Apple’s antitrust paradox

ABSTRACTThis paper builds on Khan’s work on Amazon by transferring her normative framework to Apple. It explores the company’s anti-competitive business practices, main antitrust concerns, and the currently proposed reform measures from an innovative business ethics and law (i.e., ordoliberal) perspective. The paper argues that one of the key issues with Apple is the company’s closed ecosystem combined with its role as an internet gatekeeper. The E.U.’s Digital Markets Act, which aims to open Apple’s ecosystem – via data portability, interoperability, and multi-homing requirements – is a necessary step in the right direction. Yet, it is insufficient to prevent the lock-in effects of a ‘walled product garden’ and ensure complete device and platform neutrality. That is, additional steps must be taken to overcome Apple’s dual role as a platform operator and service provider and inhibit the company from engaging in anti-competitive business conduct.KEYWORDS: Apple Incantitrustcompetition law and policyDigital Markets Actordoliberalism Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 See L. Khan, ‘Amazon’s Antitrust Paradox’ (2017) 126 Yale Law Journal 710.2 See L. Khan (n 1): “In addition to being a retailer, Amazon is a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of [TV] and films, a fashion designer, a hardware manufacturer, and a leading provider of cloud server space and computing power” (p. 754).3 See for more information on Apple’s App Store as an essential facility: B. Kotapati, S. Mutungi, M. Newham, J. Schroeder, S. Shao, & M. Wang, ‘The Antitrust Case Against Apple’ (2020) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3606073 (accessed: July 11, 2023).4 See B. Baer, J. Baker, M. Kades, F. Scott Morton, N. Rose, C. Shapiro, & T. Wu, ‘Restoring Competition in the United States’ (2020) https://equitablegrowth.org/research-paper/restoring-competition-in-the-united-states/ (accessed: July 11, 2023), J. Baker, The Antitrust Paradigm (Harvard University Press 2019), R. Bork, The Antitrust Paradox (Free Press 1978/1993), R. Bork & W. Bowman, ‘The Crisis in Antitrust’ (1965) 65 Columbia Law Review 363, H. Hovenkamp, ‘Whatever Did Happen to the Antitrust Movement?’ (2019) 94 Notre Dame Law Review 583, H. Hovenkamp, ‘The Looming Crisis in Antitrust Economics’ (2021) 101 Boston University Law Review 489, H. Hovenkamp, ‘Antitrust and Platform Monopoly’ (2021) 130 Yale Law Journal 1901, H. Hovenkamp & F. Scott Morton, ‘Framing the Chicago School of Antitrust Analysis’ (2020) 168 University of Pennsylvania Law Review 1843, A. Klobuchar, Antitrust (Knopf 2021), C. Shapiro, ‘Antitrust. What Went Wrong and How to Fix It’ (2021) http://faculty.haas.berkeley.edu/shapiro/fixingantitrust.pdf (accessed: July 11, 2023), M. Wörsdörfer, ‘Big Tech and Antitrust: An Ordoliberal Analysis’ (2022) 35 Philosophy & Technology Article 85.5 See Bork (n 4) and Bork & Bowman (n 4). Note that the title of Khan’s paper, Amazon’s Antitrust Paradox, alludes to Bork’s magnum opus, The Antitrust Paradox.6 In its early years, Amazon was willing to forego profits to be able to grow and establish market dominance, e.g., in the form of increasing market shares.7 See Khan (n 1), L. Khan, ‘The New Brandeis Movement: America’s Antimonopoly Debate’ (2018) 9 Journal of European Competition Law & Practice 131, L. Khan, ‘Book Review. The End of Antitrust History Revisited’ (2020) 133 Harvard Law Review 1655, L. Khan & S. Vaheesan, ‘Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents’ (2017) 11 Harvard Law Policy Review 235.8 See T. Wu, The Curse of Bigness (Columbia Global Reports 2018), T. Wu, ‘The Utah Statement’ (2019) https://onezero.medium.com/the-utah-statement-reviving-antimonopoly-traditions-for-the-era-of-big-tech-e6be198012d7 (accessed: July 11, 2023), T. Wu, ‘The Curse of Bigness: New Deal Supplement’ (2020). