Justice Department Wants To Take Its Bite Out Of Apple
from the the-doj-wants-its-super-apps dept
Over the course of the last few years, it feels like the FTC & DOJ have slowly started getting better at figuring out how to craft a better antitrust lawsuit. The earliest attempts were often beyond silly, but the more recent cases (while far from perfect) have finally started alleging things that seem like potential actual anticompetitive behavior.
The problem, to me, though, is that nearly every one of them overreaches, such that even when they allege things that seem potentially anti-competitive, they burden down the complaint with nonsense. But still, it feels like at least some of the early failures are leading to at least some more careful pleading in more recent cases. Not everyone agrees, though. An analysis by Daniel Crane, based on surveying various antitrust experts, seems to suggest that some of the more recent antitrust cases are on shaky ground (though it sounds like many of the experts think all the big tech antitrust cases are poorly argued).
As you’ve likely heard, the latest is last week’s move by the Justice Department and a bunch of states to sue Apple for a variety of antitrust violations. Depending on who you talk to, the case is “even stronger than imagined” or it’s patently “absurd.”
After spending a few days reading and rereading the complaint, talking to various experts, and thinking about it, I come down somewhere in the middle. There are parts of the complaint that do seem pretty ridiculous. And there are parts that at least raise legitimate concerns. But, even those legitimate concerns may still fail due to the market definition which, in this case, seems… aggressive?
The complaint itself is surprisingly readable for an antitrust complaint. That’s often a sign of a weakness in the underlying antitrust case. The more readable antitrust complaints frequently seem designed to sway the public by telling a good narrative, rather than getting to the heart of the legal issues in court.
The key part that makes this case stronger than others is that it actually shows the real potential for consumer harm, rather than relying on some of these newfangled competition theories that you don’t need to show consumer harm for an antitrust case.
But, still, some of the claims seem overblown. The DOJ’s lead argument is that the lack of super apps seems proof of Apple suppressing competition:
Super apps provide a user with broad functionality in a single app. Super apps can improve smartphone competition by providing a consistent user experience that can be ported across devices. Suppressing super apps harms all smartphone users—including Apple users—by denying them access to high quality experiences and it harms developers by preventing them from innovating and selling products.
The argument here is basically that if so-called “super apps” were allowed, users would let those apps mostly take over everything important on a phone. This would make the hardware layer less important, making it easier to switch from an iPhone to any other phone.
But… what a weird argument. The only major “super app” is WeChat in China. And there really are no super apps in the US. I guarantee that if there was a super app… the DOJ would likely be suing it for anticompetitive behavior. The fact that we don’t have super apps in the US seems like a sign of more healthy competition in the app market, and not proof of anti-competitive behavior by Apple.
It is true that the DOJ has emails from Apple execs fearing the rise of potential super apps, but this still doesn’t make much sense in the context of the larger complaint:
Apple recognizes that super apps with mini programs would threaten its monopoly. As one Apple manager put it, allowing super apps to become “the main gateway where people play games, book a car, make payments, etc.” would “let the barbarians in at the gate.” Why? Because when a super app offers popular mini programs, “iOS stickiness goes down.”
The lack of an anti-competitive app at the app level doesn’t seem like a particularly strong argument for anti-competitive behavior at the hardware/OS level.
The second concern also seems weak, at best. It’s the lack of success of cloud streaming games on iOS devices:
Cloud streaming game apps provide users with a way to play computing intensive games in the cloud. Cloud streaming games (and cloud streaming in general) can improve smartphone competition by decreasing the importance of expensive hardware for accomplishing high compute tasks on a smartphone. Suppressing cloud streaming games harms users by denying them the ability to play high-compute games, and it harms developers by preventing them from selling such games to users.
Once again, this all seems very speculative. People have been predicting big things for cloud gaming for many, many years now, and it’s never really caught on anywhere. And it’s not just because Apple doesn’t like them. Remember, Google had a whole big cloud gaming initiative that fizzled. It’s hard to blame that on Apple’s iOS policies.
From there, though, we get to a few arguments that should at least raise some eyebrows. Some of the decisions seem to have little purpose other than to limit competition and harm end users. I’ve gotten sick of antitrust cases trying to take things that have perfectly legitimate reasons for being done and casting them as being done for anti-competitive reasons, but here there are a few decisions that seem hard to justify by Apple (of course, we still need to hear Apple’s side of the story).
