US appeals court revives antitrust lawsuit against Apple
reuters.com
reuters.com
Most of the document is about the complex procedural history of the case. The meat of the new decision is on page 20 onwards:
> Apple argues that it does not sell apps but rather sells “software distribution services to developers.” In Apple’s view, because it sells distribution services to app developers, it cannot simultaneously be a distributor of apps to app purchasers. Apple analogizes its role to the role of an owner of a shopping mall that “leases physical space to various stores.” Apple’s analogy is unconvincing. In the case before us, third-party developers of iPhone apps do not have their own “stores.” Indeed, part of the anti-competitive behavior alleged by Plaintiffs is that, far from allowing iPhone app developers to sell through their own “stores,” Apple specifically forbids them to do so, instead requiring them to sell iPhone apps only through Apple’s App Store.
...
> [W]e rest our analysis, as compelled by Hanover Shoe, Illinois Brick, UtiliCorp, and Delaware Valley, on the fundamental distinction between a manufacturer or producer, on the one hand, and a distributor, on the other. Apple is a distributor of the iPhone apps, selling them directly to purchasers through its App Store. Because Apple is a distributor, Plaintiffs have standing under Illinois Brick to sue Apple for allegedly monopolizing and attempting to monopolize the sale of iPhone apps.
(IANAL)
What?!?
It's the _only_ distributor of apps to app purchasers.
Seems akin to FedEx saying they do not distribute packages, they merely sell distribution services to shippers.
Sounds like a company store in a mining town. The company pays your pay checks, charges you high rent and high prices at the company store (Which is also the only store)
If this is deemed illegal then its going to get quite interesting on both the phones and game consoles. Welcome back Atari 2600.
A key insight. Many companies sell products that in turn have marketplaces which they wring some control over.
Game consoles is indeed an interesting one, because it parallels so perfectly. If Apple must allow competitor markets within iOS, so must Sony and Microsoft. (Note that physical game sales also require paying a commission to the console maker, so it's a different market but the same business model.)
Or cable TV. Does Comcast have a monopoly on selling additional cable channels and pay-per-view through my Comcast set top box? How is that any different?
Anyway finding a physical world analogy will be though so maybe we should resign trying. (Fact that duplicatinga/delivering cost for digital product is close to zero is an example of why physical analogy will often fail)
A close analogy would be Apple owning every shopping mall in the world, charging shop owners annual rent AND taking 30% of their revenue. Also as part of their lease agreement, Apple forbids tenants from selling their products out of their own independent shop or even out of their own homes or websites. Could you imagine how much more expensive goods would be if shopping mall landlords took 30% off the top line of every tenant?
Of course you could say there's Google Play, but your Android app is a different product from your iPhone app. Also, Google Play conveniently has the exact same arrangement with the same 30% commission, so it's basically just a parallel universe where people are stuck in one or the other.
I don't know how they have gotten away with this for so long. Imagine if Microsoft took 30% of the revenue of every Windows app developer (of course beginning after their monopoly was already established)! They couldn't even get away with bundling a web browser into their operating system. What Apple is doing is far worse.
The current situation in the iOS ecosystem would be more like McDonald's forbidding you from bringing your own beverages into their restaurants, even if they don't sell the same beverage (or even a competitor of one they do sell) and you plan to buy their food.
Of course, restaurants can and do frown upon or even outright forbid the above behavior, but they also don't charge multiple hundreds of dollars for you to walk through the door.
To further demonstrate that semantic disconnect, the app developer is only paid when Apple receives a payment from the user for that app. Modeled in terms of McDonald's selling soda, it would be equivalent to McDonald's not paying Coca Cola until someone orders and pays for a fountain drink. AFAIK, this ain't the case.
In other words:
* McDonald's actually buys soda from Coca Cola, then resells it to customers
* Apple only facilitates the transfer of money (from user to developer) and application (from developer to user)
If anything, Apple is probably closer to an escrow than a retailer (another bad analogy, I know, but certainly better than any notion of Apple buying and reselling apps).
Although I understand the 2600 / Nintendo argument, I think at this point forcing an opening in the stores will probably be the only way for independent software companies to survive long term. It will also lessen the power of Apple or Google to silence app developers.
