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There are growing concerns that Apple could be facing an anti-trust investigation by the US Department of Justice.

Apple faces antitrust worries

What does antitrust mean?

In most jurisdictions around the world, it is illegal for large companies to band together to form agreements or “trusts” to behave in a particular way – for example, to all sell their products for the same high price. Laws designed to outlaw this type of behavior are called antitrust legislation.

However, the term is used more generally to refer to laws designed to prevent companies from engaging in any kind of anti-competitive action – that is, do anything that would tend to artificially distort competition within a market.

One common myth is that antitrust laws only apply to monopolies. This is very much not the case: They apply to any company large enough to have a dominant position in any market. As we shall see below, the definition of the word “market” can be crucial to deciding whether antitrust concerns arise.

Why is Apple facing antitrust investigations?

First, Apple is a very large company, and it would be very easy for a company of that size to commit antitrust violations, so it is to be expected that any massive corporation would be put under the antitrust microscope.

But in Apple’s case, there are some more specific concerns based on the company”s market dominance in particular areas. These are addressed below.

What are the antitrust concerns with Apple?

There are a number of different ones, in areas as diverse as ad tracking and Sign In With Apple, but here are three of the main ones.

The App Store

The biggest antitrust concern is the App Store.

Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store.

Companies like Epic Games argue that they should be allowed to sell in-app purchases without Apple taking a cut of their revenue. The argument here is that Apple harms developers by taking part of their income, and consumers by forcing developers to charge more to make up for Apple’s cut. Apple, in response, says that it is perfectly normal for a company to take a cut of the sales it facilitates.

Default apps

Additionally, some companies accuse Apple of anti-competitive behavior by giving its own apps advantages over third-party ones.

One way that Apple does this, they say, is by pre-installing its own apps. For example, when the Apple Weather app is already installed on an iPhone when you buy it, then Apple’s own app has an obvious advantage over a competing app.

There is overlap here with the App Store concerns. For example, Apple Music and Spotify are competitors, but not only is Apple Music preinstalled, you can subscribe from within the app. If Spotify offered this same ability, it would have to pay Apple a 30% cut. Spotify can’t afford this, so users are forced to take a more long-winded route to subscription, which gives Apple Music an additional competitive advantage.

Relationships with carriers and retailers

Apple has also been found guilty in more than one country of exploiting a dominant position within the smartphone market to place undue demands on carriers and retailers.

Because the popularity of iPhones meant carriers had to sell them, Apple was able to dictate terms. In South Korea, for example, it was accused of imposing three onerous conditions on local carriers:

  • Carriers had to buy minimum quantities of each model, dictated by Apple
  • Carriers had to share the cost of warranty repairs or replacements
  • Carriers had to pay to run Apple’s own TV ads for the iPhone

Budget-focused carriers might, for example, want to buy only older and cheaper models, as that’s what their customers want, but Apple would force them to buy flagship models, too. And if a phone proved faulty, Apple wouldn’t just replace it, but would oblige carriers to meet some of the costs. Finally, although carriers had to pay the full cost of running iPhone ads on TV, they were only allowed to use Apple’s own ads, and the only thing they were permitted to change was adding their own logo to the final frame.

Additional areas of concern range from Apple Pay to a 4K video codec alliance!

What could happen to Apple as a result?

Antitrust outcomes will usually happen on a country-by-country basis, though there are exceptions. In Europe, for example, it is likely that the European Union will act as a bloc, and that any legislation applying to Apple will apply across all 27 member countries.

The worst-case scenario for Apple is for the US government to call for the breakup of the company. For example, it might be ruled that Apple Inc cannot run an App Store while also selling the iPhones on which those apps run. This is not a likely outcome, however.

A more likely scenario is a series of smaller changes. For example, Apple might be required to appoint an independent oversight board to carry out app reviews, or that it must allow Spotify to offer in-app subscriptions without taking a cut.

How is Apple responding?

In public, Apple’s stance is an outraged one, arguing that it does not have a dominant position and is doing nothing wrong. Behind closed doors, the company is aware that it either has to change some of its practices, or be forced to do so by law.

For example, while publicly declaring that a 30% commission on apps was industry standard, Apple made a massive U-turn by introducing the Small Business Program, with a 15% commission instead. Although touted as applying to the smallest developers, it in fact applies to 98% of them. It would be more accurate to say that the App Store now has a standard commission rate of 15%, with a higher 30% rate applying only to a tiny minority of companies.