The strongest of these is how Apple has deliberately degraded messaging services. We’ve discussed this somewhat in the context of Apple and Beeper, where Beeper offered a third-party service that would make anyone’s messaging more secure by end-to-end encrypting messages between iMessage users and non-iMessage users. Apple blocked Beeper from doing so, claiming it was necessary for security purposes. But that made little sense.
And here, the DOJ calls out Apple’s behavior:
Messaging apps are apps that allow users to communicate with friends, family, and other contacts. Messaging apps that work equally well across all smartphones can improve competition among smartphones by allowing users to switch phones without changing the way they communicate with friends, family, and others. Apple makes third-party messaging apps on the iPhone worse generally and relative to Apple Messages, Apple’s own messaging app, by prohibiting third-party apps from sending or receiving carrier-based messages. By doing so, Apple is knowingly and deliberately degrading quality, privacy, and security for its users and others who do not have iPhones. Apple also harms developers by artificially constraining the size of their user base.
It seems likely that Apple will claim it does this for security reasons, but those reasons seem flimsy. There are many ways in which Apple could make sure that third-party messaging is more secure, but it chooses not to do so.
Again, here, the DOJ has pretty clear evidence that Apple is making that experience worse at least in part to build lock-in and to avoid competitive pressure.
Apple recognizes that its conduct harms users and makes it more difficult to switch smartphones. For example, in 2013, Apple’s Senior Vice President of Software Engineering explained that supporting cross-platform OTT messaging in Apple Messages “would simply serve to remove [an] obstacle to iPhone families giving their kids Android phones.” In March 2016, Apple’s Senior Vice President of Worldwide Marketing forwarded an email to CEO Tim Cook making the same point: “moving iMessage to Android will hurt us more than help us.”
In 2022, Apple’s CEO Tim Cook was asked whether Apple would fix iPhone-toAndroid messaging. “It’s tough,” the questioner implored Mr. Cook, “not to make it personal but I can’t send my mom certain videos.” Mr. Cook’s response? “Buy your mom an iPhone.”
While many will claim Cook was joking with that last quip, there is a valid point here. The reasons Apple made this decision appear to be not for the benefit of users, but for anti-competitive reasons.
The last two areas are a bit more middle-ground: smartwatches and digital wallets. I don’t think that Apple should need to go out of its way to allow third parties to build tools, but the DOJ again suggests that Apple has deliberately, for anti-competitive reasons, sought to limit access to important functionality. On the smartwatch front, Apple has limited access to certain functionality that the Apple Watch gets access to to guarantee that third party smartwatches can’t compete:
Smartwatches are an expensive accessory that typically must be paired to a smartphone. Smartwatches that can be paired with different smartphones allow users to retain their investment in a smartwatch when switching phones thereby decreasing the literal cost associated with switching from one smartphone to another, among other things. By suppressing key functions of third-party smartwatches—including the ability to respond to notifications and messages and to maintain consistent connections with the iPhone—Apple has denied users access to high performing smartwatches with preferred styling, better user interfaces and services, or better batteries, and it has harmed smartwatch developers by decreasing their ability to innovate and sell products.
And, with digital wallets becoming a key payment system, Apple also appears to be limiting third parties from doing much that is useful:
Digital wallets are an increasingly important way that smartphones are used and are a product in which users develop a great deal of comfort and trust as they typically contain users’ most sensitive information. Digital wallets that work across smartphone platforms allow users to move from one smartphone brand to another with decreased frictions, among other things. Apple has denied users access to digital wallets that would have provided a wide variety of enhanced features and denied digital wallet developers—often banks—the opportunity to provide advanced digital payments services to their own customers.
There may be a stronger “security” argument for that last one, but some of it sure looks like it’s only being done for anti-competitive purposes. For example, blocking anyone else from tapping into the NFC tap-to-pay feature:
Multiple app developers have sought direct NFC access for their payment or wallet apps. Yet Apple prohibits these developers from incorporating tap-to-pay functionality in their apps for fear that doing so would “be one way to disable [A]pple [P]ay trivially,” leading to the “proliferation of other payment apps” that might operate cross-platform and ultimately undermine Apple’s smartphone monopoly.
There is no technical limitation on providing NFC access to developers seeking to offer third-party wallets. For example, Apple allows merchants to use the iPhone’s NFC antenna to accept tap-to-pay payments from consumers. Apple also acknowledges it is technically feasible to enable an iPhone user to set another app (e.g., a bank’s app) as the default payment app, and Apple intends to allow this functionality in Europe.
