CALLS TO break up Facebook this week were interrupted by a more immediate threat to a company just down the road. The Supreme Court’s decision allowing an antitrust lawsuit against Apple to proceed is relatively narrow, but today’s technology titans have reason to be nervous nonetheless.
Justice Brett M. Kavanaugh sided with his four liberal colleagues Monday to let device owners challenge Apple over the way it allows iPhone and iPad users to download apps only through its proprietary store — and then takes a commission on some of the sales. The ruling is less dramatic than it may sound: It’s up to a lower court to determine whether Apple or its store holds a monopoly in any market, as well as whether the firm is abusing its position. Still, a conservative justice’s willingness to entertain a rethinking of antitrust policy in the digital age is a surprise, and a signal.
Antitrust advocates argue that the regime around competition today lags behind the times. Network effects help large companies grow larger while keeping little ones out, and every piece of data acquired makes the last millions or billions of pieces more valuable. The most ardent crusaders for regulation say focusing only on whether consumers are immediately being charged higher prices will not be enough to rein in the tech industry’s power players. In that sense, the court’s opinion is more of the same. It asks whether Apple’s commission policy leads developers to recoup what they lose by making users pay more.
Other aspects of the ruling, however, are surprisingly forward-thinking. By determining that consumers can have a direct purchasing relationship with a platform even when they are buying third-party products, the court blurs the line that companies have held so far: that they are neutral intermediaries. And the additional acknowledgment that the third parties might also bring a case for any harm that Apple causes them in its role not as a dominant supplier of apps but as a dominant buyer — a “monopsony” rather than a monopoly — opens up another front for litigation.
Apple has a robust argument for why it should remain beyond regulatory reach. Its software runs on less than half of U.S. smartphones and a much smaller share of smartphones worldwide. Opponents say that does not matter because Apple still has a stranglehold on apps that run on its devices. (Plus, iPhone users are much bigger spenders than their Android-customer counterparts.) Figuring out what market a company has a monopoly in, if any, is a difficult enterprise. Figuring out whether that company is unfairly leveraging its role to hurt consumers or snuff out any potential competition can be thornier still. But before this week, it looked as though these fights might never have a chance to occur when it came to tech companies. Now, a battle has begun.