The U.S. antitrust case against Apple was not a closely guarded secret. Stories in the New York Times and Bloomberg spoiled not just the general timing of the case, but its contours as well. That gave Adam Kovacevich, of Chamber of Progress, the confidence to dispute the government’s arguments before the lawsuit was filed — a risky choice, I think.
Kovacevich is the CEO and co-founder of Chamber of Progress, a nominally progressive lobbying organization for large technology companies. It was launched in 2021, and is funded by corporations you know like Amazon, Apple, Google, and Uber; Kovacevich used to work on public policy at Google. The Chamber uses its support of progressive causes like voter rights and universal health care as cover for its main activity, which is reflecting the priorities of its funders. The Chamber routinely argues on its blog and in legal filings in defence of big business as usual.
Kovacevich begins his attempt at front-running the government’s arguments by transforming a possibility into an definite:
This suit has been rumored for months, so we have a good idea of what it will include. It will likely force iPhones to work more like Android devices.
If you’re among the millions of Americans who have purchased an iPhone because of integrated features like Find My Phone, Apple Pay, iMessage, or integration with Airpods and Apple Watch, you better hope that this lawsuit fails.
Because if it succeeds, there will no longer be any difference between your iPhone and an Android device.
This is flagrantly untrue. Maybe you are willing to cut Kovacevich some slack because this article was written before the complaint was filed, but I am not, because Kovacevich could have just waited one extra day to see if he was right. But, even on Wednesday, it would have been outside reasonable grounds to think the case would pitch enough stuff that, if successful, would remove “any difference between” iPhones and Android phones. Even the E.U.’s Digital Markets Act, for how comprehensive it is, will not have that result.
In a press release published after the suit was filed — otherwise known as the correct time to react to something: after it has happened — Kovacevich did pull back to a more cautious position of saying it “would make iPhones more like Androids”, emphasis mine. But that is so vague, even in its full context of “forc[ing] Apple to open up its software and hardware”, it is almost meaningless. Is a private API for the NFC chip really part of what makes an iPhone so different from an Android phone? That seems like a pretty flimsy argument when there is so much about iOS that is actually meaningfully different from Android and not for reasons hostile to competition.
Kovacevich:
This lawsuit wasn’t spurred by consumer or voter complaints. Instead, companies like Tile, Beeper, Spotify, Match Group (a former client of DOJ Antitrust Chief Jonathan Kanter), banks, and payment apps have all spent months pushing the DOJ to bring this lawsuit. They would be the largest beneficiaries of the lawsuit.
Whether Americans’ complaints “spurred” the Department of Justice to act is a good question, but it is untrue to argue there have been no complaints. Most people in the U.S. have, for years, responded favourably to polls asking if they support regulating the largest technology firms, though they have not ranked it as a top priority. Even the Chamber of Progress’ own polling found support for regulations, somewhat undermined by the specific examples of consequences.
It is probably true that business complaints were the primary drivers of the DoJ’s action, though. An annotation I wrote for one part about payment apps in my copy of the complaint reads “sounds like a bank wrote this”. But protesting this on the grounds of corporate involvement is pretty rich coming from the guy who runs a lobbying firm arguing for the positions of even bigger corporations. Are we really supposed to be mad if Tile benefits?
Kovacevich:
More than 135 million Americans own an iPhone. And for many of them, the ease and simplicity of iPhone’s integrated experience is why they purchased the device in the first place.
I have owned Tile tracking devices. Apple’s AirTags and Find My Phone work much better.
I have owned Android Watches. But the connection between my Apple Watch and my iPhone is seamless.
When I pop in my AirPods, my iPhone recognizes them right away. And iMessage just works across my phone, computer, and iPad.
When I purchase an app on my phone, it’s automatically available on my iPad too.
Despite years of hype over “mobile payments,” I never even considered leaving my traditional wallet at home until I started using Apple Pay.
Why, specifically, are these third-party products less capable on an iPhone compared to first-party options, Adam?
More to the point, what is the goal here? The government’s position is not that Apple should reduce the capabilities of its own products, but that Apple should not so aggressively restrict third-party capabilities. What if other smartwatches or tracking devices or headphones worked better with iPhones? Maybe not entirely to Apple’s first-party standards but, you know, better. That sounds like a preferable situation to one in which consumers are compelled to remain within the confines of first-party products allegedly because of deliberate attempts to avoid competition.
Kovacevich:
I understand fully why Tile, Beeper, and Match Group have agitated for this lawsuit. It would surely benefit them. But US competition law is designed to help consumers, not competitors. And this suit will force Apple to break the seamless experience that millions of customers have chosen.
