Apple Is In Hot Water Again...Now What?
The Biden Administration is attacking yet another big tech firm...
About a couple months ago, we covered the scrutiny that big tech has faced with the EU. More recently, the US has also reared its fangs on big tech. As the DoJ writes:
The Justice Department, joined by 16 other state and district attorneys general, filed a civil antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act.
Now, this isn’t really anything new. ICYMI, Epic Games sued Apple after they banned Fortnite from the AppStore, leading to a fierce dispute over payments and anti-steering rules. To Epic Games’ dismay, the judge ended up siding with Apple on 9 of 10 appeals. All Apple had to allow was for developers to be able to use other payment methods.
Coming out about exactly 2 months after the Apple vs Epic Games lawsuit was resolved, it seems almost as though the DoJ observed the dispute play out and carefully and meticulously picked the appeals it chose. As Mark Gurman of Bloomberg writes, here’s what the DoJ is arguing:
Apple has hindered the development of “super apps,” software like WeChat in China that includes several mini apps.
The company hasn’t supported cloud streaming game services, which run off a data center and can be delivered to the iPhone for playback.
Apple has barred third-party texting apps on the iPhone from sending SMS messages, and its own messaging software doesn’t work on Android.
There’s a lack of full support on the iPhone for third-party smartwatches, including the ability to get some notifications.
Apple doesn’t let third-party apps use its tap-to-pay technology to make in-person payments.
Take a second and decide for yourself which claims have weight and which are kinda wishy-washy. We’ll get into it in a bit - first, let's explore the backdrop that brought Apple to where they are today.
On The Shoulders Of Giants
Here’s something to think about: Was there a specific event or product that enabled Apple to propel where they are today? Kind of a hard question to answer, but here’s what the DoJ thinks.
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.
When Apple released the iPod in 2001, one of the key growth drivers for its success was the development of a platform agnostic way of accessing iTunes, you know, to add songs to your iPod and stuff (whether through legit or possibly questionable ways). The clear winner in the consumer technology space at this time was Windows OS. Steve Jobs knew that to be even the slightest bit competitive here, it was imperative that the iPod be accessible to as many people as possible.
You see, Microsoft was in a bit of trouble at the time. Back before Google ever existed, Netscape commandeered 90% market share over search. In classic Microsoft fashion, the company could not stand to lose a space they could easily crush simply by embedding their own search engine in every computer that ran on a Windows OS. Ever wondered why Internet Explorer was so trash? It's because it was literally built by a bunch of kids in college. That’s right. Microsoft literally bought licenses of Marc Andressen’s school project, Mosaic, back at the University of Illinois Urbana-Champaign and hastily built it into Internet Explorer.
To ensure its adoption, Microsoft looked to every OEM in the computer space and offered them a sizable discount on Windows licenses if they backed the use of Internet Explorer on their products. Using phrases like “take away their oxygen supply” and “crush them”, Microsoft succeeded in exterminating Netscape and brought Internet Explorer to 95% market share by 2000. After a youth filled with savagery, it's no surprise that Bill Gates has shifted to an image of philanthropy.
Ultimately it was decided that Microsoft would be prohibited from making the “take it or leave it” deals with third parties and enforced to disclose more technical information to rivals and industry participants.
Worth Its Salt?
The argument the DoJ makes is that Apple leveraged the fallout of the Microsoft lawsuit to propel itself to where it is today. Using their position today, Apple is turning around and doing the same exact thing to developers on the AppStore that Microsoft did back in the day to Netscape. The company has enforced various systems and software under the guise of “proprietary”. Everything from lightning cables, to Swift app development, to closed payment systems make up the Walled Garden, and have led them to be touted by shareholders and customers alike.
Just as with any antitrust lawsuit, the DoJ does not win simply by proving that Apple is a monopoly. Rather, they must prove that Apple’s monopoly power actually harms the end customer. Is there an established pattern of steps that is hard evidence that Apple is acting as a monopoly? Well, the DoJ decided to hang their hat on 5 key issues, namely the limitation of super apps, banning cloud streaming gaming apps, undermining messaging standards, Apple Watch cross-OS compatibility issues, and the enforcement of Apple’s Digital Wallet. Well, here are my two cents.
Not taking a side here, but Super Apps, Apple Watch, and Cloud Gaming…really? In the realm of arguments the DoJ could have made, its questionable that they picked these three issues. Is an all-encompassing app really something that Americans want? Do people outside of iPhone users care to purchase an Apple Watch? Isn’t Apple already resolving the issue with Cloud Streaming? The DoJ seems to spin up some cool anecdotal evidence in their 88 page complaint but none of it matters unless they can really prove that Apple has intentionally inhibited what customers can do using Apple products.
Regardless of the outcome of this case - one thing is clear. Governments here and abroad are breathing down the necks of big tech. Right now it is Apple, but yesterday it was Amazon and the day before Google. It’s possible Apple wins this battle, but unlikely the industry can get away unscathed. Lawsuits are remediation for the past, but new regulation is underway - the Digital Markets Act (DMA) in the EU is curtailing the reach that big tech has over smaller rivals using their platforms. Big tech firms just “aren’t as invincible as they were 5 years ago”. It’s likely the era of self-regulation is over.
That’s all for this one folks! As we develop the newsletter, I’ll try to expand the diversity of topics and angles we cover. If you’re interested in more content related to the scrutiny that big tech faces from regulators, let me know by dropping a comment or liking this post. If you enjoyed reading, please feel free to share with your friends. Reach out to us at logicallyanswered@substack.com if you have any insider opinions or leave a comment on our Substack page!