Apple’s Closed World Catches New Fire

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A wide range of Apple practices that went unnoticed when the company was an underdog are coming under renewed scrutiny today.

The big picture: Apple’s long history as second fiddle – first to IBM, then to Microsoft – has given it the freedom to set its own rules, even as it has built much more tightly controlled ecosystems than its rivals. But now it’s the most valuable and arguably most powerful tech company in the world.

Driving the news:

  • On Monday, the EU notified Apple that it had reached a preliminary conclusion that Apple violated its antitrust laws limiting the iPhone’s contactless instant payment system to only support Apple’s service. Bloomberg reported on Monday online payment rival PayPal helped spur the complaint.
  • EU digital markets law, meanwhile, would require Apple to allow users to download iPhone apps through third-party platforms and allow developers to offer their own payment systems.
  • The review is not limited to Europe. In South Korea, a relatively new law requires Apple to allow competing payment mechanisms. Apple’s conduct would also be limited by numerous proposed antitrust bills in the United States.

what changed is not Apple’s approach, but rather its size.

  • For most of its history, Apple has gotten away with practices that might have caught the attention of regulators if the company had a larger market share.
  • When Microsoft was criticized in the 90s for integrating Internet Explorer and media players into Windows, Apple was doing the same on Mac.
  • As Apple shifted to digital music, the iPod was the only music player that worked with iTunes, and iTunes was the only way to purchase music to play on an iPod.

With the iPhone, Apple has extended its control much further, making its mobile browser the only web access option on the phone.

  • The first iPhone only allowed Apple’s own apps. When the company opened up the device to other app makers, Apple imposed itself as the sole arbiter of which apps users could download, while cutting both app sales and payment for goods. in-app digital.

Between the lines: Most competition laws do not focus on control per se, but target companies with power in a particular market that use their power to dictate prices or expand into adjacent markets. But Apple has been pushing the boundaries of antitrust law for some time.

  • His first big brush came via an ebook lawsuit nearly a decade ago.
  • There, although Apple was not found to have a monopoly on the phones and computers used to download content, the courts ultimately concluded that it had conspired with publishers inflate the price of digital books.

Be smart: The biggest issues for Apple right now are the fight over iPhone App Store rules.

  • Apple has made modest changes to its policies, some of them as a result of lawsuits or laws, making significant changes to its once-standard 30% commission on most App Store transactions.
  • But the company has made it clear that it views its control over who can put apps on iPhones as a line in the sand that it intends to defend. He argues that efforts to reduce this control – either through rival app stores or “sideloading” – will hurt users, making their phones less private and less secure.
  • “We are deeply concerned about regulations that would compromise privacy and security in service of another purpose,” Apple CEO Tim Cook said in Washington last month, referring to both the DMA of the EU and a number of bills pending in Congress. force Apple to open the App Store.

What to watch: It remains to be seen how Apple will comply with the Digital Markets Act, and none of the US antitrust bills have passed Congress.

  • The momentum may be building, but Apple has found ways to withstand major changes, even in the face of laws like South Korea’s who carefully aim at his business.
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