BirchTree

Talking tech since 2010

Apple, the Governement, and 2541 footnotes

The House Judiciary Committee release it's long-running report on antitrust policy, focused on Apple, Google, Amazon, and Microsoft. The full report is here, and it's chunky.

There is a ton to get into here, but I had to call out the fact that this report is 449 pages long and includes 2541 footnotes! 9to5Mac’s Zac Hall, Ben Lovejoy, Guiherme Rambo, and Filipe Esposito are called out by name too, as is John Gruber, which is kinda cool. No mentions of myself, which is a shame, but probably for the best.

Anyway, onto the highlights of the Apple section!

(Page 333) More than half of mobile devices in the U.S. run on iOS or iPadOS

This totally checks out, and is not the worldwide number we also hear thrown around (in which iOS is a smaller fish), but it’s the more relevant number for this, an investigating into power in the US.

(Page 334) Apple’s market power is durable due to high switching costs, ecosystem lock-in, and brand loyalty. It is unlikely that there will be successful market entry to contest the dominance of iOS and Android.

Again, also very true. Switching to Android means leaving tons of purchased content behind, as well as losing access to some features that are very important to people. This is not reason in itself that Apple has a monopoly, of course.

(Page 334) Apple’s App Store is the only method to distribute software applications on iOS devices. It does not permit alternative app stores to be installed on iOS devices, nor does it permit apps to be sideloaded. As discussed earlier in this Report, consumers have a strong preference for native apps to web apps, and Apple has acknowledged key differences between them. Developers have explained that Apple actively undermines the open web’s progress on iOS “to push developers toward building native apps on iOS rather than using web technologies.”

True. The App Store is the only way to distribute apps on iOS, and while web apps and PWAs are a thing, Apple has not gone far enough to make these options that are viable alternatives for merchants. The technology is there to do more, Apple has refused to implement many of them though. We can argue about whether they are right to do so, but it is undeniable that PWAs could be more capable on iOS than they are today.

(Page 338) In addition to its app, Dark Sky supplied data to independent weather apps, like Carrot, Weather Line, and Partly Sunny. As a result of Apple’s takeover of Dark Sky, independent weather apps will lose access to the inexpensive, hyper-local weather data that Dark Sky supplied, leading some weather apps to shut down and others to rely on higher-priced suppliers for forecast data.

I don’t know if this is illegal or not (nor do they suggest it is), but this point is definitely worth noting. I made a weather app in 2017 and Dark Sky was the only reasonably affordable weather API I could use in the app. Dark Sky’s API going away absolutely raises the cost of operating for many weather apps.

(Page 341) Additionally, as previously noted, there is little likelihood for new market entry in the mobile operating system or mobile app store markets to compel Apple to lower its rates.

There’s tons more in the pages leading up to this quote, but this point is spot on as well. Android and iOS are like gas stations on the same corner; they both sell gas, you can choose which one, but they are always the same price and there is no room for another gas station to move in.

(Page 342) Software designer and technology writer John Gruber agreed, explaining that in the mid-1990s there was “a thriving market for software sold directly over a thing called ‘The Internet,’” and that Apple’s omission of the fact that “direct downloads and sales over the web” pre-dated the iPhone by more than a decade “is flat-out dishonest.”

I love that Gruber’s sass made it into this report.

(Page 344) Apple’s rationale for its commissions and fees has evolved over time. Its recent explanations of the basis for its 30% commission differs significantly from its explanation of its fee and revenue expectations in the early years of the App Store.

The report is getting a little sassy now too.

OK, I’m going to skip ahead like 30 pages and get to the recommendations.

(Page 377) Some have suggested that there is little difference between the dominant platforms’ access to and use of this data and the way that brick-and-mortar retailers track popular products. The Subcommittee’s investigation, however, produced evidence that the platforms’ access to competitively significant market data is unique. Specifically, the dominant platforms collect real-time data which, given the scale of their user-base, is akin to near-perfect market intelligence. Whereas firms with a choice among business partners might seek to protect their proprietary data, the platforms’ market power lets them compel the collection of this data in the first place.

And:

(Page 378) Second, dominant platforms can exploit their integration by using their dominance in one market as leverage in negotiations in an unrelated line of business.

This is not necessarily illegal from my view. Yes, it gives you added power to do more things in more spaces, but that’s also the point of business.

(Page 378) And fourth, these firms can use supra-competitive profits from the markets they dominate to subsidize their entry into other markets.

Not commenting on if this is legal or not, but it is incredibly frustrating to me that every big company feels like they need to do everything. Does Google need a movie store? Does Apple need to be in TV/film production? Not to beat a dead horse, but this also reminds me how odd it is to see people get excited when these companies release something and gleefully exclaim how “smaller company X is done for now.”

(Page 378) To address this underlying conflict of interest, Subcommittee staff recommends that Congress consider legislation that draws on two mainstay tools of the antimonopoly toolkit: structural separation and line of business restrictions.
There it is, the conclusion of what they suggest be done.
The subcommittee also recommends:
  • Implementing rules to prevent these companies from overly advertising their services over competitors
  • Rules that would make switching platforms less painful for consumers
  • Interoperability of services (citing things like email and phones as good examples of this today)
  • More stringent rules around acquisitions that consolidate power
  • Rules aimed at helping publishers work better with Facebooks/Google’s algorithms
  • Rules to restrict how much platform holders can force those building on said platforms
  • Generally strengthening antitrust laws
  • And more

This is an incredibly dense document, and I only really looked at the Apple stuff, which started 333 pages into this thing! I have not even come close to processing this, or even reading close to all of it, but my impressions reading the parts I did was that pretty much everything I read was factually spot on. This wasn't a situation of me knowing all about the Apple business strategy and practices and scoffing at how wrong the politicians got it; in fact, I was surprised how accurate everything was. The conclusions one draws from those will differ, but the simple facts offered seemed really good to me.

On the conclusions themselves, I think a lot was recommended here, and while certainly not even close to all of it will be implemented, there is some stuff in there that would be real disrutions to these companies.

I'll eagerly be awaiting commentary from those who know the law better than me and can add more context around how sweeping these changes are and how reasonable they are in the first place.

The one thing I know for certain is that the companies involved in this report are not reading this today and thinking, "wow, this is great stuff!"

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