US Anti-trust law, price fixing and app stores

Question

This question clarifies that apple doesn't have a large enough share of the smartphone market to be considered a monopoly. The argument being that because they are not a monopoly they can bundle their apps and not be in violation of US anti-trust law.

Looking at the issue from a slightly different angle, couldn't it be argued that Apple conspired to raise and fix the price for apps and certain services to favor their own platform. For example they were found liable for this behavior in this case. Even though Apple clearly didn't have 90+% of the eBook market.

What if my app developer wanted to use Amazon as a payment processor and not Apple? How is it legal for Apple to restrict products & services in such a manner?

Answer 1

Prosecutors could just be exercising their prosecutorial discretion, but if they thought that Apple was acting in violation of anti-trust law, I believe they would prosecute. They've done it before (the eBook case).

This is purely an opinion, as this case hasn't been tested in court, so there is no case law to cite for you, but I believe the facts in the Mircrosoft case can be distinguished from the facts in Apple's case because Apple doesn't have a monopoly on the smartphone market. Over the past few years, Apple has had between 15 and 20 percent of the smart phone market by unit:

Contrast that with Microsoft's 90%+ market share in the 1990s.

Since Apple does not have a monopoly, it is not taking advantage of a monopoly when it forces particular default app choices on you.

In U.S. v. Apple (the eBook case), the anti-trust behaviour didn't involve only Apple, but also Hachette, Harper Collins, Macmillan, Penguin, and Simon and Schuster (who, taken together, had 48% of the eBook market as of Q1 2010). Thus, this is distinguished by the type of behaviour that happened and the magnitude of the market controlled by the defendants. Price fixing amongst ostensibly competing publishers that will sell on Apple's platform is drastically different behaviour than what you are asking about in your question.

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^{I don't believe that Apple actually price-fixes any of the apps sold in the store. App publishers are free to choose a price from a large variety of tiers.}

Answer 2

First, regarding the ebook thing. Apple was the only one selling ebooks, the other parties involved (the publishing companys) were colluding with Apple to artificially increase the price. They did this by forming what is known in economics as a Cartel which is illegal under Section 1 of the Sherman Anti-Trust Act.

Now, Apple's restrictions on their products is perfectly legal and protected by under intellectual property law. If you don't like it don't buy Apple or make an iOS app. The simple fact that it is possible to find and purchase alternatives easily is enough to say its not a Monopoly. It is really that simple and not the same situation at all. In fact, it is precisely the opposite.

What Apple is, at least where the app store is concerned, is a Monopsony which, is an economic environment where there is one buyer and many sellers. In this case Apple is only the buyer of ios apps and developers are the app sellers. Another example of a monopsony is major league sports franchises. When these franchises collude they form a cartel and can set the price of talent at whatever they see fit, which is why players formed associations (to similarly protect their interests). Because monopsony are so rare, Sherman Anti-Trust Laws don't explicitly forbid them from occurring. One could argue in fact that intellectual property law legalizes monopsonies to a certain degree. Never the less it is a companys' right to control the way their product is used by consumers as long as other comparable substitute products are available. And the only way to stop Apple from restricting things like payment processing would be to form a large enough group of iOS app developers that if they walked away iOS apps would suffer a great deal, and bargain with apple as cohesive unit.

On last thing, if I were Apple and you asked me your question I would answer with a question of my own, is it not better for Apple to do all of its own payment processing? If you have a problem with customer payment information, download issues,..., you call one number. They don't say, "oh were sorry but you will need to call our third party payment processer to discuss these matters." At which point you are put on hold for the next 6 hours. Just food for thought.