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Tim Cook, Apple CEO, speaks at the Dreamforce 2019 conference in San Francisco on November 19, 2019.
David Paul Morris | Bloomberg | fake images
The House Judiciary antitrust subcommittee released a report Tuesday that said Apple has “monopoly power” over the distribution of software on iPhones, allowing it to generate large profits from the App Store and extract revenue from the App Store. developers.
The 450-page Democratic majority report is the culmination of a 16-month investigation that also examined competitive practices at Amazon, Facebook and Google and included CEOs of the four giants who testified by video conference in August.
The report recommends that dominant technology platforms, including Apple, be prohibited from entering “adjacent lines of business” and should not be allowed to give preference to their own services or products. But the report also complements Apple in some places: It also noted that Apple’s mobile ecosystem has produced significant benefits for consumers and app developers.
If these recommendations eventually become law, they could force big tech companies, including Apple, to change fundamental business practices, such as how you distribute your own apps through the App Store or what products or services you choose to develop. .
In an interview in September, Apple CEO Tim Cook said that he hoped the company could “break free” from antitrust investigations and that he believes Apple does not have a dominant market share in smartphones. The report says that Apple has about 45% of the smartphone market in the United States.
Looking at the iPhone app market
But the report defines a different relevant market: Instead of looking at smartphones in general, it looks at the distribution of software applications on iOS devices.
The report’s authors focus on Apple’s control of its App Store, the only way consumers can install apps or software on an iPhone, along with Apple’s trend to buy smaller tech companies and turn them into features for Apple products. The authors found that Apple enjoys monopoly power over the distribution of software applications on iOS devices.
Specific points include the following:
High switching costs. The report says that people rarely switch from iPhones to Android phones, making distribution on Apple devices their own market because they need not fear that developers or consumers will abandon their iPhones.
“Apple’s market power is enduring due to high switching costs, dependence on the ecosystem, and brand loyalty,” the report says. “There is unlikely to be a successful market entry to contest the dominance of iOS and Android.”
Excluding rivals. The report found that Apple uses its control to foreclose its rivals and give its own apps and services a boost, including adjusting the App Store search results to promote its own apps and using the App Store to push competitors when launches competitive products.
It points to when Apple launched Screen Time, a feature for iPhones that parents could use to monitor their children’s use of phones and tablets.
Parental control software developers complained after the feature’s launch that they were shut out of the lucrative market for iPhone owners, and the apps were reinstated after media attention.
“Here, Apple’s monopoly power over application distribution allowed it to foreclose its rivals for the benefit of Screen Time,” according to the report.
Find reasons to eliminate competitors. At one point, the report says a former head of Apple’s review process said in an interview that Apple’s top executives would find “pretextual reasons” for removing apps from the App Store, especially when they were competing with Apple services. The report does not give details or give an example.
Benefits above normal. The report also focuses on Apple’s 30% cut from in-app purchases made on an iPhone. It found that the company has become more insistent that developers use in-app purchases as the company’s services business, which includes the App Store, becomes an engine of growth and profit.
“Apple’s monopoly power over the distribution of applications on iPhones allows the App Store to generate profits above normal. These profits are obtained by extracting rents from developers, who pass on price increases to consumers or reduce prices investments in innovative new services, “the authors write.
Sherlocking. The report also examines how Apple often releases products or features that replicate what major app makers sell on the App Store, a topic that it correctly points out has a nickname among Apple product developers: Sherlocking.
The Democratic staff cites former Apple CEO Steve Jobs as saying the company “has always been a disgrace at stealing great ideas” as evidence that Apple monitors its app store to copy the best ideas and incorporate them into the iPhone. It alleges, citing app developers, that Apple uses the App Store to collect sensitive business data that it can use to unfairly compete with third-party developers.