That is one perspective on U.S. competition law. But it is not an argument shared by everybody, and it is disingenuous to claim that is how the law has been “designed” so much has how it has been shaped since the 1970s.
The argument in favour of also balancing a desire for competition has been criticized by lobbyists for large technology firms, but it is a discussion worth having: what problems are created by the mere existence of uniquely large businesses? The Chamber and the CCIA say their size is what lets them offer things like comprehensive services and free shipping, which consumers like and, therefore, there is no need to intervene. But are there negative outcomes, too, especially if smaller businesses struggle to compete due to those apparently inherent advantages of being big? That is a core question of newer perspectives on antitrust.
Kovacevich then takes on the question of whether the iPhone has “market power” or “monopoly power”, which are different things that he seems to conflate. The title of this section is “Courts Have Found that iOS Doesn’t have Market Power”, and I wanted to focus on this:
Furthermore, Judge Yvonne Gonzalez Rogers found in the Epic v. Apple case that:
Apple’s market share is below the general ranges of where courts found monopoly power under Section 2…[the] Court cannot conclude that Apple’s market power reaches the status of monopoly power in the mobile gaming market.
I am always suspicious when I see mashed-together quotes like these. Indeed, the first part of the quote comes from two pages before the second. While it was fair to eliminate some of the discussion and assessment of the market, this mashup eliminates significant context from before and after.
For background, on page 87, the judge notes that this is a calculation of the global mobile gaming market, of which Apple’s share is apparently nearly 60% by dollar value despite the iPhone’s 16% share of global devices. Whether this global share will be relevant to the 2024 trial is a question for the courts.
Immediately before the first part of that mashup quotation, the judge writes on page 137:
[…] That Apple has more than a majority in a mostly duopolistic, and otherwise highly concentrated, market indicates that Apple has considerable market power.
So to Kovacevich’s section title — “Courts Have Found that iOS Doesn’t have Market Power” — I would note that courts have also found iOS does have market power. And here is what the judge wrote immediately following the second part of that mashed-up quote, as it appears on page 139:
That said, the evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share. Apple is only saved by the fact that its share is not higher, that competitors from related submarkets are making inroads into the mobile gaming submarket, and, perhaps, because plaintiff did not focus on this topic.
The impression you might get if you read Kovacevich’s summary is that Apple is definitely not a monopoly. But the actual argument made by the judge in this case is that if Apple’s share grows only a little more, it may be have a monopoly position.
Kovacevich wraps by comparing the duopoly of device options to Disneyland and Yosemite National Park:
It’s great for consumers that we have these two alternative models of mobile devices — one closed and integrated, one open and flexible. People vote with their pocketbooks — and have switched back and forth between Androids and iPhones.
So why should the government force iPhones to look more like Androids?
I enjoy visiting the safe, sanitized environment of Disneyland and the wild of Yosemite National Park. But I would hate to see the government force Disneyland to look more like Yosemite (or vice versa).
Tourist attractions are a poor analogy for owning a smartphone. A better one, if you want an analogy, is something like a really powerful company town compared to a normal city. Everything you can buy and do is filtered through a paternalistic owner, there are seemingly arbitrary rules, and despite all the bureaucracy, it is unwise for businesses to ignore setting up shop there because its residents seem to spend more money.
People make all kinds of trade-offs when they buy something as complex and convergent as a smartphone, and it is difficult to know how much of that is a fair vote with their wallet and how much of it is a side effect of the platform owner’s impositions.
We saw this play out before the iPhone 6 was introduced. Apple still sold plenty of iPhones even though its models had smaller displays than competing products, and it was unclear whether people were buying iPhones because they were small or in spite of their size. The still-unbeaten unit sales of the iPhone 6 models shows lots of people wanted a bigger iPhone. Some of those buyers formerly used an Android phone, but others were existing iPhone customers who bought previous models even though they wished they could be bigger. Still others were like me: people who still bought an iPhone because of other factors, even though they were now — and remain — too big.
Questions like these are far too complicated to simplify into the catchy but wrong claim that “government [will] force iPhones to look more like Androids”. There are undoubtably some — many, probably — who really like the way their iPhone works today. But I know people who have other smartwatches who wish they worked better with their iPhone. There are iPhone features which I bet would work better if Apple had meaningful competition within its own platform.
That lots of people buy iPhones is not inherently a vote of confidence in each detail of the entire package. If some of those things changed a little bit — the U.S. government’s suit is not a massive overhaul of the way the iPhone works — I doubt people would stop liking or trusting the product.
Whether they will like or trust their bank’s attempt at a wallet app is another discussion entirely.