The company has also quietly made a number of other changes in direct response to antitrust concerns, for example, opening up the Find My app to third-party accessories, and allowing people to change their default email app and web browser.

However, Apple is still sticking its head in the sand and hoping the issue will go away – when it absolutely won’t.

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Judge denies media requests for public release of Steve Jobs deposition from iPod antitrust case

A judge decided today to deny media requests for a public release of Steve Jobs’ videotaped deposition in last week’s iPod antitrust case. Apple had been fighting back against these requests, saying that members of the press who wanted to air the video just wanted to see “a dead man.”

The ruling essentially states that since live testimony from witnesses was not recorded and then released to the media, the Jobs deposition should not be either. Because the video was not entered into evidence as an exhibit, it can’t be treated like evidence.

There was also a concern expressed in the ruling that in the future, witnesses might be hesitant to give videotaped depositions if they believed the video might be released to the press. Transcriptions of the portions of the video shown in court are included in the public record, and the judge found that to be sufficient.

You can real the full ruling below (via Apple Insider).

Apple wins iPod & iTunes DRM antitrust case, jury decides

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Update — Apple’s statement via CNBC: “We thank the jury for their service and we applaud their verdict.”

A jury has decided that Apple is not guilty of violating antitrust laws in the decade-old lawsuit involving the iPod, iTunes Music Store, and digital rights management usage. The jury had to determine if the iTunes updates affecting customers’ iPods were “genuine product improvements” with Apple citing security concerns for implementing the usage of DRM.
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Jury begins deliberations in antitrust lawsuit over iPods, iTunes, and third-party music stores

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The class-action lawsuit against Apple over alleged anticompetitive behavior in how the iPod handled songs from third-party much stores is finally in the hands of a jury. Following last week’s final witness testimony, the jury has started deliberations in the decade-old case.

The evidence and testimony in this case have given us quite a bit of insight into the way Apple operated ten years ago with regards to its iPod and iTunes business. Former CEO Steve Jobs took jabs at rival Real Networks in a videotaped deposition (which the media wants the public to see, but Apple doesn’t). We also learned details of Apple’s contracts with record labels.


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Apple fighting media requests to air Steve Jobs deposition from iPod antitrust suit

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As we noted earlier today, several media outlets have filed a motion that would allow them to air the videotaped deposition of Apple co-founder Steve Jobs that was played for jurors in the ongoing iPod antitrust lawsuit. Now the Verge reports that Apple is fighting back against the motion, with the company’s lawyers accusing the media of wanting to see “a dead man.”

As Apple attorney Jonathan Sherman put it:

The marginal value of seeing him again, in his black turtleneck — this time very sick — is small. What they want is a dead man, and they want to show him to the rest of the world, because it’s a judicial record.


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AP, Bloomberg and CNN file motion to allow them to broadcast Steve Jobs deposition video

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We may get to see the two-hour video of Steve Jobs giving pre-trial evidence in the iPod antitrust case, if the judge approves a motion jointly filed by AP, Bloomberg and CNN to make it public. CNET reported:

“Given the substantial public interest in the rare posthumous appearance of Steve Jobs in this trial, there simply is no interest that justifies restricting the public’s access to his video deposition,” attorney Thomas Burke, who is representing all three media organizations, wrote in the filing Monday

The video currently has the same status of live testimony given in the case, meaning that it can be reported on but the video cannot be broadcast … 
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Last plaintiff in iTunes antitrust lawsuit disqualified, but the show must go on as lawyers search for replacement

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In the latest twist in the iPod antitrust lawsuit that has already given us a deposition of Apple co-founder Steve Jobs and details about Apple’s deal with record labels to sell music in the iTunes Store, a judge ruled on Monday that the trial will continue even though there are no plaintiffs left.

Yes, you read that correctly. Every single plaintiff in the case has been disqualified. Marianna Rosen, the last complainant standing, was discovered to have never purchased an iPod that was affected by the song-deleting software updates in question.


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Apple questions whether iPod class action suit can proceed as case may lack genuine plaintiffs

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Just as it looked like the iPod-related class action suit against Apple was getting interesting, Eddy Cue arguing that competing music stores had effectively hacked the iPod, it now seems the case is in danger of collapsing.

Apple’s lawyers have written to the judge to say there is no evidence that either of the two plaintiffs owned iPods during the time affected by Apple’s action to remove non-iTunes songs from iPods … 
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Apple admits it deleted songs purchased through competing stores from iPods without warning

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Today’s continuing testimony in the iTunes antitrust lawsuit has revealed that the company added changes to iTunes that deleted music that had been purchased through competing stores like Real Player from iPods. Users would not be notified that any music would be deleted by updating their music players.