So, in the end, this case strikes me as having some good parts and some questionable parts.
In every antitrust case, the big question is going to be about market definition. Because if Apple doesn’t have a dominant position in whatever market is accepted, then it’s pretty much free to do those anti-competitive things, and if people don’t like it, they should vote with their feet. The DOJ will claim, of course, that many of the decisions above were designed to block the ability to vote with their feet, and I’m sure Apple will insist that the market should be as widely construed as possible and… that could work? Perhaps they can convince a judge (or eventually a jury) that the iPhone isn’t necessarily as dominant as it might otherwise seem. In an era where we’re seeing more and more devices come on the market, some of which you could argue compete with smartphones in new and novel ways, perhaps the market is that broad.
All that is to say, we’ve seen some pretty ridiculous antitrust cases over the last few years. This one, though, seems more on the serious side of the ledger — but with some holes that Apple will look to push back on. Still, this case isn’t a slam dunk either way, and I think Apple has a real fight on its hands.
Filed Under: anti-competitive behavior, antitrust, competition, digital wallets, doj, messaging, messaging apps, smart watches, super apps
Companies: apple
Comments on “Justice Department Wants To Take Its Bite Out Of Apple”
This applies somewhat to the DOJ antitrust case, but probably more so to the EU’s recent positions:
An apocryphal tale:
I built a security company that sells product to protect homes and businesses. My company developed all of the products that we sell and service to ensure that all work together seamlessly and securely.
These products are so secure, that properties protected by my company’s systems have significantly fewer break-ins and thefts than properties protected by any other security system.
This success has made my business the leader in the security industry, by far, and as a result, my company now controls most of the market for security systems.
Other companies are now complaining that we do not allow their products to work with our systems. They want to sell key fobs, keypads, sensors, and such that will work with our system. They do not want to pay any fee to us for this and they do not want us to have the authority to vet any of their products.
Regulators believe that it’s in the best interest of consumers to force us to allow other company’s products to work with our systems and that it would be anti-competitive to grant us any oversight of those products. They believe that the lower-cost of these competing products would provide a great benefit to consumers
Flash forward two years…
Criminals have found that certain third-party devices transmit codes without encryption or with minimal encryption. These criminals have developed equipment to intercept the transmissions from these low-security devices. Now, they are using that information to circumvent our security systems.
As a result, the efficacy of our security systems is declining, because there are more break-ins at properties protected by our systems. The percentage of break-ins on properties that use our tools exclusively has not increased (in fact, it’s dropped) but it has increased dramatically at properties using certain third-party devices.
That has affected the public perception of the quality of our systems. Reports show an overall increase in the number of times our systems have been circumvented. Our stock has been dropping because we “are not the company we used to be,” and “their products are no better than the cheaper systems any longer.”
The fault lies not with our products, but with the fact that we were forced to open our systems to less secure products. Public perception and corporate value is based on an overall view, and since we cannot control or stop the effect of these third-party products, our own company’s value is in decline and we are losing market share.
Yes, other companies have gained market share and have increased profits, but all of this is at the expense of the consumers who purchased a security system that was made less secure by regulators. They saved money on the purchase, but their theft losses need to be counted against their savings, and life overall, for them is less secure than it used to be or should be.
Re:
That sucks. Apple however is in a different situation.
To make your situation similar you would need to been open to third parties originally, and then locked them out of certain features so that only your products are fully secure.
Because that’s what Apple does. It is the platform, the rule enforcement for the platform, an app developer for the platform, and an accessory maker for the platform. They compete with unfair advantages directly with developers and manufacturers.
Re: Re: Doesn't matter
It doesn’t matter. If you don’t like it you have the option of hundreds of other phones that run android. Apple isn’t even close to a monopoly. They don’t stop anyone from using a product that does what they want it to do.
Re:
It’s good to have a detailed example, but that’s a bad example. Nobody’s talking about forcing Apple to open anything or to significantly help the competitors; Apple are only in this situation because they’ve been actively blocking competition. For example, postmarketOS has been ported to some old iPhones, but it’s just an experiment; they can’t practically support iPhones, particularly the newer ones, because Apple systems are hardware-locked to prevent competing software.
There’s also no suggestion that anyone be forced to reduce security. Your hypothetical keyfob system would simply reject any unencrypted/unsigned messages sent by competing systems. But if the competitor reverse-engineered your security system and implemented it properly, it would work without being any less secure, and you shouldn’t be able to use copyright law to block it.
