Apple Responds to DOJ Antitrust Lawsuit

16 months later and having failed to dismiss the case repeatedly, Apple has finally responded to the U.S. Department of Justice’s sweeping antitrust lawsuit against the company.

“This lawsuit threatens the very principles that set iPhone apart in a fiercely competitive market,” the Apple filing reads. “The complaint’s theories, if vindicated, would reduce consumer choice and erode competition. The lawsuit could set a dangerous precedent, empowering the government to take a heavy hand in designing people’s technology.”

“This lawsuit seeks to attack a random collection of Apple’s design choices, degrade the privacy and security benefits of iPhone that customers value, and eliminate the competitive differentiation and consumer choice that currently exist in the marketplace,” it continues. “The Department of Justice and the States argues that five of Apple’s design choices are examples of a purported ‘monopoly playbook’ to eliminate competitive threats and inhibit switching.”

Those design decisions are:

• Apple’s stifling of so-called “super apps,” which Apple quietly started supporting after the DOJ suit.
• Apple’s blocking of cloud streaming apps, which Apple also stopped blocking after the DOJ, though it still inhibits such apps with arbitrarily high fees.
• Apple’s degradation of third-party messaging apps, which Apple does not deny. Instead, it simply states that there are a lot of third-party messaging apps.
• Apple’s limiting of the capabilities of third-party smartwatches, which Apple also doesn’t deny. Instead, it states that these watches can pair with the iPhone, share data via companion apps, and take advantage of only some Apple functions.
• Apple’s limiting of the capabilities of third-party wallet apps, which Apple also doesn’t deny. Instead, Apple claims that keeping these functions to itself–explicitly reducing competition and choice–“protects user security.” Cute.

That’s not much of a rebuttal. The way it reads is that all five claims were true when made, and it doesn’t even try to counter three of the five claims.

Apple’s legal filing is bizarre in other ways. It claims that the complaints that led the DOJ to investigate Apple in the first place “came primarily from a small number of third-party developers,” as if that has any bearing on the legal facts of its antitrust abuses against U.S. consumers, competitors, developers, and partners. It says that the DOJ complaints “disregard Apple’s pace of innovation,” which most would characterize as “slow,” though Apple’s pace and/or innovation likewise have no bearing on the legal facts of its abuses either.

But the central argument here, it appears, is that Apple claims it doesn’t have a monopoly. And that is patently, objectively false.

Many assume that the legal bar for a monopoly in the United States is tied to market share, more specifically an exact market share figure like 80 or 90 percent. But this assumption isn’t just overly simplistic; it’s incorrect. In what world would a company with, say 90 percent market share be considered a monopoly while an otherwise identical company with 89 percent market share was not?

Many also seem to believe that there’s no clear definition of monopoly. But that’s also incorrect. In the United States, a company has a monopoly, and is thus considered a monopolist, when it meets two complementary criteria. It must have market power so significant and durable that it can indiscriminately raise prices or exclude competitors. And its dominant position in the market must be sustainable over time so that competitive forces or the introduction of new alternatives in this market would not force it to change its business practices. Put simply, monopolies are so powerful that they can ignore competition and behave according to their own needs, as if there were no competition. Apple absolutely meets this bar, as its behavior over time demonstrates repeatedly.

But Apple’s filing claims that it lacks “the power to charge supra-competitive prices or restrict smartphone output and thus cannot exercise monopoly power in any properly defined smartphone market.”

“The facts will demonstrate that Apple competes on the merits, that its conduct is and was pro-competitive, and that it has neither intended to, attempted to, nor in fact monopolized the smartphone market,” Apple says.

I guess we’re going to find out. But I suspect the legal reality here skews a lot closer to the DOJ’s complaint than it does to Apple’s retort, which appears to be not so much a reality distortion field as it is an attempt to distract from the relevant facts. Which can be that Apple innovates and violates U.S. antitrust laws. These things are not mutually exclusive.