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3646258 (accessed: July 11, 2023).9 The paper’s title indicates that many of the antitrust issues discussed by Khan also apply to Apple (see Section 3).10 See Kotapati et al. (n 3).11 See D. Geradin & D. Katsifis, ‘The Antitrust Case Against the Apple App Store’ (2020) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3744192 (accessed: July 11, 2023), Kotapati et al. (n 3), S. Völcker & D. Baker, ‘Why There is No Antitrust Case Against Apple’s App Store. A Response to Geradin & Katsifis’ (2020) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3660896 (accessed: July 11, 2023).12 This paper builds on our previously developed ordoliberal framework and applies it to the Apple case study (see M. Wörsdörfer, ‘Individual versus Regulatory Ethics: An Economic-Ethical and Theoretical-Historical Analysis of Ordoliberalism’ (2013) 3 OEconomia 523, M. Wörsdörfer, ‘Ordoliberalism 2.0: Towards a New Regulatory Policy for the Digital Age’ (2020) 19 Philosophy of Management 191, M. Wörsdörfer, ‘Digital Platforms and Competition Policy: A Business-Ethical Assessment’ (2021) 9 Journal for Markets and Ethics 97, M. Wörsdörfer, ‘What Happened to ‘Big Tech’ and Antitrust? And How to Fix Them!’ (2022) 21 Philosophy of Management 345, M. Wörsdörfer, ‘The Digital Markets Act and E.U. Competition Policy: A Critical Ordoliberal Evaluation’ (2023) 22 Philosophy of Management 149, Wörsdörfer (n 4).13 See W. Eucken, Die Grundlagen der Nationalökonomie (Springer 1950/1965), W. Eucken, Grundsätze der Wirtschaftspolitik (Mohr Siebeck 1952/2004), W. Eucken, Ordnungspolitik (LIT 1999), W. Eucken, Wirtschaftsmacht und Wirtschaftsordnung (LIT 2001).14 According to Wörsdörfer (n 4), the following antitrust principles can be derived from ordoliberalism: competitive economy, open markets, non-exclusionary contracts, correction of market power, limiting rent-seeking, focus on regulatory policy, competition law/policy, merger review/blockage, cartel office/M&A commission, and divestiture.15 The Apple Computer Company was founded in 1976. In 1977, the company got incorporated as Apple Computer, Inc. Since 2007, the company is officially referred to as Apple Inc.16 Jobs (1955-2011) is credited with being a computer science pioneer. Together with Wozniak, he was one of the masterminds behind the personal computer revolution and co-creator of many iconic Apple products, including, but not limited to the Apple II, Macintosh, iPod, iPhone, iPad, and the first Apple Stores. He was the co-founder, chairman (1985, 2011), and CEO of Apple (1997-2011). After being forced out of the company in 1985 – and before returning to Apple in 1997 – , Jobs founded and managed (as chairman and CEO) NeXT, a tech company specializing in computer workstations (later acquired by Apple), and Pixar, a computer animation studio now owned by Disney (besides being the co-founder and chairman, Jobs was also the primary investor of the company) (see W. Isaacson, Steve Jobs [Simon & Schuster 2011]).17 See Statista, ‘The 100 Largest Companies in the World by Market Capitalization in 2021’ (2022) www.statista.com/statistics/263264/top-companies-in-the-world-by-market-capitalization/ (accessed: July 11, 2023).18 See Statista, ‘The Most Profitable Companies in the World’ (2022) www.statista.com/chart/17545/worlds-most-profitable-companies/ (accessed: July 11, 2023).19 See Statista, ‘The Leading Companies in the World, By Net Income’ (2022) www.statista.com/statistics/269857/most-profitable-companies-worldwide/ (accessed: July 11, 2023).20 See Statista, ‘Revenue of Apple by Operating Segment from the First Quarter of 2012 to 1st Quarter 2021’ (2021) www.statista.com/statistics/382136/quarterly-segments-revenue-of-apple/ (accessed: July 11, 2023).21 I.e., high-price, high-profit strategy.22 See Washington Post, ‘iTrapped: All the Things Apple Won’t Let You Do With Your iPhone’ (2021). www.washingtonpost.com/technology/2021/05/27/apple-iphone-monopoly/ (accessed: July 11, 2023).23 Contrary to Google, which has licensed its operating system (OS), Android, to several ‘original equipment manufacturers’ (e.g., Huawei, LG, and Samsung), Apple’s OS is ‘closed,’ which means it is only available on Apple hardware products.24 Apple protects from malware, e.g., via malware scanning programs and ‘sandboxing,’ has introduced heightened privacy requirements, improves quality, e.g., via removing objectionable content by human reviewers, and protects against scams and other forms of fraud, e.g., piracy (see N. Moreno Belloso, ‘Epic Games v. Apple: A Case Summary’ [2021] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3941761 [accessed: July 11, 2023]).25 See N. Petit, Big Tech and the Digital Economy (Oxford University Press 2020), F. Scott Morton, ‘Modern U.S. Antitrust Theory and Evidence Amid Rising Concerns of Market Power and its Effects’ (2019) https://equitablegrowth.org/research-paper/modern-u-s-antitrust-theory-and-evidence-amid-rising-concerns-of-market-power-and-its-effects/?longform=true (accessed: July 11, 2023).26 See for the following: Wörsdörfer (n 12 [‘Digital Platforms and Competition Policy’]).27 Note that many anti-competitive business practices are similar to the ones discussed in Khan’s paper.28 See Statista, ‘Share of Smartphone Models Sold in the United States from 2017 to 2022, by Model’ (2022) www.statista.com/statistics/755671/united-states-smartphone-market-share-by-model/ (accessed: July 11, 2023).29 See GlobalStats/Statcounter, ‘Mobile Operating System Market Share in United States of America’ (2022) https://gs.statcounter.com/os-market-share/mobile/united-states-of-america (accessed: July 11, 2023).30 See GlobalStats/Statcounter, ‘Mobile Operating System Market Share Worldwide’ (2022) https://gs.statcounter.com/os-market-share/mobile/worldwide (accessed: July 11, 2023).31 See GlobalStats/Statcounter, ‘Browser Market Share in United States of America’ (2022) https://gs.statcounter.com/browser-market-share/all/united-states-of-america (accessed: July 11, 2023), GlobalStats/Statcounter, ‘Browser Market Share Worldwide’ (2022) https://gs.statcounter.com/browser-market-share (accessed: July 11, 2023).32 See GlobalStats/Statcounter, ‘Desktop Operating System Market Share in United States of America’ (2022) https://gs.statcounter.com/os-market-share/desktop/united-states-of-america/ (accessed: July 11, 2023), GlobalStats/Statcounter, ‘Desktop Operating System Market Share Worldwide’ (2022) https://gs.statcounter.com/os-market-share/desktop/worldwide/ (accessed: July 11, 2023).33 See Statista, ‘Siri Remains the Most Used Mobile Voice Assistant’ (2018) www.statista.com/chart/14505/market-share-of-voice-assistants-in-the-us/ (accessed: July 11, 2023).34 See Statista, ‘The Most Popular Smart Speakers in the U.S.’ (2021) www.statista.com/chart/23943/share-of-us-adults-who-own-smart-speakers/ (accessed: July 11, 2023).35 See Statista, ‘App Stores – Statistics & Facts’ (2022) www.statista.com/topics/1729/app-stores/#topicOverview (accessed: July 11, 2023). According to Kotapati et al. (n 3), “Apple is responsible for 71% of all U.S. revenue generated by mobile apps” (p. 7).36 See European Parliamentary Research Service, ‘Online Platforms: Economic and Societal Effects’ (2021) https://www.europarl.europa.eu/RegData/etudes/STUD/2021/656336/EPRS_STU(2021)656336_EN.pdf (accessed: July 11, 2023).37 See Apple Inc., ‘Condensed Consolidated Statements of Operations’ (2021) www.apple.com/newsroom/pdfs/FY22_Q4_Consolidated_Financial_Statements.pdf (accessed: July 11, 2023).38 See Statista (n 17).39 See Statista (n 18).40 See Wörsdörfer (n 4 and 12).41 See J. Lanier, Who Owns the Future? (Simon & Schuster 2013), pp. 79 and 97.42 Lanier (n 41) not only criticizes the concentration of economic power in the hands of a few companies, thereby contributing to the formation of a ‘new gilded age’; he also warns of the societal risks and dangers of tech companies becoming system-relevant and potentially too big to fail, “a state of affairs that [would] degrade […] both markets and governments” (p. 250).43 See Commission ‘Competition Law 4.0’, ‘A New Competition Framework for the Digital Economy’ (2019) www.bmwi.de/Redaktion/EN/Publikationen/Wirtschaft/a-new-competition-framework-for-the-digital-economy.pdf?__blob=publicationFile&v=3 (accessed: July 11, 2023), J. Furman, D. Coyle, A. Fletcher, P. Marsden, & D. McAuley, ‘Unlocking Digital Competition: Report of the Digital Competition Expert Panel’ (2019) www.gov.uk/government/publications/unlocking-digital-competition-report-of-the-digital-competition-expert-panel (accessed: July 11, 2023).44 See Subcommittee on Antitrust, ‘Investigation of Competition in Digital Markets’ (2020) https://judiciary.house.gov/news/documentsingle.aspx?DocumentID=3429 (accessed: July 11, 2023).45 See European Commission, ‘Commission Sends Statement of Objections to Google on Comparison Shopping Service; Opens Separate Formal Investigation on Android’ (2015) https://europa.eu/rapid/press-release_IP-15-4780_en.htm (accessed: July 11, 2023), European Commission, ‘Commission Takes Further Steps in Investigations Alleging Google’s Comparison Shopping and Advertising-related Practices Breach E.U. Rules’ (2016) https://europa.eu/rapid/press-release_IP-16-2532_en.htm (accessed: July 11, 2023), European Commission, ‘Commission Fines Google €2.42 Billion for Abusing Dominance as Search Engine by Giving Illegal Advantage to Own Comparison Shopping Service’ (2017) https://europa.eu/rapid/press-release_IP-17-1784_en.htm (accessed: July 11, 2023), European Commission, ‘Competition Policy. AT.39740 Google Search (Shopping)’ (n.d.) https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39740 (accessed: July 11, 2023), A. Kornelakis, ‘Digital Markets, Competition Regimes, and Models of Capitalism’ (2021) Competition & Change (Online First) 1. N. Moreno Belloso, ‘Google v. Commission (Google Shopping): A Case Summary’ (2021) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3965639 (accessed: July 11, 2023), Wörsdörfer (n 12 [‘Ordoliberalism 2.0’]).46 See Geradin & Katsifis (n 11).47 See Washington Post, ‘How Apple Uses Its App Store to Copy the Best Ideas’ (2019) www.washingtonpost.com/technology/2019/09/05/how-apple-uses-its-app-store-copy-best-ideas/ (accessed: July 11, 2023).48 See J. Crémer, Y. Montjoye, & H. Schweitzer, ‘Competition Policy for the Digital Era. Final Report’ (2019) https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf (accessed: July 11, 2023).49 See M. Glick, C. Ruetschlin, & D. Bush, ‘Big Tech’s Buying Spree and the Failed Ideology of Competition Law’ (2020) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3746728 (accessed: July 11, 2023), Subcommittee on Antitrust (n 44), Washington Post, ‘How Big Tech Got So Big: Hundreds of Acquisitions’ (2021) www.washingtonpost.com/technology/interactive/2021/amazon-apple-facebook-google-acquisitions/ (accessed: July 11, 2023).50 T. Wu, The Master Switch (Vintage 2011), p. 25.51 See Commission ‘Competition Law 4.0’ (n 43).52 See Subcommittee on Antitrust (n 44).53 See Washington Post (n 49).54 Amazon classifies many workers as ‘independent contractors,’ which means that they have considerably fewer employment protections, e.g., with regard to healthcare and other insurances and retirement savings. In the recent past, the company has also been accused of applying union-busting tactics to prevent the establishment of unions at U.S. warehouses. Lastly, Amazon is infamous for its rather inhumane working conditions in its warehouses, including unfair hiring and firing practices and excessive packing and sorting quotas (those working conditions have reportedly got worse during the pandemic, e.g., due to the lack of personal protective equipment) (see New York Times, ‘What It Looks Like Inside an Amazon Warehouse Now’ [2020] www.nytimes.com/2020/06/09/technology/amazon-workplace-warehouse-coronavirus.html [accessed: July 11, 2023], New York Times, ‘How Amazon Crushes Unions’ [2021] www.nytimes.com/2021/03/16/technology/amazon-unions-virginia.html [accessed: July 11, 2023], Subcommittee on Antitrust [n 44], Washington Post, ‘Amazon Warehouse Workers Suffer Serious Injuries at Higher Rates Than Other Firms’ [2021] www.washingtonpost.com/technology/2021/06/01/amazon-osha-injury-rate/ [accessed: July 11, 2023]).55 See Wörsdörfer (n 12 [‘Individual versus Regulatory Ethics’]).56 See China Labor Watch, ‘Analyzing Labor Conditions of Pegatron and Foxconn’ (2015) https://chinalabor.wpenginepowered.com/wp-content/uploads/2021/04/Analyzing-Labor-Conditions-of-Pegatron-and-Foxconn_vF.pdf (accessed: July 11, 2023), China Labor Watch, ‘Something’s Not Right Here. Poor Working Conditions Persists at Apple Supplier Pegatron’ (2015) https://chinalabor.wpenginepowered.com/wp-content/uploads/2021/04/2015.10-Apple-Pegatron-report-FINAL-compress.pdf (accessed: July 11, 2023), China Labor Watch, ‘Study Casts Doubts on Apple’s Ethical Standards’ (2016) https://chinalabor.wpenginepowered.com/wp-content/uploads/2021/04/2016.02.24-Apple-Report-English-FINAL-v2.pdf (accessed: July 11, 2023).57 See. B. Merchant, ‘Life and Death in Apple’s Forbidden City’ (2017) www.theguardian.com/technology/2017/jun/18/foxconn-life-death-forbidden-city-longhua-suicide-apple-iphone-brian-merchant-one-device-extract (accessed: July 11, 2023).58 See Australian Strategic Policy Institute, ‘Uyghurs for Sale’ (2020) https://ad-aspi.s3.ap-southeast-2.amazonaws.com/2022-10/Uyghurs_for_sale-11OCT2022.pdf?VersionId=N2JQOako7S4OTiSb6L7kKE5nY2d_LD25 (accessed: July 11, 2023).59 See The Verge, ‘Apple Hires Anti-Union Lawyers in Escalating Union Fight’ (2022) www.theverge.com/2022/4/25/23041632/apple-hires-anti-union-lawyers-littler-mendelson-union-fight-cwa (accessed: July 11, 2023), The Verge, ‘Apple Reportedly Gives Retail Managers Anti-Union Scripts’ (2022) www.theverge.com/2022/5/12/23069415/apple-retail-unionization-talking-points-scripts (accessed: July 11, 2023), The Verge, ‘Apple Accused of Union Busting in its Stores for the Second Time this Week’ (2022) www.theverge.com/2022/5/19/23128247/apple-accused-union-busting-nyc-world-trade-center-stores-cwa (accessed: July 11, 2023), Vice, ‘Leaked Memo Reveals Apple’s Anti-Union Talking Points for Store Managers’ (2022) www.vice.com/en/article/m7v8qp/leaked-memo-reveals-apples-anti-union-talking-points-for-store-managers/ (accessed: July 11, 2023), Washington Post, ‘Some U.S. Apple Store Employees are Working to Unionize, Part of a Growing Worker Backlash’ (2022) www.washingtonpost.com/technology/2022/02/18/apple-retail-stores-union-labor/ (accessed: July 11, 2023), Washington Post, ‘Apple Illegally Fired Five Labor