Antitrust: An Apple a Day Keeps the DoJ away?

In a world where corporate giants loom large over the economy, the adage "an apple a day keeps the doctor away" finds a surprising parallel in the realm of antitrust laws. Just as the proverb underscores the importance of daily habits in maintaining health, antitrust measures serve as the daily nutrition needed to preserve the health of the global market. These laws ensure competition thrives, preventing monopolies that can stifle innovation, exploit consumers, and disrupt economic balance. From their origins to the latest legal battles, antitrust laws play a crucial role in keeping markets vibrant and fair.

The US Department of Justice accused Apple of operating an illegal monopoly in the smartphone market in an expansive new antitrust lawsuit that seeks to upend many of the ways Apple locks down iPhones. The DOJ, along with 16 state and district attorneys general, accuses Apple of driving up prices for consumers and developers at the expense of making users more reliant on its phones. The parties allege that Apple “selectively” imposes contractual restrictions on developers and withholds critical ways of accessing the phone as a way to prevent competition from arising, according to the release.

The government points to several different ways that Apple has allegedly illegally maintained its monopoly:

• Disrupting “super apps” that encompass many different programs and could degrade “iOS stickiness” by making it easier for iPhone users to switch to competing devices
• Blocking cloud-streaming apps for things like video games that would lower the need for more expensive hardware
• Suppressing the quality of messaging between the iPhone and competing platforms like Android
• Limiting the functionality of third-party smartwatches with its iPhones and making it harder for Apple Watch users to switch from the iPhone due to compatibility issues
• Blocking third-party developers from creating competing digital wallets with tap-to-pay functionality for the iPhone

The enforcers are asking the court to stop Apple from “using its control of app distribution to undermine cross-platform technologies such as super apps and cloud streaming apps,” prevent it from “using private APIs to undermine crossplatform technologies like messaging, smartwatches, and digital wallets,” and keep it from “using the terms and conditions of its contracts with developers, accessory makers, consumers, or others to obtain, maintain, extend, or entrench a monopoly.”

Apple is the second tech giant the DOJ has taken on in recent years after filing two separate antitrust suits against Google over the past two administrations. It’s reversed a long drought of tech monopolization cases since the landmark Microsoft lawsuit at the turn of the century. The antitrust laws of the United States are foundational to ensuring a competitive market landscape, safeguarding consumer interests, and curbing the monopolistic tendencies of large corporations. These laws aim to promote fair competition for the benefit of consumers, ensuring a variety of choices and keeping prices in check. The roots of antitrust laws can be traced back to the late 19th and early 20th centuries, a period marked by rapid industrialization and the emergence of powerful monopolies, or "trusts," which dominated key sectors of the economy.

The Genesis of Antitrust Legislation

The Sherman Antitrust Act of 1890 was the United States' first federal action against monopolies, a pivotal piece of legislation aimed at regulating competition among enterprises. This act, named after Senator John Sherman, sought to combat anticompetitive practices, reduce market dominance, and preserve a free and competitive marketplace. It declared illegal all combinations "in restraint of trade or commerce among the several States, or with foreign nations."

Following the Sherman Act, two additional pieces of legislation strengthened the U.S. government's ability to regulate monopolistic behavior: the Federal Trade Commission Act of 1914, which established the Federal Trade Commission (FTC) to enforce antitrust laws, and the Clayton Antitrust Act of the same year, which expanded on the Sherman Act by prohibiting specific types of anticompetitive practices not addressed by the earlier law.

Historic Antitrust Cases

Over the years, several landmark cases have tested and shaped the application of antitrust laws in the U.S.:

• Standard Oil Co. of New Jersey v. United States (1911): This case resulted in the breakup of the Standard Oil Company, effectively ending its monopoly over the petroleum industry. The Supreme Court applied the "rule of reason" doctrine, stating that only combinations and contracts unreasonably restraining trade were subject to the Sherman Act.
• United States v. American Tobacco Co. (1911): Similar to Standard Oil, this case led to the dissolution of the American Tobacco Company's monopoly in the tobacco industry, emphasizing the government's commitment to breaking up monopolies that restricted competition.
• United States v. Microsoft Corp. (2001): In a modern context, this case accused Microsoft of holding a monopoly in the PC operating systems market, using anticompetitive practices to maintain its dominance. The settlement required Microsoft to share its computing interfaces with third-party companies but stopped short of breaking the company up.

Europe (European Union)

Policies: The EU's antitrust policy is governed by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), along with regulations on mergers and state aid. Article 101 prohibits agreements that could disrupt competition within the EU's internal market, while Article 102 prevents firms holding a dominant market position from abusing that position.

Impact: European antitrust policy places a strong emphasis on protecting market competition, not just from a consumer welfare perspective but also considering the overall structure of the market and the fairness of business practices. The EU is also more likely to investigate and regulate mergers and acquisitions that could potentially harm competition.

Historic Cases: The European Commission's antitrust case against Google (2017) over its shopping service is a prime example, resulting in a record fine and orders for Google to change its practices. The EU has also been active in regulating mergers, such as the blocked acquisition of Alstom by Siemens due to competition concerns.

Asia (Focusing on China and Japan)

Policies:

• China: Antitrust regulation is relatively new, with the Anti-Monopoly Law (AML) coming into effect in 2008. The AML prohibits monopolistic agreements, abuse of market dominance, and restricts certain mergers and acquisitions that could limit competition.
• Japan: The Anti-Monopoly Act (1947), provides the framework for antitrust regulation, focusing on eliminating private monopolization, unreasonable restraint of trade, and unfair trade practices.

Impact: In both countries, antitrust policies aim to promote fair competition and prevent abuse of market dominance. However, enforcement can be influenced by broader economic and political goals, such as promoting national champions in global markets.

Historic Cases:

• China: One of the significant cases involved Alibaba in 2021, where the Chinese regulators imposed a record fine on the tech giant for anticompetitive practices related to its online retail platforms.
• Japan: A notable case is against Qualcomm (2009), where the Japan Fair Trade Commission found the company had engaged in unfair business practices related to its patent licensing and chipset sales.

Antitrust laws and their enforcement have evolved significantly since their inception, reflecting the changing dynamics of the U.S. economy and advancements in technology. These laws ensure that the market remains vibrant with competition, innovation thrives, and consumers are protected from monopolistic practices. As the digital economy grows, the principles of antitrust enforcement must adapt to new challenges, ensuring that the spirit of competition remains alive in the marketplace.

Antitrust laws are essential nutrients for the global market, preventing the concentration of power that can lead to stagnation and exploitation. Just as a daily apple contributes to physical well-being, robust antitrust enforcement ensures the ongoing vitality and fairness of the economic landscape. Through historic battles and ongoing vigilance, these laws continue to shape a marketplace where competition thrives, innovation is nurtured, and consumers are protected.