly technical and jargonistic — this is especially so when it comes to niche areas of law like antitrust or complex sectors of litigation like technology. Tech lawsuits are often obscure even to techies, with bizarresoftware terminology that is meaningless outside of a court of law. antitrust law loves “middleware” and copyright law loves “technological protection measure.”
A scene! Characters! The invocation of Steve Jobs himself! I think the paragraph could use a hard edit before it is published because it is a lawsuit, not a work of narrative nonfiction.
This opening paragraph isn’t even numbered, it has every paragraph numbered. It’s instead part of a weird little literary curtain-raiser that’s been stuck right before the table of contents. It isn’t against the rules but the US v Apple has a single paragraph outside of the numbered section before it gets to allegations.
The DOJs 1998 blockbuster antitrust lawsuit against Microsoft has the opening paragraph of it properly labeled as paragraph 1.
The Sherman Act states that an action must be taken to restrain anticompetitive conduct by Microsoft, which is the world’s largest supplier of computer software for personal computers.
It seems like the lawyers in US v. Microsoft wrote a document requesting that the Sherman Antitrust Act be applied to personal computers. What a snooze!
The DOJ claims that unspecified surveys have reached similar conclusions, finding that the devices linked to their iPhones deter them from switching to Android.
In March of last year, Phil Schiller, Apple’s senior vice president of worldwide marketing, was said to have forwarded an email to CEO Tim Cook saying that a switch to Android would hurt the company more than it helped.
The suit portrays this ad as triggering concern inside Apple. It says the executive wrote to Jobs about it, saying that one “message that can’t be missed is that it is easy to switch from iPhone to Android. It’s not fun to watch. The suit doesn’t quote Jobs’ response at length, but says he wrote that Apple would “force” developers to use its payment system to lock in both developers and users on its platform.
