Ten years ago, antitrust law was a topic of little public interest. Over the past four years, however, the Department of Justice and Federal Trade Commission have taken action against several large tech companies, including Google, Amazon, and now Apple. The latest target is Apple’s iPhone, which has been accused of monopolizing the smartphone market.
The lawsuit against Apple was filed on March 21, 2024, by the Justice Department’s Antitrust Division and 16 states. The complaint alleges that Apple has engaged in a pattern of anticompetitive conduct, including making “the quality of worse,” by only allowing iPhone to iPhone texting, for example. Apple has also reduced the functionality of third-party smartwatches, the argument goes, thus discouraging iPhone users from purchasing non-Apple watch products. Further, the complaint alleges that Apple has blocked third-party developers from creating digital wallets with the iPhone’s tap-to-pay feature.
If the court agrees with the government that Apple is monopolizing the smartphone market, you might need to cross “new iPhone” off your holiday wish list. The damages facing Apple would take a massive toll on the company and its structure. iPhone consumers and competitors could sue for damages, which means consumers could demand three times the costs of their iPhones, and competitors could demand three times the potential loss of profits. Not to mention that breaking up Apple into pieces to reduce its size seems to be a cure that is worse than the disease.
These potential outcomes are the reason why antitrust law in this and similar monopolization cases is more complicated than it seems. And in fact, a U.S. court in another antitrust case against Apple (Epic Games v. Apple) ruled that Apple is not a monopoly.
When considering whether a company has a monopoly in a given market, it’s important to keep in mind a few things. First, a company might be a monopoly because it is more efficient and has developed something others haven’t. In Apple’s case, it seems to offer more advanced technologies that ensure more security and privacy for its users. Consumers have repeatedly demonstrated their willingness to pay more for a phone with more advanced and secure technology.
Second, successfully enforcing antitrust law has become harder precisely because wrongly punishing corporations like Apple, Google, Amazon and Meta could actually harm consumers. If you wrongly punish a company that has innovated, you reduce incentives for other companies to do the same. Almost a century and a half of experience in enforcing antitrust law demonstrates that large corporations get big by creating services and products that enhance the quality of life for consumers. The founder of AT&T, Alexander Bell, invented the telephone before his company became a target of antitrust enforcers for monopolizing the telephone industry. Steve Jobs introduced the Mac, the iPod and the iPhone. The ingenuity of U.S. tech companies has changed the way we shop, search and interact online — in other words, how we live.
If we look at Europe, we can see how antitrust efforts are prone to stifle innovation. Europe’s antitrust agency has fined Google and Amazon billions of dollars and recently introduced a Digital Markets Act (by default) that aims to make large tech companies’ products more open, including messaging. The market there isn’t amenable to innovators like Jeff Bezos, Steve Jobs or Alexander Bell. Thus, the more vigorous European antitrust and regulatory approach against large tech companies like Apple might not be the pro-competitive antidote consumers really need or want.
Make no mistake: Enforcing antitrust law and protecting consumers from large companies’ abuses is important. But it must be done carefully. Otherwise, we risk losing not only the next iPhone, but also our lifesavers such as Google Search, Facebook and the Amazon online superstore we’ve all come to rely on. Most importantly, if we punish positive innovation, we may never see another Steve Jobs. And in that case, we all lose.
