Thread by @stevesi

Today the US DOJ+16 states/DC (HA we had 19+) filed suit against Apple over abuse of market position ̷b̷y̷ ̷m̷a̷k̷i̷n̷g̷ ̷a̷ ̷v̷a̷s̷t̷l̷y̷ ̷b̷e̷t̷t̷e̷r̷ ̷c̷o̷m̷p̷u̷t̷e̷r̷ in an effort to keep customers reliant on iPhone.

🧵contd until I lose steam

1. This is scary/concerning/freaky if you work at Apple. My first thoughts go to them. What I can say is heads down, be patient. It’s an ultramarathon.

2. If you are a competitor cheering then history tells us down the road you will either become a faded memory or will be sued.

Of course I am not a lawyer and don’t pretend to be one. When the Microsoft case first started in the early 90s. MS’s GC said to me “you have to remember, people who chose to practice antitrust (AT) law not only believe in it but see ‘monopolies’ and ‘abuse’ everywhere.”

Right now the first filing is “shots fired”. It is tempting to evaluate a case on merits and to pick sides. Except the problem is antitrust people already picked their side. It is also the case that many stories will tell the tales of successfully AT efforts *like the MS case*.

Apple has yet to defend itself. Few people speak out in favor of defendants at this time. You will hardly see anyone in the commentator-class speaking against the case. THIS IS IMPORTANT TO KEEP IN MIND.

The people commenting will talk about how AT caused Microsoft to lose the browser war or fail in mobile. Those are 100% false. The biggest impact on AT was to make Windows worse for consumers.

Intel’s efforts at thwarting AT are an even better example. AT efforts hobbled the innovation in x86 and forced Intel into doing a ton of artificial things — “MMX” anyone? While also trapping them from failing to act when AMD acquired ATI, or to embrace more efforts at discrete graphics. In hindsight the fact that the Govt is pumping $10B into Intel puts a price on how much that AT effort cost.

I sat down to read the complaint and my first thoughts were:
* Let’s see the salacious email examples
* How will the define the market
* What was the consumer harm

Will read for these.



And as you saw the case opened w/an email to Jobs about iMessage and Android. Good grief.static01.nyt.com/newsgraphics/d…

If this ever goes to trial you can bet that this case will distill down to a single-digit number of emails (there were 3 memorable ones in the MS case, IMO) or worse internal chat posts or Messages. Imagine if you will the millions of records they have.

Millions.

When it comes to “consumer harm” this has been the bedrock of US AT law for decades. In his standard-defining book Bork outlines this history.

Today, AT professionals are bored with this and want to expand it to competitor harm. This has been an agenda for democrats for decades. That’s why the Amazon case is such a big deal to FTC (DOJ and FTC take turns)—Amazon has tons of competition, vast amounts, but they are big and the AT lens says big companies abuse their position. The Google case faces similar hurdles.

Apple has just over half the share of phones in the US, with Android having the rest. This has been stable for about a decade.

So the question is has Apple prevented people from switching to Android or is it consumer preference.

“Threats” “shapeshifting rules” “restrictions” are also other words for negotiating, adapting, security/privacy/reliability/battery life/etc.

Also “just over half” is tenuous “dominance”.

Note that many of these arguments already failed in the Epic v Apple case, which hasn’t stopped Epic from complaining.

There are juicy paragraphs that make no technical sense like these.

Of course you can do that today. Amazon built a whole platform for this.

This more than anything gets to the deepest irony of this case. It is filing a case about Apple’s smartphone just as there is broad recognition that the Smartphone while hardly nadir, they are past peak innovation.

“Unless Apple's anticompetitive and exclusionary conduct is stopped,it will likely extend and entrench its iPhone monopoly to other markets and parts of the economy. For example, Apple is rapidly expanding its influence and growing its power in the automotive,content creation and entertainment, and financial services industries…”

Have they seen the news? Cars failed. AppleCard a mess. Apple TV is not Netflix or Google TV.

This “bundling” view of competition was used against Microsoft as well. It has always been a complete misunderstanding of how software platforms work and the difference between winning with a bundle that appeals to distribution and winning with a better product.

