But the lawsuit relies on a novel interpretation of antitrust law that shunts aside the longstanding distinction between monopolization and product differentiation.
The former crosses legal lines, while the latter is a common and indeed necessary strategy for companies that hope to innovate, compete, and stay solvent in the ever-evolving tech space or indeed in any competitive industry, an antitrust expert has told The Epoch Times.
Lawyers for the Department of Justice (DOJ) filed the lawsuit in district court for the District of New Jersey, along with lawyers from Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Oregon, Tennessee, Vermont, and Wisconsin.
Mr. Garland announced the action last week with fanfare and made no secret of its far-reaching aims. During a March 21 press conference, Mr. Garland accused Apple of having consolidated its own position in the market at the expense of virtually everyone else.
“We allege that Apple has employed a strategy that relies on exclusionary, anti-competitive conduct that hurts both consumers and developers. For consumers, that has meant fewer choices, higher prices and fees, lower-quality smartphones, apps, and accessories, and less innovation from Apple and its competitors. For developers, that has meant being forced to play by rules that insulate Apple from competition,” Mr. Garland said.
“As outlined in our complaint, we allege that Apple has consolidated its own monopoly power not by making its own products better, but by making other products worse,” the attorney general added.
Mr. Garland seeks to achieve a coup for his department and the Biden administration in an election year, observers say.
“This suit should be called the Jonathan Kanter-Elizabeth Warren antitrust action. I think that progressive appointees, particularly in the Environmental Protection Agency and the Justice and Labor departments are pursuing their own agendas,” Keith Naughton, the principal of Silent Majority Strategies, a Germantown, Maryland-based consultancy, told The Epoch Times.
Apple’s Strategy
While Apple charges prices for its phones ranging from $429 for its 2022 iPhone SE to $1,599 for its iPhone 15 Pro Max, and consolidates sales of an extremely broad range of smartphones, computers, tablets, watches, software, and accessories under the retail umbrella of its Apple Store, the company’s practices do not inhibit competition from other tech firms, contrary to the Mr. Garland’s claims.In fact, Apple engages in practices that make the differences between its products and those of competitors starker, and hence could be said to promote competition while maximizing its own sales.
That’s the view of Keith Hylton, a professor of law at Boston University who specializes in business law and antitrust matters.
“Based on what I have seen so far, the lawsuit seems to be thoroughly misguided,” Hylton told The Epoch Times.
To call Apple’s strategy monopolistic betrays a lack of understanding of the strategy and time-tested market dynamics, Mr. Hylton believes.
“Apple has historically sought to cultivate the high end of the tech equipment and software markets, ceding market share to rivals such as Microsoft Windows and Google Android. That is a choice that has resulted in Apple having a non-monopolistic market share, while charging relatively high prices,” Mr. Hylton said.
Mr. Hylton characterized this approach as market differentiation, and said it in no way resembles monopolization. To view it as monopolization, as the Department of Justice does, is to miss a basic distinction.
“Under this reasoning, any effort by any firm to differentiate its product or products could generate a monopolization claim from the Department of Justice,” he said.
Ignoring the Law
Not only is Mr. Garland’s department pursuing legal action against a company operating on a fairly typical business model, it is also ignoring a highly significant U.S. Supreme Court ruling under which Apple’s conduct in the market is entirely legal, Mr. Hylton suggested.Since then, the Supreme Court itself has put its imprimatur on legal reasoning far more favorable to tech companies than the outcome achieved in the Microsoft case, Mr. Hylton noted.
In Mr. Hylton’s analysis, the Supreme Court found in that 2004 case that a firm viewed as occupying a dominant position in the market—as some today view Apple—has no obligation to support its rivals.
“Almost all the specific charges against Apple involve decisions by the firm that [allegedly] failed to facilitate and enhance competition from rivals. But Apple has no duty to do so under antitrust laws,” Mr. Hylton said.
David and Goliath
Other business law experts question the timing of the lawsuit, and note that the current administration has made a heavy investment in appearing to back working people against powerful interests.“This DOJ lawsuit has many moving parts and will be confusing even to the most wonkish observers of the tech world,” Jeffrey McCall, a professor of communication at DePauw University in Greencastle, Indiana, told The Epoch Times.
Mr. McCall said that the Department of Justice’s antitrust case is not entirely devoid of valid concerns. After all, some customers do become highly acclimated to using Apple services and products for most if not all of their tech-related needs, he conceded.
“The DOJ’s claim about the ‘cumulative anticompetitive effect of Apple’s conduct’ seems legitimate, but will be tough to nail down and prove actual harm to the marketplace,” he stated.
Nevertheless, Mr. McCall said it is hard to ignore the fact that the lawsuit is unfolding in an election year—during a race that pits a Democrat candidate with a populist persona against a Republican businessman and real estate tycoon.
“It certainly looks good for the Biden administration, through the DOJ, to be taking on a big tech corporate giant in the middle of a campaign. It gives the rhetorical signal that Biden is trying to stand up for the working-class little guys against the powerful. This fits with the way Biden likes to characterize himself as the middle-class guy from Scranton who supports average people,” Mr. McCall said.
“It seems the lawsuit could have been filed any time in the last couple of years, given that the concerns raised in the suit are not new to the situation. So why now and not last year?” Mr. McCall asked.
Qui Bono?
Adding further basis to the view that this lawsuit is largely “for show” is the likelihood that Apple’s lawyers will vigorously contest it in the court for years to come, he continued.“Given that the Apple legal team, with its ample resources, will viciously fight this suit, it is clear it will be years before anything comes out of the process. Thus it is hard to image Big Tech conglomerates doing anything to change their behavior for the foreseeable future,” Mr. McCall said.
Mr. McCall said he wondered what remedies the Department of Justice would be likely, in the end, to settle for. An actual breakup or deep structural change of Apple Inc. is hard to envision, he said.
“Fines would hardly faze such a corporate giant, and would eventually get passed on to consumers. Getting fixes to the anti-competitive practices would make sense on one level, but would be difficult to referee and implement,” said Mr. McCall.
Though Mr. Garland did not raise this issue during the press conference, another factor may be at work. From President Joe Biden’s standpoint, it may be payback time against a company that refused to cooperate with the President Obama-era Federal Bureau of Investigation (FBI) back in February 2016 and went to court to oppose the FBI’s order for Apple to develop software that would permit the FBI to access a phone used by a terror suspect.
“I would think it is hard to connect those dots, especially since Garland would not have been part of that picture. But I can’t say for sure that the project is not plausible,” Mr. McCall said.
The Department of Justice did not reply by press time to a request for comment.