I am really getting a bit sick of book and music authors being treated better than developers for the purpose of speech.
1) I tend to agree with jliptzin's "There is no real world analogy because no brick and mortar company would get away with something like this." https://news.ycombinator.com/item?id=13398591
Because pricing power is the test for market power, there's actually a more complete analysis that needs to be done than this kind of superficial similarity. As it's more common for people to have multiple consoles from different vendors than multiple cellphones from different app ecosystems, it is quite plausible that a console vendor might not have pricing power in games that they sell through their stores whereas Apple might have pricing power in the app store.
I could see that as a result of a lawsuit forcing them out of the app store model.
And how would a monopoly on signing keys be any different than the original app store monopoly? That's effectively what the app store monopoly is.
(At least, not as far as is mentioned in this decision -- I haven't read the original case, only the summary discussed in this decision, but it seems fairly complete)
Instead, they point out (1) Apple's threat to ban apps that use other distribution channels from the app store, and (2) Apple's threat to void warranties of phones onto which apps have been sideloaded
So a monopoly on signing keys is actually different from what (the plaintiffs are claiming) is the problem with the app store monopoly.
Is that a joke?
I'd love to be able to sell iOS software directly to users. Even if there were no viable channels outside of the App Store having the choice would make me rest a lot easier.
But to state that "Apple's monopoly" has driven the price of software up is to be laughably out of touch with reality. Maybe this has to be argued from the point of view of the consumer and they thought "monopoly driving prices down" wouldn't be a very good case?
No-ones going to do that to get slightly cheaper apps (if they are actually cheaper, which I doubt, because I don't believe that the Google App Store is actually competing with the Apple App Store).
I reckon the rationale here is twofold:
* The currently-mandatory 30% fee would now be optional, as would be the flat developer fee (if it still exists; I haven't really looked into it in a long time)
* The availability of additional stores means the availability of different apps that might not be available on Apple's store, thus increasing competition and driving down prices through more typical supply/demand curves.
The truth is that as right now, ~78% of apps in the App Store are free to download/play. The remaining ~22% that are paid stack around the $0.99 price point, which is the lowest possible price tier for a paid app.
I don't see how this "monopoly" is raising prices...
Opening the store in a way like the one being described would result in malware and low quality apps. It'd add clutter and an incredible amount of noise (aka. Competition) hurting developers and consumer.
It's a lose lose situation IMO.
If you need proof just look at Android. Lots of stores, low quality apps, and a very fragmented way for developers to monetize.
[1] https://www.google.com/search?q=apple+store+iphone+fart+app
Apple reviews every app, there's no malware/spyware, apps are sandboxed.
If you enable lower quality apps and increased competition?
Beyond this, if I charge more for the Apple app than the website or google versions, then Apple may choose to ban my app. This means, my website app may be more expensive (higher margins, sure) because of Apple.
With Android, I can always bypass the Play Store (like Amazon does).
What do I mean by that? Gatekeeper.
Yes they can and do regularly. The extreme example is of course an exclusive contract where the vendor agrees to make it impossible to buy the good elsewhere.
Apple, on the other hand, is imposing restrictions on which price you must sell it to third parties, and, that, I think, is illegal.
There are also other considerations. A company may get away with demanding certain exclusivity rules for a few years but now we are getting to the point of 10 years so courts will look at the situation differently.
>Following Alcoa and American Tobacco, courts typically have required a dominant market share before inferring the existence of monopoly power. The Fifth Circuit observed that "monopolization is rarely found when the defendant's share of the relevant market is below 70%."(22) Similarly, the Tenth Circuit noted that to establish "monopoly power, lower courts generally require a minimum market share of between 70% and 80%."(23) Likewise, the Third Circuit stated that "a share significantly larger than 55% has been required to establish prima facie market power"(24) and held that a market share between seventy-five percent and eighty percent of sales is "more than adequate to establish a prima facie case of power."(25)
>It is also important to consider the share levels that have been held insufficient to allow courts to conclude that a defendant possesses monopoly power. The Eleventh Circuit held that a "market share at or less than 50% is inadequate as a matter of law to constitute monopoly power."(26) The Seventh Circuit observed that "[f]ifty percent is below any accepted benchmark for inferring monopoly power from market share."(27) A treatise agrees, contending that "it would be rare indeed to find that a firm with half of a market could individually control price over any significant period."(28)
When they're capturing over 90% of the profit in the smartphone industry there's no advantage to increasing market share, and some pretty big costs.