Re: Re:
Of course, neither has he provided a detailed example. He lacks a lot of details that would be neccisary to understand the failures. It appears his first party devices were susceptable to attacks from unencrypted communications, suggesting his security was largely in his encryption. To the point that once the communications protocol was reverse engineered from third parties leaking communications data (I would have assumed they just apply to be a dev to get that data, rather than sniff unencrypted data), the encryption keys and encrypted data streams were worthless.
Could OP have protected the product better? IDK. Its not clear what the product was, what was being transmitted by third parties, or how that exposed the security in a way licensing the security protocols wouldn’t.
But by the same token, by not understanding what OP was forced to share, and the timeframe and scale of OP’s downfall, and the types of breaches at play, we can’t even begin to assess the actions of the legislator or regulator.
Re: Re: Re:
I should point out that at the top is the legend “apocryphal tale”. That is, the story is a simile, not a literal “this happened” thing.
I’ll also point out a few things:
This is a complaint against interoperability requirements.
It is also a strawman, implying that “our company” would be disallowed from reviewing interoperable products and publicizing the results.
Restating the previous argument.
Public perception and corporate value are not things that are guaranteed by law. And both can be affected by PR, of which product evaluations could be a part.
Eh, no.
* consumers who stuck with in-house elements were unaffected by regulators.
* consumers who used third party elements did so at their own risk. Regulators did not make choices for them.
* … and in some cases, those third party elements will have revealed security flaws in the original product.
The ‘story’ above is, in addition to any relevance to the blog post, an argument against right-to-repair, with all the flaws of said arguments.
I am unmoved.
Re:
Anecdotes aren’t rules.
Of course Apple v Epic took a good look at whether Apple is a monopoly and said no. The Appeal Court affirmed and the Supreme Court left that in place. It seems unlikely courts will come to a different conclusion so soon after, especially as Apple’s team must know the arguments and evidence that won that case very well.
But there’s a particular aspect to this case that should make it even harder for the US government to win. Around the world Apple faces competition from three main brands, Samsung, Xiaomi and Huawei. But in the US the latter two hardly feature due to US sanctions. Some of these were ended by Biden but the damage was done.
The conditions that let Apple dominate the US market were created by the US government. It seems incredible that having created these conditions, the government now thinks it right to blame Apple for them. I look forward to government lawyers explaining how this is fair or reasonable in court.
Re:
That was a jury trial that was decided by a jury. Juries are well known for A, deciding on their feelings rather than a rational application of the law, and B, never being the same jury twice leading to highly inconsistent results of what evidence is necessary to reach certain factual conclusions. You appear more used to rulings on questions of law. The appellate court will not in general review the factual findings of the jury. But those jury findings aren’t binding on the next jury that looks at different evidence.
Re: Re:
It wasn’t a jury trial; it was before a single judge, Yvonne Gonzalez Rogers, and then a three judge panel at the Ninth Circuit. This means there’s a good clear record not only of the decisions but the reasoning, something that’s generally not available in a jury trial.
Epic v Google was a jury trial and had a very different outcome. That though has yet to work its way through appeals so the record is particularly lacking. It’s less relevant to this, as neither Epic or Google are party to this. It could play a part though as it works its way through appeals. In particular if Epic’s Apple and Google cases end up even after appeals with very different outcomes the Supreme Court might feel obliged to step in.
Re: Re: Re:
good correction. I’m not sure I internalized that detail. I’ll retract my commentary as undeveloped.
You mean the original competition theories that were done away with thanks to Robert Bork and Reagan introducing the consumer harm theory that has drastically weakened antitrust over the decades?
Xbox’s XCloud and Nvidia’s GeForce Now have been going for a while now. Apple stopped Microsoft from making an XCloud game streaming app on iOS for bogus reasons a few years back. GeForce Now seems to not have an iOS app, likely for the same reason.
They only changed this back in January of this year. Presumably to make themselves look good in front of antitrust authorities.
Re: Strawman
Game streaming apps are now allowed in the app store and Xbox has said they aren’t going to make an app so it shows the lie to all their complaining in the past.
Re: Re:
You could also argue that Apple’s longtime refusal chilled MS’s enthusiasm in terms of putting an Xcloud app on iOS. Yes Apple did lift its ban on game streaming apps but the damage has already been done.
I am fascinated by the irony that the same DoJ that accuses Apple of promoting terror/CSAM/whatever because of end-to-end encryption in iMessage…
…is now saying that blocking third-parties from participating in that same end-to-end encrypted iMessage is harming consumers.