Apple has aspects of how they integrate their products that provide huge benefits to consumers and in most every case those benefits are available to third parties. Most third parties do not want to build the same product as Apple *because* they don’t want to rely on Apple’s platform. So in most cases what is going on is that Apple has success simply because others want to exploit consumers in their own way. It is not so straight forward that this is a one way thing.

“This case is about freeing smartphone markets from Apple's anticompetitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers , reducing fees for developers, and preserving innovation for the future.”

Filing does not mention how much ATT paid to Apple. Again not understanding the basics of business.

Just out of the gate proving they do not understand the market. A simple read of history would show this is *not* why or how Apple struggled.

“From its inception, Apple had a knack for expensive, high-end design and niche marketing relative to its competitors. But it struggled to compete against rivals that offered lower prices and more programs. After two decades, Apple struggled to compete against Windows personal computers and by the late 1990s, it was on the brink of bankruptcy.”

The highlight is patently FALSE. Microsoft begged and pleaded for Apple to make iTunes available on Windows. The debate inside Apple about going to Windows is well-documented and establish by the people who debated.

How can you take this case seriously? This is how AT people claim AT is a huge benefit. They just make stuff up.

Notice there is no discussion of the enormous consumer benefit and love of the iPod. No discussion how it saved the music industry from piracy. No discussion of how it made the world’s music available in your pocket. NONE.

This is just 100% timeline fraud and gaslighting.

So now they will use emails as exhibits that the speaker is not around to defend themself. Good grief.

Also again note that the development of the App Store was also controversial because Apple prioritized safety and security. The debate internally is also well-documented. I doubt those exhibits will be raised by the governments.

“Demands” “extracts”

Wait until these people learn how products show up at WalMart on the shelves.

This is the most incredible argument. Somehow because you can’t switch to Android it slows down innovation in SmartPhones. First, the many reviewers see the iPhone as more innovative as it has consistently won in many areas that are reviewed. Second, the Android *half” of the market seems to be doing just fine. In fact most data has shown people switch to iPhone. cirpapple.substack.com/p/android-swit…

Literally what makes the iPhone what it is—people are there to have someone responsible to help in the evil world of online safety, financial fraud, and more.

The complaint hinges on 5 specific types of apps that Apple restricts that would have increased competition in smartphones. On the face of it this doesn’t make sense as it would have increased competition in these apps not in phones themselves. Super Apps, Cloud gaming, Messaging, Watches, Wallets.

The amazing thing is how vibrant all of these are today. It is just puzzling what this is about except for large incumbents with margin challenges looking to not pay Apple.

“Apple also prohibits the creation and use of alternative appstores curated to reflect a consumer's preferences with respect to security, privacy, or other values.”

In the middle they just toss in alternative app stores and unlike EU they just come out and say Apple should offer insecure, privacy, valueless stores.

I can’t even.

“Apple's smartphone monopoly means that it is not economically viable to invest in building some apps, like digital wallets, because they cannot reach iPhone users.”

Somehow it is not economically viable to address half the market. How many iPhone-only apps will Apple need to demonstrate to make the counter-point?

More technical nonsense. Blame Apple for SMS. Good grief.

That’s enough for now. This is far more ideological and political than it is legal or business. It is not just that it is weak but the foundation is based on ahistoric tales of the past. And it is horrible to quote Jobs knowing he cannot be deposed. Horrible.

Apple says it spent three years trying to bring Apple Watch to Android 9to5mac.com/2024/03/21/app…

Wanted to continue to highly the fact errors in the filing. Keep in mind most of what is said is not meant to be admissible facts but more like the opening/closing statements which have different evidentiary standards or leeway.

The filing is very confused about what the platform is. This is similar to what we experienced in the Windows case. Is it APIs? Is it the end-user experience? And in Apple's case is it the hardware?

I suspect the case is confused because so much of the institutional knowledge and political desire is to go after the software industry.

Unfortunately for that, with an iPhone the platform is both the hardware and software. This will be used one way when talking about competitors (eg dominant share) but entirely the other way when talking about developers.

This actually matters because when you seek a remedy you have to consider what it is that is being fixed. So here the platform is the OS, but Apple is a hardware company (one could quote Jobs but he can't be deposed)

The second one is clearly about software being disruptive.

