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Apple Sued by DoJ for Illegal Monopoly

Apple Sued by DoJ for Illegal Monopoly

The Six Five team discusses Apple Sued by DoJ for Illegal Monopoly.

If you are interested in watching the full episode you can check it out here.

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Transcript:

Daniel Newman: We are not Apple fanboys. We do use Apple stuff. And we have said for a long time that there needs to be some antitrust brought to Apple. What do you think about what ended up being brought to Apple this week?

Patrick Moorhead: So, we don’t do news, but I think we do need to do some background on this.

Daniel Newman: We do.

Patrick Moorhead: So, Department of Justice in 16 states has accused Apple of being an illegal monopoly. And I don’t want to start even where the 88 page DOJ documents, I want to talk about market definition, and that is the core of any type of antitrust case. And they’re accusing the company of having a durable monopoly, durable meaning going on for a long time. It’s not some one hit wonder in two markets, performance smartphones where they said they have a 70% market share, otherwise known as flagship and premium, and then 60% market share in smartphones. I think the DOJ did Apple a favor. They could have done it on revenue share or profit share, which would be like 90%. And then, secondly, the durability if you needed to drill down on that, it’s been going on for a decade.

So, what’s the harm? Sherman Act, section 2, harm competition, less choice, higher prices and fees, lower quality and less innovation. And it focused on five areas. Super apps, think of it like if you’re a game studio and you want to have everything in one app, cloud streaming apps like game streaming, messaging apps like iMessage and digital wallets. So, essentially on the super app side, harms developers by preventing them from innovating and selling products. Cloud streaming apps, harms developers by preventing developers, artificially constrain the size of the user base, sorry, keeps them from selling games to such users. By the way, we saw this with Google by the way, and folks like Epic, and I believe that Microsoft, although they weren’t too loud on it, would like a crack at cloudstream apps like gaming. Messaging apps, it’s iMessage, it’s locked down, and DOJ says it harms developers by artificially constraining the size of their user bases. That makes sense.

Smart watches, this was an interesting one. I didn’t expect this one, Dan, essentially saying, by limiting the ability to respond to notifications, Apple has denied users access to high performing smartwatches with preferred styling, better user interfaces and services or better batteries, harm smartwatch developers. Finally, you can only have one digital wallet on an iPhone and it’s Apple, and they have engorged profits on all of that. Maybe you want Bank of America app that works everywhere. It’s not going to work. Anyways, that’s the upshot. I’m going to throw just one more thing. I’ve left you a ton of oxygen. I did like what it’s saying, because a lot of what Apple says it does because a better experience by the way, they do deliver a good experience like a mainframe, like the NVIDIA full platform, but they have smoking gun emails from Apple executives by the way, going all the way back to Steve Jobs that said, there were planned lock-in of the users.

Apple also talks about, I’m going to read this. Apple selectively compromises privacy and security interests when it suits its financial and business interests, but Apple imposes contractual restraints and restrictions that are more restrictions than necessary to protect user privacy and security. I think Apple is screwed. They’re going to lose. They will fight this. They’re going to get into so much trouble. I’m just trying to figure out is this going to be the three arctic years like it was with Microsoft, or is this going to be a devastating blow like AT&T? Probably not AT&T, they’re not going to get broken up, but this is going to leave a wound.

Daniel Newman: Buddy, great assessment. I’m going to play the basics here, because you and I, by the way, you and I both are very critical of Apple’s business model. I do want to say that I think the DOJ messed up. I think they messed up, because I don’t know why they’re focused on the phone, and there’s so much centrism to this about the phone. And the thing is, the phone, there’s choice, meaning nobody has to use an Apple phone. And what they do in the app store is the most anti-competitive, most aggressive behavior. They’ve jacked up the developer fees, how they lock you into this ecosystem, they create so much your business dependency, and then they keep raising fees and raising fees, very anti-competitive, and these businesses have no choice but to participate. Having said that, when you get to the phone, I feel like there is choice.

You can go buy a Samsung, go use Android. And so, this is why I’m conflicted is, why can the U.S. and antitrust and regulators never get it right? Meaning, why can’t they focus on the right thing? The right thing is the app store. The app store is monopolistic, anti-competitive and they’re absolutely abusive of their power, and it harms consumers because it drives up prices and it ends up meaning people that choose the platform cannot shop. They cannot have any opportunity to pick different options. I like that you pointed out the wallet. As we move to digital currency and people are going to be paying exclusively on devices, why can’t we have different payment options on the phone? Other platforms do allow that. And so, you could see, Pat, by the way, there’s a lot of likeness in this to your merchant services.

They’re saying merchant services have been driven down to a much lower fee because it was seen as anti-competitive for these merchant services to drive up cost to all the merchants, which ultimately drives up cost to the consumer. The problem I’ve always had, Pat, with antitrust against Apple is that people do like Apple. The users like Apple. And so, while there is anti-competitive behavior, it is consumer harm driving up prices. What it doesn’t do is actually often discourage people from wanting to use the platform, because people that use iOS every day mostly for the messaging, which by the way another sort of anti-competitive thing they’ve done with not allowing messaging to be easy between different platforms. Well, the people like it. And so, that tends to put Apple in a good light.

Having said that, all this Pat, Apple’s a disaster right now, I really do. I was going to tweet something earlier, dude. I was like, remember Vision Pro? What happened to that? Is it over already? I haven’t seen anybody driving around town with a Vision Pro, but I do still see Cybertrucks, so I think Elon’s going to be okay.

Author Information

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.

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