Is Apple a monopoly?

Is Apple a monopoly?
Is Apple a monopoly?

Published on May 9, 2024


Antitrust proceedings are being initiated against the technology giant in the name of consumer protection. But innovation could well be the real victim in this affair.

We all know that person who always seems to have the latest Apple gadget. In many ways, Apple products have become a status symbol. While there is a dedicated and loyal group of Apple fans who believe there are no other options, and those who view these products as a signal to the world that they are superior, most us take a range of factors into account when deciding which product to buy or which streaming service to choose. Apple is certainly a top brand, but is it a monopoly?

Read the original Acton Institute article here.

On March 21, 2024, the Department of Justice and the attorneys general of sixteen states announced antitrust proceedings against Apple for allegedly monopolizing the smartphone market. It’s just the latest in a series of antitrust actions against major U.S. tech companies that have been painted as nefarious by progressive and conservative policymakers in recent years. But this latest case illustrates just how wrong regulators are in their misguided attempts to “break up big tech companies.” » If these antitrust actions are successful, they could not only change the way we experience innovation and technologies such as social media and smartphones, but also set precedents for greater state intervention in many markets competitive, and distract from what consumers really want, which government agencies claim to protect.

One of the big problems with the DoJ case is that in order to make Apple appear to be a monopoly, it has to create a definition of a market that doesn’t actually exist. Apple has less than 30% of the global smartphone market and just over 60% of the market in the United States. In an attempt to demonstrate greater dominance, the DoJ has defined the market as consisting solely of “luxury” smartphones, but consumers are reluctant to make such distinctions, and prefer to consider many different aspects of a product.

People’s reasons for choosing a specific smartphone vary, and they place different values ​​on different features. Some seek specific security or privacy features; others are interested in the quality of the camera or the availability of certain applications; still others look for certain processing functions or certain loading types. One of the main problems with the government’s argument is that it assumes that all consumers place the same value on the same features.

The most striking example is the government’s claim that Apple products create a social stigma for green bubbles. The idea that the “social stigma” of the type of message sent is a market failure requiring government intervention seems absurd at first glance, but it becomes even more ridiculous upon closer examination. For example, for those looking for group texts with a mix of Android and Apple devices, there are a range of other popular messaging apps, including WhatsApp, Signal and Telegram.

We can therefore wonder what would happen if the government achieved its goals. Many features that make Apple products unique would no longer be acceptable, including the security of a closed ecosystem that the brand has used to distinguish itself and gain consumer trust. It’s very likely that an iPhone would be less user-friendly right out of the box, and that all smartphones would become even more similar, with less potential for innovation or distinction. The government, not innovators or consumers, would decide the trade-offs between features.

This example once again illustrates the crucial importance of the consumer well-being criterion in matters of cartels and abuse of dominant position. This standard provides objective economic analysis that focuses on what antitrust law was designed to do: ensuring that consumers benefit from true free market competition.

Competition will always harm rival competitors who may make different choices or find that consumers overlook their products. Likewise, businesses often have disagreements with each other when they interact, and this is the same in the online space and smartphone space as it is in more traditional offline spaces. We would accept that Walmart and Target set the rules for what and how they sell it, and if a supplier disagreed, there would be a negotiation, or they would choose another store to sell their products. We might also find the amount of rent a mall charges a particular store frustrating, or even distasteful, but we would not think that requires strong government intervention in antitrust matters. . In many cases, issues like proper pricing and selection of apps in Apple’s App Store are similar. There are better tools for dealing with business-to-business issues, such as contract law.

When it comes to antitrust, the real question should be whether a company succeeds because it provides a product that consumers want, or because it uses anticompetitive practices that manipulate a market and harm consumers.

We should applaud companies that create innovative products to serve consumers, even if they are considered monopolies for a while. Often these “monopolies” are short-lived as rivals find ways to provide similar or even better products and services. Just two decades ago, antitrust concerns in tech focused on companies like MySpace, Yahoo, and AOL. Ultimately, it was innovation that proved to be the best competition policy, not government intervention.

Unfortunately, today’s regulators appear to have returned to a “big bad” mentality that could harm consumers by fundamentally changing the products they value. The Apple case just adds to a growing list of examples of this mentality, both from the DoJ and the Federal Trade Commission.

Consumers choose Apple products not because they have no choice, but for a variety of reasons. Like Coke drinkers or Starbucks loyalists, Apple fans generally believe their products are superior and will choose them even if it means sacrificing other features than some, like Pepsi drinkers or Dunkin’ loyalists. ‘, might prefer. But, as with smartphones, our choice often comes down to the subjective value a consumer can perceive. If the government were to dictate these options through antitrust action in a competitive market, the result would be a decrease in competition and innovation, not an increase.



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