Apple’s closed world draws new fire

A wide range of Apple practices that flew under the radar when the company was an underdog are coming under new scrutiny today.

big picture: Apple’s long history as a second enigma — first for IBM, then Microsoft — earned it the freedom to set its own rules, even though it built a much more controlled ecosystem than its rivals. But now it’s the most valuable and arguably most powerful tech company in the world.

Running news:

  • On Monday, the European Union informed Apple that it had reached a preliminary finding that Apple violated its antitrust laws by limiting the iPhone’s touchless instant payment system to support only Apple’s service. Online payments rival PayPal helped fuel the complaint, Bloomberg reported on Monday.
  • Europe’s Digital Markets Act, meanwhile, will force Apple to allow users to download iPhone apps through third-party platforms and allow developers to offer their own payment systems.
  • The investigation is not limited to Europe. In South Korea, a relatively new law is forcing Apple to allow a rival payment mechanism. Apple’s conduct will be further limited under multiple antitrust bills being considered in the US

what changed Not Apple’s approach, but its size.

  • For most of its history Apple has shied away from practices that might have attracted regulatory attention if the company had a large market share.
  • When Microsoft was criticized in the 90s for bundling Internet Explorer and media players into Windows, Apple was doing the same on the Mac.
  • As Apple moved into digital music, the iPod was the only music player that worked with iTunes, and iTunes was the only way to buy music to play on the iPod.

with iphone, Apple extended its control even further, making its mobile browsing engine the only option for web access on phones.

  • The first iPhone only allowed Apple’s own apps. When the company opened up the device to other app makers, Apple made itself the sole intermediary for what apps users could download, cutting both app sales and payments for in-app digital goods.

between the lines: Most competition laws do not focus on control, but target companies holding a particular market that use their power to set prices or expand into adjacent markets. But Apple has been pushing the limits of antitrust law for some time.

  • its first big brush A lawsuit over eBooks came through about a decade ago.
  • There, although Apple was not considered a monopoly to download content to phones and computers, the courts eventually conspired with the publishers to raise the price of digital books.

Be smart: The biggest bet for Apple right now is in the battle for the iPhone’s App Store rules.

  • Apple has made minor changes to its policies, including significant changes to the standard 30% one-time commission on most App Store transactions, whether as a result of some lawsuits or legislation.
  • But the company has made clear that it sees its control over which apps are placed on iPhones as a line in the sand that it wants to defend. It argues that attempts to circumvent that control – either through rival App Stores or so-called “side-loading” – would harm users, making their phones less private and secure.
  • “We are deeply concerned about regulations that would undermine privacy and security in the service of any other purpose,” said Apple CEO Tim Cook, working his way through the EU’s DMA and Congress in Washington last month. Referring to several bills to force Apple to open the App Store.

what to watch: It remains to be seen how Apple will comply with the Digital Markets Act, and none of the US antitrust bills have passed Congress.

  • Momentum is building for further sanctions, but Apple has found ways to resist major changes, even in the face of laws like those in South Korea that aim cautiously at its business.

Leave a Reply