10 Things you should know about Apple and antitrust
Apple's reported problems with the Feds -- possible investigation by the Federal Trade Commission, US Justice Department, or both -- needs a primer. So I've prepared a list of 10 Things you should know about Apple and also US antitrust law. Should the FTC launch the investigation, as explained in #7, Apple's short-term risk would be greater but some kind of amicably resolution more likely. I would do another list then.
Then there is #9, where I for the first time express my feelings about the US government's antitrust case against Microsoft and what that should realistically mean for Apple. With that introduction, here are the 10 things, presented in order of informational value rather than importance:
1. Apple has a definable monopoly. Actually there are two: Portable music players and mobile applications. Apple does not yet have a monopoly in smartphones and may never obtain one.
2. Apple legally acquired its monopolies. The government already ruled that Microsoft has a monopoly, and there is evidence enough that Google has one, too. Both monopolies were legally acquired, meaning no anticompetitive means were used. Apple is similar. There is no discernable, prior anticompetitive tactics behind Apple's monopolies. The company simply competed better. So what, is success illegal now?
3. Monopolies aren't illegal in the United States. Contrary to public perception, monopolies are legal entities. Antitrust law merely seeks to prevent abuse of monopoly power, particularly collusion and price fixing.
4. To win an antitrust action, the government must show consumer harm. The government must decisively demonstrate that the monopoly's actions harm consumers. That can be fairly straightforward, yet still hard to prove, when monopolies collude to fix prices. Price fixing harms consumers because they don't receive the benefits of competition; they may more. How exactly has Apple's tough developer rules, which favor its own tools, harm consumers?
5. One competitor's complaint does not an antitrust case make. OK, so maybe Adobe went crying to the Feds. US antitrust law doesn't favor competitors but consumers, unlike Europe where competitor complains carry much more weight. The Feds may investigate, but that's a long way from filing against Apple.
6. The rules apply differently to monopolies. As Microsoft learned during its US antitrust case, dominance leads to scrutiny. US antitrust law gives the Justice Department the power to apply different rules to monopolies than other companies -- the presumption being that size, dominance and influence can diminish competition, leading to consumer harm. I watched Microsoft cofounder Bill Gates testify for three days. At one point he asked the judge to give the company clear rules it could follow.
7. Application of different rules can be arbitrary. That's where which agency, the Federal Trade Commission or Department of Justice, is important. The FTC would have more leeway in charging Apple with anticompetitive behavior than the Justice Department would bringing a broad antitrust action. Adobe can claim harm, but Flash is arguably a monopoly product, too. So, what, the Feds are going to slap one monopoly to protect another? Where's the consumer benefit in that? Apple could modify rules that would benefit smaller developers and possibly skirt around or settle any FTC action.
8. Competition is more effective restraint than government oversight. Microsoft lawyers argued ad nauseum about there being competition, which the Justice Department, accompanying state attorneys general and US District Judge Thomas Penfield Jackson didn't believe. But Microsoft was right. Look at resurgent Apple, Google or computing's shifting relevance from Intel-based PCs (where Microsoft has a monopoly) to smartphones and other mobile devices (where Microsoft has limited influence). The technology market remains hugely competitive, regardless of Microsoft's monopoly or some competitor's.
9. The government should never have prosecuted Microsoft, which is reason enough to let Apple go. I've covered Microsoft's antitrust problems since 1997 but never once publicly expressed what I felt about the case. Because of the many kick-Microsoft-kick-in-ass stories I wrote, many people may presume that I supported the government's case. I wrote those stories, because that's where the reporting led me. I set aside my opinions. But I'll say today that US trustbusters were wrong to prosecute Microsoft, and Microsoft executives were stupid for not making the kind of concessions that could have prevented legal action. Additionally, during the 1997 case, Microsoft lawyers repeatedly antagonized the judge. Different courtroom manner, some Microsoft executive humility, different legal team and even another judge likely would have led to a different outcome.
While there are some similarities between Apple today and Microsoft yesteryear, any Apple antitrust case would be measurably weaker than Microsoft's. Apple's applications monopoly is relatively new. Considering Android Marketplace gains and and Nokia's new Ovi App Wizard, it's conceivable that competition may offer developers plenty of other choices for their applications. Nokia is the global handset market share leader, while Android is growing faster than iPhone. There simply is no sense to any action against Apple when competition can do more -- and faster -- than litigation.
10. Robert Reich is right. I'm a big fan of Reich's blog, which yesterday featured post: "Apple isn't the Problem. Wall Street Big Banks are the Problem." He writes:
Apple's supposed sin was to tell software developers that if they want to make apps for iPhones and iPads they have to use Apple programming tools...On the other hand, the four largest U.S. financial institutions are so big and the rest of the economy so dependent on them that if one of them makes a bad decision it can take us all down...So why is the FTC nosing around Apple and not around Wall Street?
The University of California professor concludes: "Hands off Apple. But cut the big banks down to size." Would cutting Apple down to size really benefit Adobe and other developers? I leave that question for you to answer in comments.