The DOJ antitrust lawsuit against Apple completes the set of lawsuits against big tech companies that have sparked so much anger from authorities. These include the DOJ’s ongoing lawsuits against Google and the FTC’s lawsuits against Amazon and Meta.
While antitrust officials in the Biden administration initially signaled that their enforcement goals included a concern for political power and harm to democracy, harm to workers and small businesses, justiceAnd inequalityTheir white whale lawsuits against tech companies largely complain about harm to consumers. In particular, that of Lina Khan career catalyst note in the Yale Law Journal, antitrust’s focus on higher prices was outdated in a world in which companies like Amazon harm competition through low-price strategies. THE complaint that Khan’s FTC has now filed against the company argues that Amazon harms competition through business practices that raise prices and harm consumers, which is largely consistent with recent enforcement doctrine.
In Apple’s case, it will be interesting to see if the DOJ can convincingly demonstrate that there is harm to consumers rather than just harm to competitors. This is a difficult tension to overcome when bringing a “monopolization” case under Section 2 of the Sherman Act. Section 1 covers collusive agreements and conspiracies to restrain trade, such as price fixing and dividing markets. This involves multilateral decisions, that is, behaviors involving more than one individual or company. However, the prohibition on monopolization set out in Article 2 implies that a single company can be prosecuted for unilaterally and illegally protecting its monopoly power.
As this suggests, it must be established that a company has market power before it can be determined that it has illegally protected that power. However, in a world of open competition, maintaining margins and market shares represents a considerable effort for companies. Anything a company does to compete – to gain market share and rise above its competitors – could be interpreted as an attempt to monopolize an industry, especially if the company is successful. The DOJ must explain how Apple’s practices posed an antitrust problem. To succeed in courtit will likely be necessary to demonstrate harm caused specifically to consumers, not just harm caused to competitors.
The DOJ complaint argues that Apple effectively has market power in two relevant markets, which they describe as the “performance smartphone” market (a category they designed that excludes non-high-end “entry-level” smartphones). range and lower quality), and the broader market for smartphones in general in the United States. It claims that Apple abuses its market power to disadvantage competitors and degrade quality for users outside its network. “closed garden” ecosystem.
The complaint claims that Apple achieves this through five major abusive practices: (1) it has discouraged the development of “super apps” that are written in programs that can be used on all platforms and therefore accessible by anyone. which user, regardless of the type of phone they have; (2) it removed cloud gaming applications that reduced reliance on its own hardware; (3) it deliberately degrades the quality of messaging between iPhone and other smartphone users to discourage iPhone users from leaving the ecosystem and encourage others to join; (4) it does not allow non-Apple smartwatches to interact with its ecosystem; and (5) it does not give external digital wallet app developers access to a key entry they would need to compete with Apple Pay through the App Store.
If Apple can argue that these business practices were instituted in the interest of consumers, it could be difficult for the government to convince the court that these practices are illegal. The third claim is perhaps the most difficult to defend, and one that smartphone users are increasingly wary of. An additional problem is that the group of “consumers” alleged to have been harmed in an antitrust case has sometimes varied throughout the era of the consumer welfare standard, as former division economist Greg Werden notes. DOJ Antitrust. in this podcast conversation. For example, is the relevant group of consumers iPhone users or all American smartphone users?
A editorial in the Wall Street Journal Published the same day, the case launched claims that although most apps in Apple’s App Store are free, the number of paying developers using the store increased by 374%, to 5.2 million. over the last decade. The company also claimed that global commerce facilitated by the store grew from $685 billion to $1.1 trillion, or 64%, during the years 2020-2022. If these figures are true, it could be difficult for the government to convince the court that consumers were harmed by a traditionally monopolistic method of raising prices and decreasing production.
The outcome of this and other major cases will show whether we are moving toward a policy of “competitor welfare” rather than a policy of consumer welfare. This would more closely resemble the European Union’s competition policy system, an example that many modern antitrust advocates I hope the USA will follow. In the EU, many other investigations into unilateral behavior are opened, usually at the instigation of the defendant’s rivals or the companies with which it deals. A relevant example is the recent 1.8 billion euros fine imposed on Apple by the European Commission following an investigation opened after an initial Spotify complaint.
A section of the literature on the economics of industrial organization in the second half of the 20th century explored how antitrust law could be used by businesses to gain an advantage over their competitors, i.e. subvert competition rather than protecting him. During this period, the consumer welfare standard became the mainstay of antitrust enforcement, paralleling the “end of history” where liberal, open markets and democracy were seen as the new hegemony.
However, antitrust has not been immune to the rise of populism in recent times, as demonstrated by the zeal of Biden administration officials to target consolidation (“big is bad”). However, it appears that their arguments against big tech, contrary to what they have previously stated, are attempting to argue for harm to consumers and innovation. It remains to be seen whether they will succeed in arguing their case in court.
Giorgio Castiglia is the Program Manager of the Competition Project at the Mercatus Center and a doctoral student in economics at George Mason University.
