March 26, 2024
Every day, millions across Florida will use an Apple device to communicate with family and friends, work, socialize, and pay for goods and services. The convenience and advanced features offered by Apple products have created one of the most valuable companies on earth. Being one of the most valuable companies on earth, Apple has a significant economic impact in Florida, directly supporting 3,868 jobs and indirectly supporting 58,200 jobs through its app store ecosystem.
Despite the value Apple has brought to Floridians and Florida, the Department of Justice recently announced a lawsuit, in conjunction with predominantly Democrat Attorneys General from 16 other states, against the tech giant. The lawsuit alleges that the company has monopolized the smartphone market, prevented interoperability between iOS and Android devices, and “exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants.”
While progressives and conservative tech hawks celebrated the lawsuit, the movement against the tech giant is yet another example of the Biden Administration’s willingness to use antitrust law to punish American tech innovators and entrepreneurs.
The Department of Justice’s suit repeats misleading complaints from the largest app developers who have been lobbying for government intervention about Apple’s App Store, claiming that “when developers imagine a new product or service for iPhone consumers, Apple demands up to 30 percent of the price of an app whose content, product, or service it did not create.”
In reality, the vast majority of developers pay no commission because their apps do not involve selling digital subscriptions or in app purchases. Since 2020, Apple reduced its commissions from 30 percent to 15 percent for developers earning less than $1 million. As such, those complaining about Apple’s fees are typically not small developers, but billionaires and the largest developers looking to pad profit margins.
Secondly, these fees are directed toward developing a robust cybersecurity program that protects users from malicious actors, along with an appropriate reward for a business that has invested billions of dollars in developing the IP and ecosystem that allow ordinary consumers to download software without worrying it will break their device.
The government also alleges that Apple discriminates against non-Apple users through the green bubble. In its complaint, the Department of Justice alleges that when an iPhone user receives a message from a non-iPhone user, “the text appears to the iPhone user as a green bubble and incorporates limited functionality: the conversation is not encrypted, videos are pixelated and grainy, and users cannot edit messages or see typing indicators.” The complaint continues to suggest that “many non-iPhone users also experience social stigma, exclusion, and blame for breaking chats where other participants own iPhones.” In essence, the government argues that Apple should invest significant engineering resources to improve Android devices. It also ignores the fact that Apple already announced that it will adopt RCS (Rich Communication Services) messaging support, ending the green bubble without the heavy hand of government.
Unfortunately for the government, its arguments contradict previous Supreme Court jurisprudence. In 2009, the U.S. Supreme Court ruled that “businesses are generally free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of those dealings.” Antitrust liability can only be incurred, the court stated, when a dominant firm engages in practices like predatory prices. As such, it is not a violation of Antitrust law to have messages received on Android devices displayed in green bubbles while those sent between Apple devices are blue. In making this argument, the DOJ risks violating Supreme Court precedent, questioning the constitutionality of their case, by essentially dictating how private companies do business with each other.
The government’s complaint also conspicuously ignores the vast consumer choice in the smartphone market. Today, if somebody enters an electronics store, they can purchase a smartphone from Apple, Samsung, Motorola, Nokia, Google, Microsoft, or LG. While Apple sells popular phones, it has nowhere near a monopoly of the smartphone market. The mere existence of these competitors shows that consumers are free to choose from a wide array of manufacturers offering devices at different price points and Apple faces plenty of competition. Critically, such competition incentivizes Apple to continue to develop new, cutting-edge products that consumers demand.
The recent lawsuit against Apple is just another example of how the Biden Administration has misused antitrust law to punish America’s innovators and entrepreneurs. Unfortunately, while those advocating on the right and left for these cases will claim to be acting in the public interest, the reality remains that they are penalizing a company that generates substantial welfare for consumers and provides a significant economic boost for Florida.