[1] http://www.macrumors.com/2017/01/11/iphone-31-smartphone-sal...
[2] https://www.justice.gov/atr/competition-and-monopoly-single-...
Suppose Walmart is the only retailer on the East Coast and Target is the only retailer on the West Coast. You're saying, isn't it great for Target that they only have 43% total market share so they can't be a monopoly. But they're clearly a monopoly on the West Coast, and it isn't practical for people on the West Coast to buy their merchandise from a Walmart in Boston or Atlanta, which implies they're different markets.
You can't buy an iOS app from Amazon or Google Play.
I'm asking this genuinely, from a position of ignorance, interested in hearing an answer.
Anyway, you could also fly across the country to Target and buy "the same thing" there (in GP's analogy).
There is no problem with limiting software distribution channels for your own hardware in order to have a meaningful quality assurance.
What the DoJ should instead focus on is the crazy rules apple imposes in order to limit any competition. For example you can not publish apps that compete with their own stuff (that's why we don't have a real chrome or Firefox in iphone). Even more ridiculous is that you are not even allowed to mention apple competitors. Saying this app also support android wear will get you thrown out of the store.
A better analogy would be that your Apple toaster only works with Apple power outlets and only accepts bread made or approved by Apple.
Let's not forgot that apple has tiny market share compared to google, they are only going after them because of their wealth.
2nd, let's not forget this was a completely natural monopoly. Apple didn't use the success of one thing to create a monopoly in another, iPhone was tiny when they introduced the app store. Is that the rule? If you're successful you have to share in that way?
Lastly, while I don't dream of ever having even a fraction of a fraction of the success apples had, it does suck to think that if you build something others want, others can sue you for access to the platform. Bullshit. If you don't like apples rules, don't play.
That's true of most monopolies, including ones that clearly and flagrantly violate antitrust laws.
It's like having two car manufacturers and they both recommend "approved" gas where they scrape 30% of the revenue as a tax. Anyone that wants to make their gas "approved" has to pay 30% of the revenue.
The difference between apple and google is that Google hides a little switch in the glove compartment that lets you use any gas if you want to. Apple on the other hand will void your warranty and try their hardest to break your car if you dare use unapproved gas or try to modify the car to use it
You could argue that you could just not drive a car if you didn't want to pay extra for approved gas...
The core issue is that Apple has created a marketplace for something so pervasive in daily life and has a complete monopoly on it. If the marketplace was smaller or phones less important consumers could easily say "I don't like the rules" and walk away
The pricing point is clearly wrong. Most apps are priced ridiculously low for the value they offer. I don't see that Apple can be blamed for that.
The lock-in part is also wrong. Developers are free to develop apps for Android (or Windows, if they really want to). There are even cross-platform all-in-one dev kits. (Admittedly they're not great, but it's possible to use them to do some large percentage of the dev work on a cross-platform app and then fill in the native details later.)
There are certainly elements that suck. Discovery on the app store is awful, and continues to be awful. Too many apps are still abandonware, even after last year's clean out.
Ironically developers might benefit more from better curation. A smaller number of really solid, bug-free apps would be better than the current mess of "I have no idea if this is going to crash or not" free for all.
But that's not really an anti-trust issue.
I'll be very surprised if this case gets far. It's clearly on thinner ice than the Bell, IBM, and MS antitrust cases.
If anything there's a better case to be made for hauling Google in for its near-monopoly on ad sales and search, and its habit of screwing over site owners who rely on ad revenue.
Not having any options other than a webview for web browsing is certainly damage enough particularly with zero day exploits.
That is a natural monopoly and not unlawful. They do not use the store to leverage position in other markets, which is where antitrust comes into play.
