“Buy your mother an iPhone”: how Apple went from protesting against Microsoft to being a monopoly

Apple CEO Tim Cook was asked in 2022 if Apple was going to fix the problems with its messaging service between iPhones and Android phones.

“It's hard, I don't want to make it personal, but I can't send my mother certain videos,” they told him.

“Buy your mom an iPhone,” Cook replied.

The exchange is included in the lawsuit that the Department of Justice and the attorneys general of 16 states have filed against the technology giant, accused of violating antitrust laws by abusing its dominant position.

Prosecutors have compared the lawsuit to other landmark cases, such as the one they brought against Microsoft.

Then, the company founded by Steve Jobs complained about the abuses of its rival.

Now, it is Apple that is accused of illegal monopoly.

The Justice Department's own lawsuit provides a historical review of the company, founded in 1976 by Steve Jobs and Steve Wozniak in the former's home.

From the beginning it opted for high-end, carefully designed personal computers, with an intuitive operating system that Microsoft later replicated to a large extent with greater success.

At the end of the last century it was on the verge of bankruptcy, displaced by manufacturers of cheaper computers that used Windows.

The company's fortunes changed for the better largely thanks to the launch of the iPod in 2001, associated with its iTunes application, which united consumers and record companies on the same platform.

The Department of Justice recalls that it was the antitrust case against Microsoft that opened the market and limited the ability of Bill Gates' company to prohibit companies like Apple from offering iTunes on computers with the Windows operating system.

Tim Cook, in Cupertino (California), in September 2022.Nic Coury (Bloomberg)

In 1998, Apple co-founder Steve Jobs criticized Microsoft's monopoly and "dirty tactics" in operating systems to attack Apple, prompting the company to go to the Department of Justice in hopes of getting Microsoft to " "I will play fair."

The success of the antitrust action against Microsoft allowed the success of the iPod and iTunes to multiply.

The entry of iTunes into Windows boosted the iPod and contributed to the development and success of Apple's next flagship product, the revolutionary iPhone, which took the company to the top.

“But after launch, Apple began to stifle the development of cross-platform technologies on the iPhone, just as Microsoft attempted to stifle cross-platform technologies on Windows,” the Justice Department notes.

Almost all the applications on the first iPhone, launched in 2007, were created by Apple.

There were actually just over a dozen: Calendar, Camera, Clock, Contacts, iPod, Messages, Notes, Phone, Photos, Safari, Stocks, Voice Memos, and Weather.

A year after the launch of its smartphone, Apple invited third-party developers to create native applications for its revolutionary mobile phone.

That was a double-edged sword.

The economics of a smartphone platform are such that the value of the platform to users and, in turn, to the platform operator itself increases when new applications and new features are added.

But if these functions threaten the platform itself or the migration to another is simple, they can end up harming it.

Apple's decision to invite third parties and the resulting proliferation of applications generated tens of billions of dollars in profits for Apple and is what has allowed it to reach an iPhone user base of more than 250 million devices in the United States. .

The company has a market share of more than 70% of the high-performance smartphone market and more than 65% of the overall smartphone market.

To avoid risks, Apple maintained tight control of its app store, enforcing its rules arbitrarily, according to the Department of Justice.

“It frequently uses the App Store's rules and restrictions to penalize and restrict developers who leverage technologies that threaten to disrupt, disintermediate, compete with, or erode Apple's monopoly power,” the lawsuit contends.

“Apple selectively designates APIs as public or private to benefit Apple, limiting the functionality that developers can offer iPhone users, even when the same functionality is available in Apple's own apps, or even in select third-party apps. ", Add.

A huge power

Apple's control over the distribution and creation of applications gives it enormous power.

“Limiting the features and functionality created by third parties and therefore available to iPhone users makes the iPhone worse and deprives Apple of the economic value it would obtain as a platform operator.

"It does not make economic sense for Apple to sacrifice the benefits it would obtain from new features and functionality, unless it has some other compensatory reason to do so, such as protecting its monopoly profits," the letter states.

The Justice Department's lawsuit focuses on five areas in which it considers that the abuses of dominant position have been most evident: messaging services, the digital wallet, the interrelation of the iPhone with smart watches in favor of the Apple Watch, the super applications (like WeChat, which serve as a gateway to various utilities) and

cloud

streaming services, particularly for video games.

Apple has created such barriers to entry in the mobile phone market that large companies with enormous resources have had to throw in the towel.

Amazon launched its Fire mobile phone in 2014, but was unable to sustain its business profitably and abandoned it the following year;

Microsoft abandoned its mobile business in 2017;

HTC left the market by selling its smartphone business to Google in September 2017, and LG withdrew in 2021. Only Samsung and Google remain significant competitors in the US smartphone market.

“The barriers are so high that Google is a distant third party to Apple and Samsung, despite the fact that Google controls the development of the Android operating system,” the lawsuit says.

The Attorney General of the United States, Merrick Garland, at the press conference this Thursday in which he announced the lawsuit against Apple.Associated Press/LaPresse (Associated Press/LaPresse)

“Apple charges almost $1,600 for an iPhone,” said US Attorney General Merrick Garland this Thursday when announcing the lawsuit.

“But, as our complaint alleges, Apple has maintained monopoly power in the smartphone market, not simply by getting ahead of the competition on the merits, but by violating federal antitrust law.

“Consumers should not pay higher prices because companies break the law,” he added.

The deputy attorney general seconded him: “No matter how powerful, no matter how prominent, no matter how popular, no company is above the law,” he said.

The lawsuit demands that Apple be declared to have violated antitrust legislation and that all types of corrective measures be imposed.

Among them, stop blocking the way for super-applications and

streaming

applications in the cloud;

that makes way for third-party messaging and digital wallet applications;

to make other competitors' smart watches compatible and, in general, to prevent anti-competitive practices through their application stores.

The lawsuit, so far, has cost it more than $100 billion in stock market value in one day.

A quarter of a century after the company founded by Steve Jobs revolted against Microsoft's anticompetitive practices, judges will have the say on whether it is Apple that violates antitrust laws with the iPhone.

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