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iPod-related class action suit against Apple starts tomorrow, Steve Jobs emails & video key evidence

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This case goes back a while …

Emails and a video deposition by Steve Jobs are likely to form key elements of the evidence in an iPod-related antitrust case against Apple which opens in California tomorrow, reports the NYT.

The case goes back more than a decade, to the time when iPods would play only music purchased from iTunes or ripped from CD, with consumers unable to play music bought from competing stores. The class action alleges that this amounted to anti-competitive behaviour, and that consumers were forced to pay higher prices as a result … 
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Italian authorities give Apple & others 20 days to submit defence to “unfair” in-app purchase claims

An Italian competition organization has given Apple, Google, Amazon and Gameloft twenty days to submit a defence to its investigation into in-app purchases or face a fine of up to €5M ($6.9M), reports ZDNet.

The companies now have 20 days to comply with the requests for information that came with the letter, and to respond with their defences to the allegations. If the alleged violations proved to be true, the three internet giants and the European game developer could each face a fine up to €5m — although the Italian watchdog told ZDNet that the punishment would be proportional to each company’s size.

The complaint is based on two concerns. First, whether consumers are clear about the likely total cost of the app at the time they download it. Second, whether sufficient information is provided about how to prevent or limit in-app purchases, especially in games played by children.

Apple settled a similar complaint with the FTC in January, after last year offering refunds to parents whose children had made in-app purchases. At that time, Tim Cook pointed to the safeguards in place, which include the ability to disable in-app purchases with a single switch, and requiring a password for any purchases made more than 15 minutes after downloading the app.

iOS also now alerts customers that further purchases can be made within 15 minutes without re-entering their iTunes password, and all iTunes apps that offer in-app purchases are labelled as such in the App Store.

Apple’s request to remove court-appointed ebooks antitrust monitor rejected

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A motion by Apple to halt the operations of a court-appointed antitrust monitor has been rejected, the Wall Street Journal reports. The lawyer, Michael Bromwich, was appointed by the court to ensure the compliance Apple’s iBook platform with antitrust laws. Apple previously petitioned the court to have Bromwich removed from his post, believing that his $1,100/hour legal fees were leading him to take undue investigative steps solely for the purpose of overcharging the Cupertino company.

Bromwich was temporarily taken off of Apple’s case, but subsequently returned to continue his duties. Apple then accused Bromwich of going beyond his legal authority and requested once again that he be removed from the company’s case. Today the court ruled that Apple’s request would have resulted in Bromwich being unable to execute his legal duties, and thus rejected the injunction.

The full ruling is embedded below:


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Apple granted temporary relief from external monitor in ebooks antitrust dispute

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In what is quickly becoming the next big ongoing back and forth between Apple and [insert third party here] of 2014, a new development has unfolded in the antitrust dispute over Apple’s iBooks practices. Michael Bromwich, the external monitor assigned to ensure Apple complies to antitrust laws relating to its iBooks program, has been temporarily removed, Reuters reports, following an “administrative stay” granted to Apple following a recent complaint filed by the Cupertino tech company against the attorney.


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Samsung could settle in EU antitrust case over use of essential patents against Apple

Reuters reports that Samsung is currently in preliminary discussions with EU regulators regarding a possible settlement related to charges that it abused its market dominance by blocking Apple from fairly using its essential patents in various ongoing patent disputes:

The talks came after the European Commission, which acts as EU competition regulator, told Samsung in December that it was acting unfairly by seeking injunctions against Apple over use of the essential patents.

“Samsung has been involved in settlement discussions for several months now. Samsung wants to settle,” said one of the sources, who declined to be identified because of the sensitivity of the matter.

If Samsung does settle in the case, it could avoid as much as $17.3 billion in fines. However, it would presumably have to agree to license its essential patents on fair terms, which could have an impact on current cases related to the European Union’s 3G UMTS standard.

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Penguin agrees to pay $75 million in consumer damages following eBook price fixing case

We already knew back in December that Pearson, along with a handful of other publishers had decided to settle with the U.S. Department of Justice in the high-profile Apple ebook price-fixing case. Today a statement from Peason’s Penguin unit confirms that it has now also reached an agreement that will see the publisher pay $75 million in consumer damages to the US State Attorneys General on behalf of people that were overcharged due to the alleged price fixing:

Penguin has reached a comprehensive agreement with the US State Attorneys General and private class plaintiffs to pay $75 million in consumer damages plus costs and fees to resolve all antitrust claims relating to eBook pricing.  Penguin has also committed to the State Attorneys General to abide by the same injunctive relief as previously agreed in a separate settlement with the Department of Justice.

