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The Justice Department recently sued Apple for violating antitrust laws, claiming that Apple monopolized or attempted to monopolize the smartphone markets. They allege that this violates Section 2 of the Sherman Antitrust Act, which makes the attempt to monopolize a felony. This prosecution isn’t a one-time occurrence, either: under the Biden administration, the DOJ and other federal regulatory agencies have been more zealous in their prosecution of big tech giants. The DOJ is also prosecuting Google, whilst the FTC is going after Facebook and Amazon.
But what really makes a monopoly all that bad?
Yes, the DOJ alleges that a lack of competition stifles innovation and hurts consumers. But is Apple’s “monopoly” really bad for us? The ecosystem that Apple has created with its assortment of products — the iPhone, MacBook, Apple Watch, AirPods — creates an environment where all of these devices interact with each other. Apple’s products are not necessarily strictly “better” — in fact, by many metrics such as price, app quality, and customization, Android-operating phones are far better. So why do consumers continue to buy Apple products and make them the biggest company on Earth?
It’s because of the interactivity that comes with a closed ecosystem. The DOJ alleges that rather than Apple competing, it leverages its already existing market share (59% of the people in the US have an iPhone) to extort fees and rules to maintain the market share, rather than innovating in order to keep consumers with them. And it is true that Apple has not come out with a widespread flagship product since 2016, with the release of the AirPods. Since then, it has built and improved upon its already existing products, but has not shaken up the tech industry anywhere near as much as the iPhone did .(I am excluding the Apple Vision Pro, because, while it may be the highest quality headset out there, there are many competitors and it currently has a price tag of $3,500, making it unaffordable for most people.)
The more “entrenched” in Apple a person becomes — that is, as they buy more and more Apple products — they may become less and less likely to switch to Android. But is this due to the stringent restrictions Apple has placed on its products’ interactivity with Android? Or is this simply due to the greater quality of the Apple products? As seen with the infamous “green bubble,” Apple has made efforts to stifle inter-platform connectivity, with photos, videos, and sometimes not even emojis not even making it through the void of Android. And Apple’s fees upon app developers seeking to use its app store have been stringent to say the least. (Remember Epic Games’ suit against Apple?)
But it cannot be said that there aren’t benefits to having one giant isolated system. For one thing, Apple’s cybersecurity is unparalleled in the tech giant sector. The FBI has admitted that it cannot break the encryption of the user’s data, and Apple has refused to cooperate with them in the past over making a backdoor into their software.
Additionally, if you’ve ever become or experienced with Apple’s ecosystem, you are aware of the seamless data transference from device to device and the interaction with devices such as the AirPods that wouldn’t normally be available on Android. So is this worth the potentially higher prices? Would you be willing to pay a premium for having the “ecosystem” that comes with Apple products?
This conundrum, of whether monopolies are good or bad, stretches as far back in US history to the writing of the Sherman Antitrust Act. At that time, in the late 1800s, companies such as Standard Oil were dominating their respective industries, with Standard Oil specifically controlling more than 90% of the market. However, what Standard Oil did was create, well, a standard of oil. When you bought Standard Oil, you knew you were getting the same product everywhere. One of the main reasons that these giant companies were considered corrupt and evil was because of the conditions they placed their workers in and the influence they had on the government. Hopefully now, because of more regulation around labor, those concerns may be assuaged.
Recently, Google has come under fire for paying Apple about $20 billion in order to make themselves the default search engine for iPhones. The judge ruled that this stifled competition by not allowing alternate search engines, such as Bing or DuckDuckGo, to have an opportunity to compete. Although you could manually change your search engine, being the default usually resulted in Google being the search engine for the lifetime of that iPhone. Google has vowed to appeal, and even in the most DOJ-friendly ruling from a higher court, there is an extremely low likelihood that Google would be broken up.
Still, the fact that the current legal environment is very anti-monopoly begs the question: why?
This is about whether monopolies are inherently evil. Are they bad in general, or only in specific cases? Does an environment of limited innovation and presumed increasing cost for the consumer negagte the benefits?
I take a somewhat different view on this subject: monopolies are only bad when they harm the consumer. Putting a premium on its products does not harm consumers, as they can still pursue cheaper options in the market. Charging an exorbitant amount to app developers, and forcing them to share their profits, also does not harm consumers, even if it’s playing hard ball with other businesses. Apple does charge you an extra fee to enter its ecosystem, but in my opinion, that’s not harmful. It’s worth it.
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