Activists, Union Says’ (2023) www.washingtonpost.com/technology/2023/03/28/apple-union-firings/ (accessed: July 11, 2023).60 See Subcommittee on Antitrust (n 44).61 See for the following: Wörsdörfer (n 4 and 12 [‘Digital Platforms and Competition Policy’]).62 See European Commission, ‘Commission Opens Investigations Into Apple’s App Store Rules’ (2020) https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1073 (accessed: July 11, 2023), European Commission, ‘Statement by Executive Vice-President Margrethe Vestager on the Statement of Objections Sent to Apple on App Store Rules for Music Streaming Providers’ (2021) https://ec.europa.eu/commission/presscorner/detail/en/speech_21_2093 (accessed: July 11, 2023), European Commission, ‘Preliminary Report – Sector Inquiry into Consumer Internet of Things’ (2021) https://ec.europa.eu/competition-policy/system/files/2021-06/internet_of_things_preliminary_report.pdf (accessed: July 11, 2023). In the U.S., Apple got sued by multiple iPhone users for its (allegedly) monopolistic practices in the ‘aftermarket for iPhone apps.’ The Supreme Court decided in Apple Inc. v. Pepper that Apple consumers can seek antitrust charges against the company, i.e., sue the company for inflated app prices (see Apple, Inc. v. Pepper, 587 U.S. __ [2019]. https://supreme.justia.com/cases/federal/us/587/17-204/ [accessed: July 11, 2023]). In 2019, the company got sued by two app developers over the (alleged) violation of competition law, taking issue with Apple’s in-app commission fee. Furthermore, the DOJ (and FTC) are examining various complaints about Apple’s business practices, particularly related to the App Store (see Geradin & Katsifis [n 11]). Noteworthy is also that, according to a recent report by the Subcommittee on Antitrust (2020), Apple wields monopoly power in the app distribution market for iOS devices with a 100% market share. Lastly, there is the pending Epic Games lawsuit, which will be discussed in greater detail below, as well as a recent Biden administration report (see Department of Commerce, ‘Competition in the Mobile Application Ecosystem’ [2023] www.ntia.gov/sites/default/files/publications/mobileappecosystemreport.pdf. [accessed: July 11, 2023] urging the government to ‘harden’ app store regulations, e.g., with the help of the currently debated bipartisan Open App Markets Act.63 In 2020, Apple launched the Small Business Program, which charges a 15% rate – instead of the usual 30% – for small app developers, i.e., those making less than $1m (see Geradin & Katsifis [n 11], Moreno Belloso [n 24]).64 See Bloomberg, ‘Apple’s New Services Off to a Slow Start in First Year’ (2020) www.bloombergquint.com/business/apple-s-new-services-off-to-a-slow-start-in-first-year (accessed: July 11, 2023), CNBC, ‘Apple’s App Store Had Gross Sales of Around $50 Billion Last Year, But Growth is Slowing’ (2020) www.cnbc.com/2020/01/07/apple-app-store-had-estimated-gross-sales-of-50-billion-in-2019.html (accessed: July 11, 2023), Subcommittee on Antitrust (n 44); see for the latest data: Apple Inc., ‘App Store Developers Generated $1.1 Trillion in Total Billings and Sales in the App Store Ecosystem in 2022’ (2023) https://www.apple.com/newsroom/2023/05/developers-generated-one-point-one-trillion-in-the-app-store-ecosystem-in-2022/ (accessed: July 11, 2023).65 See Subcommittee on Antitrust (n 44).66 See European Commission (n 62). Note that many iOS apps are more expensive – sometimes up to 30% – compared to their Android counterparts, indicating significant consumer harm (see Kotapati et al. [n 3]).67 The Android OS and Google’s app store policies are not as strict as Apple’s. The downloading of alternative app stores (e.g., Amazon’s App