In anticipation of reaching this agreement, Pearson had made a $40m provision for settlement in its 2012 accounts. An incremental charge will be expensed in Pearson’s 2013 statutory accounts as part of the accounting for the Penguin Random House joint-venture.

Apple eBook price-fixing lawsuits hit Canada following DOJ suit

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Following an investigation into alleged eBook price-fixing, the U.S. Department of Justice filed an antitrust lawsuit against Apple and publishers Macmillan and Penguin earlier this month, who refused to settle. Other publishers, including Hachette, HarperCollins, and Simon & Schuster, settled and reached an agreement to return Amazon to its previous wholesale model and dismantle Apple’s agency model. The settlement also included agreements with select states that would see $51 million in restitution paid to those who purchased eBooks through Apple’s platform. Now, several Canadian publications are reporting class-action lawsuits were filed against Apple and the five publishers throughout Canada.

Lawyer Normand Painchaud spoke with The Montreal Gazette about his class-action suit filed in Quebec Superior Court and talked about two others filed in Ontario and British Columbia:


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US Federal Trade Commission subpoenas Apple in Google antitrust probe over iPhone search

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According to a report from Bloomberg (via AllThingsD), the U.S. Federal Trade Commission subpoenaed Apple as part of its antitrust investigation of Google. There are not many details currently, but the report claims the FTC is interested in Apple’s agreement with the company to use Google as its primary default search engine on iOS devices.

The agency’s request for documents includes the agreements that made Google the preferred search engine on Apple’s mobile devices, said the people, who weren’t authorized to speak publicly and declined to be identified. Google rivals such as Microsoft Corp. (MSFT) have criticized these agreements as anticompetitive.


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The Justice Department probing Apple and five major US publishers over alleged price fixing of electronic books

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The Wall Street Journal reports that the United States Justice Department threatened to launch an antitrust lawsuit against Apple and five of the nation’s biggest book publishers over an alleged price-fixing that has resulted in higher prices of e-books.

Several of the parties have held talks to settle the antitrust case and head off a potentially damaging court battle. If successful, such a settlement could have wide-ranging repercussions for the industry, potentially leading to cheaper e-books for consumers. However, not every publisher is in settlement discussions.

The government is specifically aiming to probe CBS Corp.’s Simon & Schuster Inc., Lagardere SCA’s Hachette Book Group, Pearson PLC’s Penguin Group (USA), Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, and HarperCollins Publishers Inc., a unit of News Corp. that also owns The Wall Street Journal.

At question: The so-called agency model where publishers freely set prices of their titles on Apple’s iBookstore before the Cupertino company reaps 30 percent of the proceeds. The freedom to pick the price has led most—if not all— publishers to allegedly raise prices of e-books across the board as they feared customers would get accustomed to inexpensive $9.99 Kindle books from Amazon.

Barnes & Noble CEO William Lynch already gave a deposition to the U.S. Justice Department. He said abandoning the agency model would allow a single party to achieve dominance in the marketplace, alluding to Amazon. According to the people familiar with the matter, the U.S. Justice Department believes that Apple and the publishers “acted in concert to raise prices across the industry, and is prepared to sue them for violating federal antitrust laws.”


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Apple, Google, and five other companies must face lawsuit over no-poaching agreements

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Late last week we told you that the U.S. Justice Department apparently had evidence that Apple, along along with Google, Adobe, Intuit, Pixar, Intel, and Lucasfilms, entered “no-poach” agreements as part of an antitrust investigation from 2010. U.S. District Judge Lucy H Koh made a statement yesterday at the U.S. District Court in San Jose, Calif., confirming the companies must face a lawsuit. According to the report from Bloomberg, Koh said she would allow plaintiffs to re-file their complaint even if an initial request by the defendants to dismiss the claims is granted.  

Judge Koh’s decision yesterday will result in Google and the other companies having to provide a detailed account of the agreements made with other companies. They must also allow lawyers to take depositions. One lawyer representing the plaintiffs, Joseph Saveri, said, “We get to see what really happened,” claiming the case could result in hundreds of millions of dollars in damages. Google provided statements to Bloomberg claiming they have “always actively and aggressively recruited top talent,” while the others have declined to comment.

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