Tuesday, May 4, 2010

Attacking a non-monopolist

On a day that should have been a happy day for Apple, the press is breathlessly covering a leaked story intended to put its tail between its legs. As the WSJ.com reported Monday:

Apple Draws Scrutiny From Regulators
FTC, Justice Department Discuss Possible Inquiry Amid Complaints From Application Developers, Advertising Firms


WASHINGTON—U.S. antitrust enforcers are taking a keen interest in recent changes that Apple Inc. made to its licensing agreement with iPhone application developers and are likely to open a preliminary investigation into whether the company's actions stifle competition in mobile devices, according to people familiar with the situation.
Or, as the FT reported Tuesday:
US authorities have signalled an interest in a potential antitrust probe into whether the software underpinning Apple’s groundbreaking iPhone unfairly locks out competitors, according to a person familiar with the matter.
There’s only one problem with this story: “unfair” is not against the law. Anti-competitive monopolistic practices are.

As experienced antitrust economists noted last summer, there’s no way Apple (with its minority iPhone market share) could be found in a court to have violated antitrust laws:
As [Former FCC Economist Michael] Katz himself noted, “This is notion that iPhone is dominant handset … is just wildly overstated.” He predicted that a claim of a violation of an antitrust law “would never hold up in court” and thus the Justice Department won’t even investigate it.…

In other words, there’s no justification for government intervention if there’s no market failure.
To its credit, ComputerWorld found the story

Antitrust charges against Apple over its decision to ban rivals' development tools from the iPhone would likely fail because the company doesn't have a stranglehold on the mobile market, an expert said today.

"It's going to be difficult for the government to prove antitrust allegations," said Hillard Sterling, an antitrust attorney at Chicago-based law firm Freeborn & Peters LLP.

"The government has to show that Apple's conduct is adversely affecting competition for consumers, and that requires that it show the absence of choice."
So why is it making news? As lawyers like to say, cui bono? Did the leak come from competitors, hoping to tarnish the Apple brand? From regulators, hoping to intimidate Steve Jobs (fat chance) with a case they could never win in court?

Monday’s news was otherwise great for Apple. Apple announced it had sold 1 million iPads in 28 days. (I’m still waiting to hear how many units of the Amazon Kindle and B&N Nook have been sold.)

Also Monday, Canalys released Q1 estimates of worldwide smartphone sales that made Apple look good:
Nokia: 21.4 million, 38.8% share, 56.6% YoY growth
RIM: 10.6 million, 19.2% share, up 45.1%
Apple: 8.8 million, 15.9% share, up 130.8%
HTC: 2.8 million, 5.1% share, up 105.8%
Motorola: 2.6 million, 4.7% share, up 136.8%
So while Apple’s share has risen from 11.5% to 15.9%, it still has a long way until it can earn the title (and the scrutiny) of a “monpolist.”)

1 comment:

Kenneth M. Kambara said...

Citing hardware share obfuscates the issue. I'm not hip on where Katz and Shapiros' heads are these days, but their older stuff is, well, dated. I'm quite curious what their thinking is these days, given the recent discussions of multi-sided markets:


I find this approach to be useful not just in terms of policy and regulation, but also from a strategic viewpoint.

I've had several convos. on these issues and those in the trenches "get" the idea that Apple's market power is much more nuanced than how the press is characterizing it. Focusing on hardware is cherrypicking facts, so I'm not sure if this is just laziness, ignorance, an agenda, or a combination of all of the above on the part of the press.