Earlier quoted context omitted.
Yeah, the amazement amongst people here on HN amazes me. The district court was crystal clear about this in their judgment, which at the time caused quite some consternation. The appellate court then affirmed the same and even clarified more clearly that it’s completely fine because it primarily is the mechanic Apple gets payment for the use of their IP and, secondly, their services that encompass more than just paym…
> The appellate court then affirmed the same and even clarified more clearly that it’s completely fine because it primarily is the mechanic Apple gets payment for the use of their IP and, secondly, their services that encompass more than just payment processing. This completely ignores Apple's market power though. Because what stops Apple from making this 40% or 50%? 30% is a fair price? Look what they did to Spotify…
Market power has little to do with the legality of a business model at first blush. Only in very narrow circumstances might it be a relevant factor.
In this case, market power doesn’t matter at all, no matter which angle you approach it with.
For starters, fundamentally, market power doesn’t preclude a company from extracting payment in exchange for their services and IP. This is what both courts explicitly (re)affirmed.
And that makes sense, of course; just because you’re big doesn’t mean you can be forced to give your stuff away for free.
From an antitrust angle, market power mainly starts to matter once you abuse that market power. Here, all signs on the commission point the opposite way.
Apple introduced the 30% commission and the strict App Store rules around the same time the App Store was launched, at which point they had no relevant market power to speak of, so that was not an antitrust issue.
The parties quibbled a bit about at which point Apple gained market dominance because that’s a relevant measuring point to establish antitrust issues. Still, regardless of wherever you place that starting point, it is clear that Apple didn’t use that market power to turn on the screws.
They didn’t, say, increase the commission or impose more onerous restrictions. The opposite happened.
They first introduced a commission discount of 15% for subscriptions after the first year, and later on, they introduced the small business program that provides a 15% reduction to developers with less than $1M in revenue, which, as I understand it to be, covers about 90% of the developers.
These moves, whether for altruistic reasons, goodwill reasons, or fear of regulatory action, are the opposite of abusing one’s market power.
I think that Apple is quite aware of this risk, which is why they always introduce things minimally and strictly, because that gives them the option to assess and decide to loosen up things, whereas the opposite isn’t possible; they can’t impose more restrictions due to the potential antitrust issues at their current size.
Moreover, courts aren’t eager to retroactively punish just based on success.
The way the courts see it, it’s almost self-evident that Apple wasn’t acting in an anti-competitive way with their commission.
From their perspective, if Apple was able to enter a market as a nobody (or create it even, if that’s how you want to look at it) with such restrictive rules and with a commission rate that is now considered high (even though it was a significantly lower commission than what was standard at the time) and still managed to capture a good chunk of the market as they did, then there must be pro-competitive forces at play, even when it’s hard to quantify them.
Again, the way they see it, if it all were so terrible, then nobody would’ve signed up for it in the first place. So, there had to be a pro-competitive benefit that outweighed all of those negatives.
> Because what stops Apple from making this 40% or 50%? 30% is a fair price?
Competition in the relevant markets as defined by the court? Antitrust violations? Pick your poison.
Courts generally don’t care much for hypotheticals because hypotheticals can’t be remedied, and it doesn’t feel good to dole out punishments for things that could be.
Courts tend to limit themselves to what has happened instead of what could happen.
That’s not to say they don’t look at it at all. In this specific case, they’ve looked at the competitive effects and what would stop Apple from doing X, Y, and Z in their test to establish how much competitive pressure Apple is under to understand the motivations behind some of Apple’s actions.
But ultimately, unless Apple does the thing you fear, they can’t punish it.
> Look what they did to Spotify with Apple Music. They absolutely abused their ownership of the platform to stifle a competitor.
I’m looking, but I don’t see much. Of course, this is in part because Spotify wasn’t a party in this case, and so their arguments weren’t a part of the considerations, and the Spotify matter hasn’t been adjudicated.
Ultimately, what I see is that Apple has some benefits that Spotify doesn’t have.
Apple doesn’t have to pay itself a commission (although it might have some internal bookkeeping that accounts for its left hand paying its right hand, like how the Apple entities pay the Irish entity licensing fees for selling Apple products and IP).
Apple also has easier access to customers under their vertical integration.
Other than that, Spotify has near feature parity (or at least the option to offer feature parity) by the frameworks Apple offers third parties.
At face value, this isn’t enough for an antitrust case. Businesses can expand and offer customers services that compete with third-party services and leverage their existing customer relationships to try and sell those services.
There is no positive obligation to facilitate competition or even help competition.
There is, however, a prohibition to leverage your power to stifle your competition actively; an excellent example of this would be Apple banning Spotify from the App Store once they started Apple Music. But again, the opposite is true; they created frameworks that can offer feature parity with Apple Music.
> Also, things change when you effectively become a utility. Apple shouldn't be able to hide behind their "aww shucks, we need the 30% to keep the lights on" routine.
Perhaps for you, but not necessarily for the courts. Especially when they haven’t designated your service as a utility.
Again, just because you are successful (i.e., widely used, successful at selling your stuff) doesn’t mean you suddenly lose your rights.
What’s surprising to me is that everyone always goes, “Oooh, just wait until Apple gets sued and the court gets involved.” Then, when the courts decide differently than the desired outcome, people try to relitigate the matter.
Either people have a poor understanding of what matters legally, or people have expectations that don’t match the legal reality of standing law.
And it’s not like the 9th Circuit or the District Court for the Northern District of California are known to be “activist courts” or known to be corporate friendly. If anything, they’re known to be pretty strict on SV corporations.
You can read plenty of admonishments in the District Court’s judgment, but ultimately, they have to stick to the laws and case law at hand.