Mike Scarcella
(Reuters) – The U.S. government’s antitrust case against Apple (NASDAQ:) builds on the watershed 1998 case that broke Microsoft’s (NASDAQ:) stranglehold on desktop software, but it may prove to be a flawed plan to combat smartphone competition.
The iPhone market today is very different from the near-monopoly market for Microsoft’s Windows operating system two decades ago, and as a result the government may face a more difficult challenge in fighting Apple, legal experts say.
The Justice Department, along with 15 state governments, accused Apple of illegally monopolizing the smartphone market through restrictions on app developers that limit choice and innovation, which it said forces consumers to pay higher prices.
Apple said the government was wrong about the facts and the law.
According to several legal experts, the government must prove that Apple’s business practices were “exceptional” and caused harm to consumers by degrading the quality of competing products.
The government has accused Apple of stifling technologies that could increase smartphone competition in five areas: so-called “super apps,” cloud-based gaming streaming apps, messaging apps, smart watches and digital wallets.
One example cited by the government will be familiar to anyone who sends text messages from an iPhone to an Android phone user – the dreaded “green bubble” that results in interference such as grainy photos sent as text that don’t apply when text messaging between two phones using Apple’s iOS operating system.
Antitrust regulators said Apple is rapidly expanding its influence and power in industries such as content creation and financial services.
By comparison, Microsoft has been accused of abusing its market dominance to prevent users from freely installing software on computers running the company’s operating system.
This may seem similar to Apple’s control of the app store, but legal experts say there are important differences between the two.
Apple can enter into contracts with whomever it wants and develop products as it sees fit, legal experts say.
That becomes a problem when a company with monopoly power takes steps to reduce short-term profits to keep out competitors in the long term, says Douglas Ross, an antitrust expert at the University of Washington School of Law.
“The DOJ’s underlying assumption appears to be that Apple must cooperate with its competitors to allow them to compete with Apple,” Ross said. “This is contrary to antitrust laws.”
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Microsoft was forced to open up its operating system because it controlled 95% of desktop operating systems in the 1990s. By comparison, Apple held 55% of the North American smartphone market based on shipments at the end of September, with the rest largely made up of phones using Google’s (NASDAQ:) Android operating system, according to Canalys, a market analysis firm. solid.
The Department of Justice is seeking to define the smartphone market in the United States. Apple officials said they would try to persuade the court to define the market as the global smartphone market.
Apple and rival Samsung Electronics (KS:) accounted for about 20% of the global market in 2023, according to Canalys, although Apple slightly outpaced Samsung in shipments.
Microsoft “clearly had a monopoly and there were no effective competitors in the PC operating system market,” Ross said. On the other hand, Android is “very popular, especially in the rest of the world, and is a very effective competitor to iOS.”
Ross predicted that the Justice Department will have a harder time defeating Apple than it did in the Microsoft case.
Some of these allegations have already been raised in court.
In a 2021 antitrust case brought by Fortnite creator Epic Games, a federal judge found after trial that Epic failed to prove that Apple users were “locked in” to their iPhones and did not switch to Android devices.
Of course, government lawyers are aware of these differences and brought the case anyway.
Legal experts said that reflects the Biden administration’s Justice Department and Federal Trade Commission views on complex cases.
“They’re happy to take the risk on a really big case,” said plaintiffs lawyer Patrick McGahan, whose firm is involved in the lawsuit against Apple.
Attorney Melissa Maxman of Washington said the Microsoft case has changed the technology landscape and called the government’s lawsuit a step toward increasing competition in the smartphone market.
“If you open up the market for other competitors to enter, you will see prices go down and quality go up,” Maxman said. “That’s exactly what Microsoft said – and guess what, it was true.”
(This story has been rewritten to correct a typo in paragraph 11)