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The European Union announced on Monday that it would launch an investigation into the practices of Apple, Alphabet and Meta, in line with last week’s antitrust lawsuit against Apple by the U.S. Department of Justice. This is the Biden administration’s latest move against dominant technology companies.
“We have seen the temptation to ignore the law,” said Margrethe Vestager, vice president of the European Commission, which proposes and enforces EU law.
Why I wrote this
After decades of stagnation in antitrust cases against Big Tech, the European Union is working with the United States to protect consumers from market powerhouses like Apple, Alphabet and Meta.
However, approaches to solving such problems vary widely.
Fiona Scott Morton, an economics professor at Yale University’s School of Management, said the EU passed a law and created a special body to regulate dominant digital platforms. “That way…we can resolve these types of problems faster.”
In the United States, courts determine remedies for monopolistic actions. After a decades-long hiatus in antitrust litigation against Big Tech, the Federal Trade Commission and Department of Justice have resumed efforts to protect consumers.
The US approach could yield significant results. In 1982, a federal judge split AT&T’s telephone monopoly into multiple companies. However, a 1998 antitrust lawsuit against Microsoft had mixed results. In Apple’s case, it’s unclear whether the courts will grant it a monopoly.
Regulators are moving to rein in big technology companies on both sides of the Atlantic.
The European Union on Monday announced an investigation into the practices of Apple, Alphabet and Meta, coinciding with the U.S. Department of Justice’s recent antitrust case against Apple. This is the Biden administration’s latest move to level the playing field for technology companies and consumers.
“We have seen the temptation to ignore the law,” said Margrethe Vestager, vice-president of the European Commission, which proposes and enforces EU law.
Why I wrote this
After decades of stagnation in antitrust cases against Big Tech, the European Union is working with the United States to protect consumers from market powerhouses like Apple, Alphabet and Meta.
However, approaches to solving such problems vary widely. There is an open debate as to which one will produce the best long-term results.
In Europe, the European Union has passed legislation to create a special agency to regulate dominant digital platforms, said Fiona Scott Morton, an economics professor at Yale School of Management. “That way…we can resolve these types of problems faster.”
In the United States, courts determine remedies for monopolistic actions. After a decades-long hiatus in antitrust lawsuits against Big Tech, the Federal Trade Commission and Department of Justice under the Biden administration are moving forward against companies deemed to be potentially monopolistic, including Alphabet, Amazon, and Meta. We are taking new steps to protect consumers.
The US approach could yield significant results. In 1982, a federal judge famously split AT&T’s telephone monopoly into multiple companies. However, the process is slow and not always successful. A 1998 antitrust lawsuit against Microsoft had mixed results. In the current case against Apple, it’s unclear whether a court will find the company has a monopoly there.
In 1998, “Microsoft clearly dominated the operating system market at the time, with a 95% market share,” said Sruti Satchenkary, a professor of strategic and business economics at Vanderbilt University School of Management. . “Apple doesn’t have anything like that.”
Instead, the company’s iPhones account for about 65% of the U.S. smartphone market and just 20% of the global market, according to most estimates, with Samsung’s Android phones ranking second in each market.
Some experts argue that most dominant technology companies are not monopolies in the traditional sense and should not be broken up in antitrust cases.
“In fact, these are among the fastest growing industries in the American economy,” says Herbert Hovenkamp, a professor at the University of Pennsylvania School of Law and the Wharton School. “They’ve brought tremendous benefits. They’re actively engaged in research. … This whole idea that we should only go after Big Tech as a structural problem strikes me as wrong. I feel like it’s an idea.”
Instead, he said, the Justice Department should issue narrower and more easily won injunctions that target specific violations.
In contrast, the EU’s new digital market law does not rely on market share to determine monopoly power. Instead, we identify technology companies that dominate certain markets and create remedies when those companies take unfair advantage of consumers or competitors. To comply with the law, Apple is starting this month to allow app sellers in Europe to distribute their products through channels other than the App Store. Similarly, Google offers European users a choice of map programs after searching, rather than automatically defaulting to his Google Maps.
“The problem is not how big tech is,” Manuel Versdorfer, a professor of business and computing ethics at Maine Business School, wrote in an email. “Control and ownership of this data allows technology companies to leverage dominant and strong market positions across market segments.”
Five focus areas
In Apple’s case, the Justice Department’s lawsuit focuses on five areas in which it alleges the company abused its monopoly power with the iPhone.
So-called super apps or cloud-based apps combine multiple features into a single piece of software, similar to the ease of use of Apple’s ecosystem. Cloud-based apps, such as games, rely on internet-based servers to perform the heavy lifting, rather than the user’s smartphone. Citing internal Apple communications, the Justice Department alleges that the company took steps to remove both types of apps because it feared they would make users less dependent on their iPhones.
The Justice Department also accuses Apple of intentionally lowering the quality and security of cross-platform messaging to encourage users to continue using iPhones instead of buying cheaper Android phones. For similar competitive reasons, the company restricted the functionality of third-party smartwatches to keep consumers buying Apple Watches, and banned the functionality of third-party digital wallets to keep people focused on their iPhones. .
“There are natural incentives; [Apple] You have to look for ways to protect your profits,” says Andrew Chin, a professor of marketing and economics at Johns Hopkins Carey Business School. The question is whether the company’s practices are “contrary to the welfare of the entire economy, including consumers,” he added.
In response to the lawsuit, Apple said it has spent billions of dollars building a superior, well-integrated ecosystem. The group argues that the government’s misguided attempts to open up the system will make it worse. The Department of Justice counters that a good user experience is an illusion and that more competition will only make the smartphone experience more innovative and better.
Antitrust laws do not always yield the desired results. A study last year found that the Microsoft ruling led to increased innovation, patent and R&D spending by Microsoft’s competitors, but not to increased profits for those competitors. Vanderbilt University professor Satchen Curry, a co-author of the study, said increased competition often does not increase profits.
Microsoft has also become wary of sharing its development tools with other software companies.
On the other hand, Microsoft has been slow to enter new businesses, which has given other companies, including Apple and the upstart Google, an opportunity to enter and control parts of those businesses. Ironically, the Department of Justice points this out in the Apple lawsuit.
Similarly, the Biden administration may be trying to send a message.
“parable [the administration] “They’re not necessarily winning every case…These big tech companies are being a little more cautious in what they do,” Professor Sachenkary said.
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