Apple and antitrust

Ben Thompson for Stratechery:

Reuters reported last week that the U.S. Department of Justice and the Federal Trade Commission were divvying up tech companies for potential antitrust investigations… There’s just one problem: it’s not clear what there is to investigate.

There is no company for which the question of market definition matters more than Apple. The company is eager to point out that the iPhone has a minority smartphone share in every market in which it competes; even in the U.S., Apple’s best market, the iPhone has 45% share, less than the 50 percent of sales the FTC suggests as a cut-off.

The obvious remedy for Apple would be allowing 3rd-party payment processors for apps; frankly, I think this might go too far, as there are real benefits to Apple controlling everything API-related on the iOS platform. I would be satisfied with Apple allowing apps to launch web views for payment processing that is clearly handled on the app’s own webpage.

Alternatively, Apple could be forced to significantly reduces its App Store take rate, but I would prefer that Apple be forced to compete for payment processing business, which would achieve a similar result.

MacDailyNews Take: As we wrote on May 13th:

We think the ultimate ending to this legal challenge will be that developers will be able to accept payments in their apps without being forced to give Apple a cut or as much of a cut as today.

Companies that currently are large enough to work around Apple and send users to their own sites for payment include Amazon and Netflix. Apple will likely need to end this practice and allow all developers to allow users to subscribe to services, buy ebooks, etc. within their apps without a 15%-30% fee. A smaller fee may be tenable, as Apple does have costs to run the App Store, of course. We’ll see after the legal gears grind glacially and eventually spit out their end results.

By the way: On every iPhone, iPod touch, iPad, and iPad mini box, the potential buyer is informed of requirements, including “iTunes X.x or later required for some features” and also that an “iTunes Store account” is required. The plaintiffs were informed of the requirements prior to purchase. If the plaintiffs didn’t like the terms that came along with Apple devices, they should have opted for a pretend iPhone from any one of a dime-a-dozen handset assemblers. Then they could blissfully infest their fake iPhones with malware from a variety of sources.

Note also that Apple doesn’t set the prices for paid apps.

Lastly, the amount by which Apple Inc. has driven down software prices across the board, on every major computing platform, makes legal actions such as this eminently laughable.

19 Comments

  1. These app developers would ruin IOS with there cheaply make programs. They could add bad orograning, viruses. Good then, remove your from the store and see what happens ? Are they willing to lay all advertising expenses, Storeage if the app itself and paying fees for downloading the app itself; who going to pay for that.. ok the consumer. Are you going to complain about the company who also collects a third as well..

    1. Established Brands would not only be able to support the infrastructure to support their own ‘App store’, but also benefit from cutting out Apple as a middleman. It takes a lot of risk for consumers to ‘shop’ at a 3rd party App store but large brands would not risk loss of social currency by including malware.

      The fees being charged may be one part of the equation, but I believe the true crux may be the lack of market competition/other outlets for retailing iOS Apps that do not fit Apple’s App policies that are unrelated to security or privacy..

      1. “the lack of market competition/other outlets for retailing iOS Apps”
        When you have to use a trademarked name in describing a market, you’re no longer talking about a market, you’re talking about a company’s products. A monopoly in shipping COULD be a thing. A monopoly on FedEx drop boxes… well, now you’re just talking about a service owned by FedEx.

        1. I use the trademarked name to distinguish a product type being retailed not the market which are App Stores. If I produce a new product why should it be restricted to a single instance(store) in the marketplace, especially if an arbitrary condition outside of the consumer protective policies is used to deny acceptance of my product for distribution?

  2. Apple needs to claim the App store is a feature of iOS and by extension, iCloud.
    Apple writes software to sell hardware. Not the other way around..

  3. Maybe the good folks at MDN can dig into their history files to bring us the story of the original introduction of the iPhone and the apps presented at the introduction. Very limited in the app offering and within a millisecond developers started calling for the opportunity to write apps for the iPhone. It took s while – wasn’t there eventually an option to write apps through Macs? And when developers were allowed to write and deliver apps there were some rules – like no porn. There was also a total freedom to price the apps as the developers desired. Apple made it clear that there would be a fee for all of Apple’s efforts, from actually design and developing the App Store infrastructure, acquisition of necessary hardware and systems, managing the sales and delivery, etc.

    If you look at where we are today it’s clear that Apple has done a pretty good job. Far better than the competition could have achieved.

    1. Agreed Apple has done a pretty good job, but without allowing for competition at all weakens your argument for what the competition could achieve.

        1. Don’t know why you would jump to guessing smartphone market in this thread which obviously talks about Apps in Apple’s App store which are all iOS. To make it clear, there is no competition in the market for the sale and distribution of iOS Apps.

  4. What is the alternative to Apple taking a cut? Maybe charging rent to be in the App Store to begin with? All this will do is cut out all independent developers.

    The 30% allows small developers to sell their wares and not have to fork over an impossible amount of money to start with. It’s really an equalizer.

    1. The alternative would be to compete on the ‘cut’ by allowing competing iOS App Stores. Apple could justify a slightly larger cut than competing App Stores by maintaining the best processes to ensure Apps are vetted to be as safe as Apple can make them. Competing App stores would also allow a broader range of Apps that are otherwise not allowed on Apple’s App Store beyond the security and privacy requirements.

      1. So you are saying essentially, allow Cydia official place on iOS, and any other repo. Apple doesn’t have to worry software compatibility, APIs, or anything else but it’s own App Store.

        Hmmm how well has the Linux standard bearer of app distribution faired? For the most part, commercial software on Linux is rather lackluster and Red Hat will not support any guarantee of the OS or apps, other than what it distributes itself.

        Kinda makes the environment ripe for abuse and uncertain. At least with Apple the uncertainty is if Apple approves your app or not.

        Had anyone bothered to look at the bottom line on how much Apple takes in on the App Store? Steve originally didn’t want it and wanted all apps to be web/cloud based. Apple does keep track of how much they have paid developers from the App Store. I suppose half of that figure is Apple’s take.

        1. “Hmmm how well has the Linux standard bearer of app distribution faired? ”

          I don’t know. How has every PC software vendor faired (including the Mac)?

          And still…
          No one would force anyone to shop outside the previously walled garden, given a choice.

          1. So the App Store and it’s current policies is about politics. How do you keep people on the iOS platform?- wall the garden. But that’s pretty cynical. 🙂

            What about safety of the device and PII? What about preventing the poisoning of the ecosystem? You have to admit Android has its problems, even if you only stick with Google Play. It seems to me Amazon’s App Store is pretty clean and walled off. But what about their percentage take? Google’s percentage take? If the whole industry has 30% of sales to the store provider, them you can’t say it’s anti competitive.

            1. Much more concerned about the censorship matter. Not that other concerns don’t matter. Some do, some don’t.

              One that doesn’t is about poisoning the ecosystem. Once sold these devices are owned by their purchasers, and they decide, on their own device, what is poison and what isn’t.

            2. Even with Amazon’s fork of Android (FireOS), it is not walled off. Just as you can change you setting to allow for third party sources in Android, the same can be done on FireOS devices. The user and vendors are allowed the choice to use the proscribed Android based App Stores (Google Play and Amazon) or choose to purchase/vend at other Android based App Stores or directly distribute APKs if desired.

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