Euh. They really don’t have better antitrust actions?
Not a monopoly
All of the DOJ’s accusations are completely moot because they only apply to a monopoly and you can’t be a monopoly with only 58% marketshare.
iPhones have < 30% of the market
How is that now a monopoly?
How is it that letting others use Apple’s tech for free is the desired outcome?
Apple might still have the highest profit in that market. My favorite year was when Samsung posted a loss because of battery-gate; Apple’s % that year, was 104% of the profit. Perfection.
People pay more for Apple products. Always have. Paying those prices for wannabe AppleCorps, nobody does that. Nobody will. Because they aren’t as good a product as iPhone.
Jailbreaking your phone furnyour own personal use does not break the dnca because it is not fir “private financial gain”
Just like the requirement that north korea has that you use one of their sim cards does not break the dmca if you have to crack the code to unlock your phone to use it
When the online radio station broadcast a figure skatinh event there 10 years ago, unlocking my phone to use their sim card did not break the dmca as as I was doing it for my own use and was not doing it to make money.
So if the travel ban is ever lifted and Americans can go there, breaking to electronic locks to use thheur sim card does not break the dmca
Also, when you go to North Korea if the travel ban is lifted you and subject to their laws and the dmca has no jurisdiction in the dprk
Re:
Ah, yes, your plan to avoid American prosecution is to hide behind the DPRK. My guy… you keep posting these plans, but I strongly suspect that you haven’t truly thought any of this through.
The Orwellians intrusions into Our lives, and taking over, or trying to take over every aspect of society, governance, commerce, science, agriculture, energy production. health, thoughts, biometrics, biological functions, dna, rna, creativity, business, home appliances, thermostats, energy use, abd driving is suffocating everyone else.
I am sick of it. The tech comanies are worse than monopolies, they are the most evil tyrants that have ever lived.
The most evil criminalsin world history shoukd not get to be the richest and most poerful people in world history too.
We would be better off if they were all in federal penitentiaries. They are psychopaths. They keep proving it.
I am sick of being their victim!
Re:
Just wait until you hear about this newfangled program from the NSA.
The feds won’t save you. The feds are the reason you have the tech companies.
Re: Re:
I hate the feds too. I hate the entire government and the entire system and the entire surveillance state. They are all serial criminal psychopaths and terrorists. What’s not to hate about them?
Re: Re:
It is more of a coup de’tat t than a monopoly, and that goes for the other tech companies too!
I forgot to include communications and entertainment in their take over of society.
Oh, and finance too with cryptocurrencies, cbdc, and digital wallets, and tNASA. It is total insanity. It is not as though they replaced something terrible with something better. They replaced something excellent, with something totally evil. They replaced the constitution with the surveillance state. It is not working for anyone except them, and to the detriment of everyone but them.
George Herbert Walker Bush was the greatest president in my lifetime. I miss the country that America was when he was president.
When non-experts climb Mt. Stupid
No. No, no, no, no.
A well-designed app doesn’t have “broad functionality”. You don’t want your social media app to also do your banking and stream your music. You want your social media app to do social media, and do it well. Your banking app does banking. And your music streaming app does the streaming.
I’ve lost count of how many clients I’ve had to steer into a narrow, well-defined scope, or that I’ve rejected because they insisted their ‘everything’ app had to have way too much functionality. (I have yet to see any of those rejects make it to market and last more than a year)
Re:
Face it, anyone selling tech project is not an expert in technology, because they are all lemons that violate lemon laws, risking personal, corporate, national, and international security. What kind of expert would invite a headache like tgat into their lives permanently?
Re: Re:
it was product, a hacker changed it to project.
Too late. That piece missing from the apple in the logo? That’s the bite Android took when it launched on the market.
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Face reality techies! Your products suck and so do you! They should have named Apple Lemon! Any product that is tnat easily breaced by hackers is a lemonthatshould not be on the market, nd Apple is actually the most secure on the market! They are all lemons!
Re:
Jibberish. Are you paid to post this shit?
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You should be extremely afrain techies! You sold Lemon products to everyone, including local, county, state, and the federal government. Do you know what they can do to you for that techies? The government has prosecuted school kids for selling lemonade without a license because they are tough on crime. What the fuck were you thinking techies?!
Re:
OMG, hackes stole my . Absolutely nothing to do with that two-yea-old business between ocksta and emedy or my own shitty spelling.
Did an Elon Musk stan contribute to this complaint?