Bell telephone had a similar monopoly. They owned the phone lines and wouldn't allow any non-approved equipment connected.
Your view really depends on if you see the phone primarily as a platform for apps or as an "apple phone" with some apps as neat little add-ons.
Antitrust comes about when a company has a high enough market share AND uses this market share to bludgeon any competitions. Apple created a market, they own the method of distribution, and they actively use their position to prevent competition with their own products and stop alternative markets from forming. Much like Bell
I feel like only a non-elected, inner circle within Govt gets to decide what these condition will return today. Even if the whole country is split 50/50, its only their retval that matters.
In ideal society, a legal debate is nothing to be proud of. People's lives/properties depends on it.
In the Apple case, they've taken whatever legal means possible to stop side-loading and alternative stores, dropped apps that try to sell via other paths. They have a vertical stranglehold on the platform, and are in a dominant position.
Practical, no. But possible.
If you try to define antitrust in terms of platforms instead of markets, then every company that has a platform is a monopoly. And that is, of course, quite absurd and renders the term "monopoly" meaningless. Which is why it's not actually interpreted that way.
So specifically in this case the APIs for installing an app. But thinking more generally the APIs for iCloud Drive or Siri as well.
Just think of being able to replace iCloud Drive with your own implementation to sync to local Drive, S3, etc.
Part of me feels like if Apple has to allow apps outside of the app store, maybe they can then void your warranty. Like if you open up your computer and start installing parts on your own...
If you install a virus, etc it should be the user's fault for using a non trusted store. Why should Apple have to support somthing they didn't authorize?
I haven't seen a antivirus app ever featured on iOS, but on my Android devices I have... I thought it was kinda funny to install a antivirus on a phone or tablet in the first place - but I guess they are just computers in the end still and more to worry about when you leave them wide app.
"Google does it too" isn't a valid defense if it does turn out Apple is found to have done something wrong.
Note that the permissions system, app signing (with any key as long as it's the same for subsequent versions of the app) and other safety features are built into the system so they still work the same - security it not dependent on the Play Store.
Start thinking about the reputational and potential future stock damages from just having this information coming out.
So what gives ? Specifically what can a business in general do to avoid such fate ?
Incorrect. Antitrust occurs when you violate the laws regulating use of market power, which have little to do with customer trust ("trust", in this sense, refers to a monopoly, not to consumer trust in the firm.)
And unlike a traditional retail store, the whole process is exceptionally transparent — every developer pays the same 30%, every developer gets boned by the same restrictions.
Anyway, there is a competitor to the App Store, it's the Play Store and it's available to any consumer who wishes to shop there. Apple certainly doesn't have a monopoly on app sales.
Except Android apps don't work on iPhone.
The thing is, the law doesn't concern itself with iOS app sales, but rather the overall market of app sales. Is the overall market of app sales healthy? Yes, it most certainly is.
The reality is Apple doesn't control the marketplace of mobile apps. They don't even have a majority of it. People are free to choose whatever handset they like. And they do.
Except for those tied to a specific device for work reasons. Blackberry, anyone (that is, back in the day?)
If someone was cheating you for 30% of your bill on anything, wouldn't you complain?
To your second paragraph: transparency isn't what's being discussed here. The developers aren't suing Apple; end users are.
To your third paragraph: nobody is alleging that Apple has a monopoly on computer programs in general; the point is that they have a monopoly on distribution channels for -- specifically -- iOS apps.
Here's a question, if Apple ran the App Store for free (0% commission) would there be any case to answer? How about 1%? Why is 30% so unreasonable? Seems to be the fair market rate for store services, I'd argue.
Microsoft has a monopoly on distribution channels for Xbox games. (Including packaged game discs which just like their online store require their blessing and a license fee. The only difference in practice is method of data delivery and additional middlemen taking a further cut of sales.) Should Microsoft be required to open the Xbox to games not blessed by Microsoft?
Sure, why not?
I'm not particularly interested in discussing whether those legal restrictions are philosophically compatible with some concept of freedom. Citing the best work of political science of the last 40 years,
Minister - We are discussing right and wrong.
Humphrey - You may be, Minister, but I'm not. It would be a serious misuse of government time.