The third is some weird notion of what consumers care about. Note credit card companies would like a word over what people care about, hint it isn't transactions.

I keep returning to this last point -- Apple resists technologies. Antitrust law doesn't make it illegal to make dumb choices. If a new technology is compelling it get adopted first on Android (or Linux for that matter, as we've seen in XR, glasses, pins). And this idea it keeps iPhones expensive is non-sensical not to mention easily observed by watching the Super Bowl ads.

The documents will show they were debating whether to have apps at all. Why? Because of concerns over how people will exploit the platform and risk security and privacy, and battery life. See "Thoughts on Flash" and see "I'm a Mac" tv commercials. The whole concept of curated apps and platform definition to include h/w, software, store ignores the idea of unleveling technology the same as EU has done. This is rear view mirror regulation.

How does Apple drive people away?

What is a monopoly rent if the price has gone down as the platform became more popular? Why is Android's take the same? Why is Sony's? Does anyone think Unity/Unreal like their store fees or do they feel they messed up?

As you keep reading this is getting more sloppy. What's a "subset of developers" v "app maker"? Last I checked only the government has taxes.

Have they used an Android phone? Has anyone tried to get their photos of Google? Can you even move your Google docs anywhere? Have you tried to export your saved maps? The list is endless and Google has higher share.

Please read "Thoughts on Flash" as it could not be clearer why Apple did what it did. And this was before the iPad and long before PWAs or large smartphone share. Apple had less than 15% share when it drew the line at these runtimes. Yes it is the case that behavior is different when there is large share and if anything Apple is far more lax today with HTML and other extensions to single apps.

Other than saying super apps have less stuff in their store this makes no sense at all.

This is probably one email for this entire point.

A key part of Apple's brand promise is child safety. The streaming platforms are used by many under 18 or under 16 and are notorious for lax to no enforcement of standards and for inviting use to in-app purchasing to bypass parental controls. Essentially DOJ is arguing against having those capabilities on iPhone.

The EU is currently figuring out the problems they are creating in pushing this agenda.

Imagine a world where a company should be forced to provide its service for a competitor when there are a multitude of services that can be used a click away and in fact are used by 5-10x the number people already.

Apple's success in China and Europe speak to the success of alternate messaging platforms.

Nowhere is there any view that Google should do a better job providing stuff for iOS.

This is a lot of words to talk about opening up NFC which has a host of challenges. OTOH Square a company that did not even exist managed to become a $50B payments business without access by simply using the audio connection. Venmo and PayPal have both benefitted enormously from iPhone.

One of the challenges with using competitors as the proxy for consumers is that competitors go to DOJ and say what they want but what they want is always to gain advantages over each other with the least friction to their own work. This is a never-ending debate.

We saw this a ton in the Windows case because at the root of the case were OEM rights. Amazingly the case required us to have precisely uniform terms for each OEM which they HATED because then there was no way to have something as simple as a cool bizdev deal tied to a new type of PC or a volume discount for the biggest customers.

So even if there is access to APIs the competitors to each other hate level playing fields and will find that to complain about.

Android did payments first. It was their idea not to charge and had nothing to do with Apple. Apple entered the market charging which says something about the quality of the capability and desire for companies to partner with them. It is similar to MFI and hardware -- google did not think of defining standards and maintaining them for hardware accessories for Android. So there's nothing to enforce and no business case and hit or miss when you buy accessories.

One of the most striking aspects of this complaint is the idea that Apple has recently developed all the issues complained about in an effort to maintain "monopoly."

This is not the history of the phone or design choices or even Apple itself. The "playbook" (using their words) for Apple has been essentially unchanged since 1984. All that has changed is the increasing quality of the experience as the industry has grown up.

This is another example of not giving credence to what Apple already does. For example with house keys in HomeKit by using HomeKit keys are part of a Home, shared across users, managed across devices, etc. Regardless of how many brands of locks one has. Failing to even acknowledge the benefits Apple brings is irksome.

This reminds me of EU thinking we need to make default device drivers pluggable so that a printer company can be sure to sell ink rather than avoid zero days.

