What’s the lawsuit about?
The United States Department of Justice has announced an antitrust lawsuit against Apple. Antitrust action against companies is intended to thwart monopolistic behavior that a government believes impedes competition and hurts consumers. The claim that “Apple has locked its consumers into the iPhone while locking its competitors out of the market” is at the heart of this suit. For example, other Bluetooth trackers cannot access Apple’s location services the way AirTag does, the Apple Wallet is the only way for banks to get to the tap-to-pay NFC chip, and the iPhone doesn’t play as nice with smartwatches that are not the Apple Watch.
Why Apple? Why now?
The Justice Department’s actions should not come as a surprise. Among the very few things the last two U.S. administrations have been able to agree on is an antitrust crackdown on tech companies like Amazon, Google, and Meta. Apple, too, has seen its fair share of legal action in the U.S. and in Europe, where it has been fined 1.8 billion euros for limiting competition from music streaming rivals.
When you’re as big as Apple, there’s a target on your back. The company’s market capitalization flirts with three trillion dollars, but more importantly, it commands a resounding 60%+ share of the smartphone market in the U.S. Therein lies the rub – our phones are the primary portal into how we live every moment of our waking (and sleeping) lives. What Apple chooses to allow or disallow has outsized implications for every provider hoping to get in through the portal and play a role in the digitally addicted lives of American consumers.
Is This A Monopolistic Power Play?
Well, that’s for the courts to decide (if you know how these things go, you won’t be holding your breath for it). However, if you are familiar with Apple’s DNA, then you will understand why the company defends its “moat” with a ferocity unlike many others.
Apple’s origin story is built on the foundation of demystifying technology and bringing it to consumers’ kitchen tables through intuitive, simple, and relatable experiences. This original idea, then represented by the iconic Mac smiley-face “hello” as a substitute for bloatware-infested DIY PC computing, still survives many decades later despite the proliferation of new devices and interfaces.
Apple is accused of limiting competition and taking actions that have “built and reinforced the moat” around its offerings, also often referred to as its walled garden. At the heart of the matter is a tussle between choice and curation. Apple’s obsession with its customer experience leads it to control the experience tightly, make decisions on its customers’ behalf, and maintain an ecosystem that consistently delivers on the experience the brand promises. That philosophy limits choices for consumers. To that end, there is no dearth of people who are irked by this handcuffing and choose not to frolic in Apple’s walled garden. Then there are others who are part of the Apple family precisely because of the carefully managed ecosystem’s ease of use and intuitiveness.
The value of a connected ecosystem and seamless experiences increases exponentially when numerous devices are simultaneously at work. For example, your in-home morning yoga class gives your phone, watch, fitness subscription, and streaming device a workout, all at the same time. Apple’s unique value proposition allows its users to focus on yoga without worrying about how the underlying technologies speak to one another.
By virtue of the ubiquity of the iPhone, Apple becomes a de facto toll gate through which other providers must pass to access a large and lucrative customer base. But while its decision to limit access may be construed as hampering competition and hurting some consumers (which the courts will decide), it also ensures a better experience and creates value for its consumers.
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