Store or Samsung’s Galaxy Store), as well as the sideloading of apps, are theoretically possible in Google’s ecosystem; users can also use alternative in-app purchase (IAP) systems. Yet, essential functions are often missing, e.g., automatic app updates, and users receive misleading security warnings and must overcome technical barriers and difficulties; switching is, thus, not as easy as it could be (see Geradin & Katsifis [n 11]).68 See European Commission (n 62).69 See CNBC, ‘Apple Can No Longer Force Developers to Use In-App Purchasing, Judge Rules in Epic Games Case’ (2021) www.cnbc.com/2021/09/10/epic-games-v-apple-judge-reaches-decision-.html (accessed: July 11, 2023), Moreno Belloso (n 24), The Verge, ‘Epic Offers New Direct Payment in Fortnite on iOS and Android to Get Around App Store Fees’ (2020) www.theverge.com/2020/8/13/21366259/epic-fortnite-vbucks-mega-drop-discount-iphone-android (accessed: July 11, 2023), The Verge, ‘Apple Just Kicked Fortnite Off the App Store’ (2020) www.theverge.com/2020/8/13/21366438/apple-fortnite-ios-app-store-violations-epic-payments (accessed: July 11, 2023), Washington Post, ‘Apple Loosens Rules for Developers in Major Concession Amid Antitrust Pressure’ (2021) www.washingtonpost.com/technology/2021/08/26/apple-app-store-payment-settlement/ (accessed: July 11, 2023). In a first decision in the Apple v. Epic Games case, Apple won nine out of ten counts (see Epic Games, Inc. v. Apple, Inc., No. 4:20-cv-05640-YGR (N.D. Cal. [2021]) https://storage.courtlistener.com/recap/gov.uscourts.cand.364265/gov.uscourts.cand.364265.812.0_2.pdf [accessed: July 11, 2023]): The judge ruled, among others, that Apple is not a monopolist and that Epic Games must pay Apple damages ($3.6m) for breach of contract, that is, violating Apple’s App Store policies. Yet Apple’s anti-steering provisions were considered anti-competitive and thus illegal – mainly because they hide crucial information from app users, thereby stifling consumer choice. Consequently, Apple needs to change its App Store policies and loosen its grip over in-app purchases. E.g., the company will no longer be able to prohibit app developers from communicating with users about alternative payment and subscription options; that is, app developers can now provide a link that directs app users away from the App Store and steer them to the developer’s website to purchase or subscribe to digital content. Epic Games appealed the ruling, but lost again in April 2023 (see Epic Games, Inc. v. Apple, Inc., No. 21-16506 (9th Cir. [2023]) https://law.justia.com/cases/federal/appellate-courts/ca9/21-16506/21-16506-2023-04-24.html. [accessed: July 11, 2023]). Noteworthy in this regard is that in early 2022, 35 U.S. states – and Microsoft – have voiced their support for the Epic Games’ appeal through amicus curiae briefs (see Foss Patents, ‘35 U.S. States and Microsoft Support Epic Games Against Apple in Ninth Circuit, Breathing New Life into #FreeFortnite Antitrust Appeal’ [2022] www.fosspatents.com/2022/01/35-us-states-and-microsoft-support-epic.html [accessed: July 11, 2023]). Shortly after that, Microsoft announced changes to its app store rules similar to those proposed by the recently advanced Open App Markets Act (i.e., treating all apps equally and not ranking company apps over others; app developers will also be permitted to use their own payment systems). The likely reason for these rule changes is that the company is in the middle of the Activision Blizzard acquisition, where it needs approval from the FTC. Note that with this acquisition, Microsoft is moving more into the gaming subscriptions market and would hence benefit from a liberation of app store regulation (see Washington