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Technology Stocks : Apple Tankwatch
AAPL 230.62+1.3%Jul 12 3:59 PM EDT

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From: Jon Koplik2/27/2024 12:51:07 AM
   of 32570
WSJ Opinion / William Barr / Siri, Does Apple Violate Antitrust Law ? .............................


Feb. 26, 2024

Siri, Does Apple Violate Antitrust Law ?

The Justice Department reportedly plans a major lawsuit against the firm -- with good reason.

By William P. Barr

Politicians in both parties broadly agree that a handful of tech companies hold too much power. As attorney general in 2019, I launched an antitrust review of the problem. The Justice Department filed suit the following year against Google for monopolizing internet search and search advertising. Under Attorney General Merrick Garland the department has pressed forward with the Google case and the Big Tech review and is now reportedly preparing to file a major antitrust suit against Apple. This is a good development.

Big Tech firms like Apple require rigorous antitrust scrutiny. Today, virtually all aspects of life -- finance, commerce, entertainment, social relations, news and public discourse -- are conducted over a handful of digital platforms. Giant tech companies have the power to snuff out challenges to their dominance; collect mountains of customers’ personal data, which they can exploit to manipulate users’ decisions and beliefs; and control what we hear and read. This overwhelming economic and social power is antithetical to the founding principles of our democratic republic.

While antitrust enforcement under President Biden, particularly at the Federal Trade Commission, has gone too far, the Justice Department’s concerns about Apple are justified. Keeping markets free requires confronting anti-competitive abuses. For many years, competitors have credibly complained that Apple has used its dominant market position and heavy-handed tactics to cripple competition.

More than half of the mobile devices in the U.S. are Apple devices using its proprietary iOS operating system. Apple has made its App Store the only way for software developers to reach this vast market, and it uses technical and contractual restrictions to box out competitors. Apple does this in two ways: by prohibiting iOS users from downloading software from any other source, and by making developers agree not to distribute their apps through any other store as a condition of getting access to the tools necessary to make iOS-compatible apps.

A significant part of Apple’s business now is distributing other companies’ applications to iOS users. The App Store’s dominance allows Apple to take up to a 30% cut on sales of paid apps, demand the same fee for subsequent “in-app” purchases, and insist that developers not communicate with customers about less expensive ways to download their apps. This arrangement limits competition and raises prices. With surging sales of more than $89 billion in 2023, the App Store by itself would rank in the Fortune 100.

Apple allegedly uses its control over iOS and the App Store to impose technical limitations on competing apps that impair their performance. A 2020 House Judiciary Committee investigation cited Apple’s treatment of Tile Inc., a company that makes hardware and software enabling users to track lost items. Tile told the committee that in 2019 Apple made changes to iOS 13 that increased the difficulty of using the Tile app and devices, while at the same time rolling out and pre-installing its own competing Find My app.

Another example of Apple’s anti-competitive behavior is how it gives preference to Apple Pay over other mobile payment services. Apple installs within its iPhones near field communication chips, or NFCs, so the devices themselves can complete tap-to-pay transactions. The European Union has challenged Apple for allegedly handicapping rivals by denying the same NFC access to competing mobile payment services.

Apple has also long pursued a strategy of weaving together an integrated ecosystem of easily inter-operable products and services. That is unobjectionable, but when the company moves into a new product market -- such as smartwatches or smart homes -- the regulators’ concern is that Apple makes hardware and software choices that optimize the inter-operability of its own new-market devices with Apple’s ecosystem, while degrading the inter-operability of incumbent devices. The Justice Department has reportedly been studying why iPhones work better with Apple smartwatches than with other smartwatches.

Smartwatches illustrate how impairing inter-operability can harm competition. Apple smartwatches, standing alone, would have no obvious competitive advantage over those made by Garmin. But if Garmin watches don’t work as smoothly with the ever-present iPhone, Apple’s product would gain an advantage. In essence, Apple would be using its power in the smartphone market as leverage to capture a new market with a less compelling product.

Nor is the inter-operability issue confined to rival devices. Two months ago, Apple blocked an Android message application, Beeper Mini, which allowed Android phones to exchange secure and encrypted messages using Apple’s iPhone-only iMessage service.

There is little question that Apple incorporates some hardware and software design choices that make it difficult for customers to leave the system and harder still for rivals to compete with any part of it. Apple typically claims that any anti-competitive effects are justified to protect the security and privacy of its ecosystem. But there is reason to think this security-privacy mantra is frequently used as a pretext when the real purpose is hobbling competitors.

In 2018, after launching its own parental-control application, Screen Time, Apple purged similar third-party apps from its App Store. Internal Apple communications proposed advancing the “narrative” that this was done for privacy reasons. According to a House report, when the Justice Department announced it was investigating the matter, Apple started reinstating the apps and found less-restrictive ways of satisfying supposed privacy concerns.

Apple uses an arsenal of tactics whose anticompetitive effects, taken individually, may operate subtly but, taken cumulatively, work powerfully to suppress competition. To make headway, a Justice Department challenge must address these tactics comprehensively and force Apple to demonstrate that the handicaps it inflicts on rivals are essential to achieving legitimate security and privacy requirements. The burden should be on Apple to prove that less restrictive alternatives don’t exist.

Mr. Barr is a co-founder of Torridon Law PLLC, a distinguished fellow at the Hudson Institute and author of the memoir “One Damn Thing After Another.” He served as U.S. attorney general, 1991-93 and 2019-20.

Copyright © 2024 Dow Jones & Company, Inc.

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