Apple is going to dominate the auto industry with CarPlay and keys. Have they not kept up with Bloomberg on Apple CAR?

To show how confused the DOJ is about hardware v. software they say this:

"Apple's conduct has resulted in less choice for smartphone users. Today, only two companies (Google and Samsung) remain as meaningful competitors to Apple in the premium smartphone market."

Google is not a meaningful maker of Smartphones.

Samsung is not a meaningful maker of smartphone operating systems.

So which is it? Also "premium smartphone" is a tell that further down they will start to define the market in a funky way, "premium" is all that matters.

The other companies they might refer to, Blackberry, Amazon, Nokia, Microsoft all went out of business in their unique and well-documented ways having nothing to do with Apple doing stuff to them.

The continued emphasis on cross-platform says this is about the software and assumes the PC model for hardware. This doesn't make any sense. The market is for Android compatible phones not phones lacking an operating system.

Apple literally defined the iPhone App Store from a start to resist runtimes. Steve Jobs explained all of this with respect to Flash when iPhone had <15% share.

This makes no sense still after reading this same claim the third time. Apple is making its product better by not supporting these things and more people use the phone because it is better because battery life, security, privacy, control of credit cards, child safety, and more are better.

In this case the DOJ is assuming better is Android. If Android is better then more people would use it as is the case around the world in total.

Is there a car that only has CarPlay?

THIS IS SO WRONG. This presumes that the right model for smartphones is the PC model. Please please go watch I'm a Mac commercials. When was the last time someone ran antivirus software on their iPhone or blue screened?

What this claim does is fail to recognize innovation. Insane.

Also discovery will show they tried to get the Mac store to be like the iPhone App Store.

This is key. What they are saying is that they will find the right market later and do so based on whatever Apple says and whatever they can find a consulting economist to say.

But to be clear if we define the market to include only where Apple sells phones then Apple is winning there.

OTOH Walmart sells iPhones and wouldn't that by most economic definitions include entry level. This is going to be a debate over phones that are $89 v $129 or $19/month v 29/month?

But this whole case is defined to be not Android v. Apple but only some Android phones (Samsung and Google?) v Apple even though the consumer of other Android phones are exactly equivalent in terms of the developer endpoint or the consumer using apps.

Apple's monopoly caused these phones to fail.

A good deal of the relief sought is based on the desire to make it so there is no phone platform but just middleware. This is almost certainly momentum from the US case where middleware became known to legal circles. The irony is that was all about Java which completely failed for all the obvious technical reasons it would fail.

The fact that there are two middleware solutions for games shows the complete fallacy in the idea "there can be only one". Instead we'll all just get tons of crappy apps that each do their own take on "operating system". If you want more on the mistake of cross-platform development check this out -> medium.learningbyshipping.com/divergent-thou…

Also this podcast on cross platform with Benedict Evans and I.

Cross platform just doesn't work and it is technically criminal for the DOJ to base a whole case strategy on thinking that is what developers should do.

a16z.com/podcast/a16z-p…

What does DOJ want for relief? They aren't explicit at this stage. This part of the case can get hyperbolic quickly. In the Microsoft case that was brought the primary claims were about the PC operating system market, access to APIs by third parties, middleware distribution within Windows by OEMs, and browsers.

Yet quickly the "remedy" for all those was to split Microsoft into two companies, Windows and Everything Else. But that split literally had nothing to do with the claims of the case. Even after that breakup was ordered the settlement ended up being about...terms and conditions with OEMs, distribution and defaults for middleware, and turning off IE. They even stopped short of forcing Microsoft to distribute Netscape though the EU picked up there.

So expect the ask to start to look like the EU but *even more*. At least early on. This will include stuff like
* Any developer can have access to any API apple uses for a competitive first party app (skipping over whether the only those developers or all developers can use it---hello NFC readers)
* App Store fees
* App Stores associated with apps that are as good as App Store with no intermediate approval
* and so on.
* Defaults for at least wallet, music, news, streaming, etc. What a mess this will be as everyone jockeys to be a wallet which is a service with no value other than having just one.

Thank you for reading. I feel better now. 🙏