Post, ‘In a Bid to Appease Regulators, Microsoft Announces New App Store Principles’ [2022] www.washingtonpost.com/technology/2022/02/09/microsoft-app-store-principles/ [accessed: July 11, 2023]).70 See European Commission (n 62).71 See Bundeskartellamt, ‘Proceeding Against Apple Based on New Rules for Large Digital Companies (Section 19a(1) GWB) – Bundeskartellamt Examines Apple’s Significance for Competition Across Markets’ (2021) www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2021/21_06_2021_Apple.html (accessed: July 11, 2023), Bundeskartellamt, ‘Bundeskartellamt Reviews Apple’s Tracking Rules for Third-Party Apps’ (2022) www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2022/14_06_2022_Apple.html?nn=3599398 (accessed: July 11, 2023).72 Another way Apple distorts (downstream) competition is with the help of default settings: For instance, clicking on a link on an Apple device opens the Safari browser, clicking on an address opens Apple Maps, and requesting a song activates Apple Music. Siri is also programmed in a way that favors – i.e., automatically launches – Apple products and services. In addition, Safari is set as the default browser on most Apple products. Noteworthy is that Apple received $12b in 2019 from Google to make Google Search the default search engine on the Safari web browser (the likely reason is that Apple does not offer its own search engine; it does thus not directly compete with Google) (see Fortune, ‘Google to Pay Apple $12 Billion to Remain Safari’s Default Search Engine in 2019: Report’ [2018] https://fortune.com/2018/09/29/google-apple-safari-search-engine/ [accessed: July 11, 2023]). The above business practices have in common that they create stickiness and hence a status-quo bias – simply because most users keep the presented default option and do not change the settings on computers or mobile devices (other consumer-related behavioral biases include framing effects, the sunk cost fallacy, risk aversion, and limited attention [see Kotapati et al., n 3]). More importantly, these tactics give Apple products a competitive edge over rival applications and create additional market entry barriers. Overall, those tactics have the potential to limit market competition and, thus, innovation.73 See European Commission (n 62); Spotify, ‘Consumers and Innovators Win on a Level Playing Field’ (2019) https://newsroom.spotify.com/2019-03-13/consumers-and-innovators-win-on-a-level-playing-field/ (accessed: July 11, 2023), Spotify, ‘Time to Play Fair. Leveling the Playing Field’ (2022) https://www.timetoplayfair.com (accessed: July 11, 2023).74 This practice is similar to Google Search and Google Shopping (see European Commission [n 45]).75 Besides, Apple also promotes its own services (e.g., via push notifications urging users to re-subscribe) and imposes marketing restrictions on rivals (i.e., those push notifications are not available to competitors).76 See European Commission (n 62), Geradin & Katsifis (n 11).77 See European Commission (n 62).78 Apple has, for instance, access to payment and performance data of competing apps (e.g., the time users spend on certain apps). This information is then used to decide on which apps to develop in-house.79 See Subcommittee on Antitrust (n 44).80 See Geradin & Katsifis (n 11), Kotapati et al. (n 3).81 Besides the App Store Guidelines, app developers also need to sign Apple’s Developer Product Licensing Agreement.82 See Geradin & Katsifis (n 11).83 See European Commission (n 62).84 Note that Apple’s own services are exempted from the 30% (discriminatory) tax (see Kotapati et al. [n 3]). Also note that in 2022, Google started lowering its app-store commission fees for some developers in