[mikehearn]

I have a question about monopolies and market abuses.

Apple released their phone in 2007, the App Store in 2008, and in-app payments in 2009. During that time their marketshare was fairly small, and it didn't start to really grow until they expanded availability to the Verizon network in 2011.

Right at launch of the App Store, Apple announced its sales commission would be 30%. Then they extended that same fee to in-app purchases a year later. At the same time they set the rules that third-party app stores were not allowed, and that third-party payment processors could not be used.

I'm mentioning all of this history to make this point: Apple made these rules when they were not a monopoly by any definition. They released these products, with these rules, into a free market and let the market (both users and developers) decide which products to use and which products to develop for.

Now, obviously, between 2007 and 2021 the iPhone has been a wild success. Its platform has grown in users and developers every year.

So in terms of the framing of "market abuse", at what point between the launch of these rules and now did Apple cross that threshold between free-market competitor who can legally control their own platform to monopolist abusing its power?

I'm asking this question not just to make a point, but because I think it will be instructive for future companies to understand where in the growth curve the rules they started with can potentially cross over into being "abusive".

[tsycho]

You can do all sorts of "monopolistic abuse" on your platform as long as it is small and inconsequential. No one cares, even if it was illegal, though it mostly is not.

But the rules and scrutiny changes once you become large enough to be "considered" a monopoly i.e. once your decisions and policies start affecting a significant portion of the market/ecosystem, then your policies are going to be subject to new regulation.

Google supporting side loading from the very beginning was a smart idea, even if its too complex and scary for the majority of Android users. They should have done the same for payments.

[majani]

Sideloaded apps can adopt any payment system they want

[askafriend]

> You can do all sorts of "monopolistic abuse" on your platform as long as it is small and inconsequential.

This statement feels like an oxymoron.

[CRConrad]

> > You can do all sorts of "monopolistic abuse" on your platform as long as it is small and inconsequential.

> This statement feels like an oxymoron.

Only if one lacks the imagination to expand "monopolistic abuse" (note the quotes) into "abuse that would be 'monopolistic' if the perpetrator were big enough".

[bostik]

30% was highway robbery from the start. Pure and simple.

It was merely a less awful deal than most other indie commission models, with sites like Kongregate and their ilk demanding >80%. Against that kind of flaying and skinning, 30% was an improvement!

I've said it before. A very good agent, who actually works for their client and arranges them with repeat lucrative contracts, gets 15%. App stores, as gatekeepers to their walled gardens, extort twice that.

Btw - if they want to get into recurring payment scene, let them compete with payment processor fee structures. For the privilege of arranging trusted, mostly secured payments and handling the back office accounting, 3% should be a damn good ceiling. The payment industry is making money hand over fist with that kind of cut.

[simonh]

>30% was highway robbery from the start.

That was not at all obvious to anyone in 2008. It's a pretty typical margin from the console industry, which was the main point of reference at the time. Apple spent several billion building the App Store infrastructure, the SDK and setting up the review and payments system and it took years for App Store revenue to catch up with the sunk investment and expenses. Also practically everyone in the industry at the time was saying Microsoft and Google would imminently wipe Apple out of the mobile market.

This is a tough one, I think 30% made perfect sense in 2008 but does seem steep now. Apple makes huge profits on the App Store, but it mostly seems to have happened by accident, their original strategy seems to have genuinely been to just break even and maybe make a modest margin, with the store mainly just being a competitive advantage. The huge success and profits have been a windfall.

However that all happened and we are where we are. I don't object to Apple's app store margins or IAP charges, it's their product, their rules.

I do think banning developers from informing users of how to get subscriptions and such outside the store is foolish. That's clear overreach. I see why they do it, otherwise subscription services can cut Apple out and free-ride, but they probably just have to take the hit.

[ehvatum]

>However that all happened and we are where we are. I don't object to Apple's app store margins or IAP charges, it's their product, their rules.

You are right. It's a question of incentives. The Apple/Google duopoly is incentivized towards control because it allows for abusive profit extraction. They have less incentive to open their platforms and both continue to invest heavily to avoid doing so, because their product, their rules is extremely profitable.

>I do think banning developers from informing users of how to get subscriptions and such outside the store is foolish.

From the Apple/Google perspective, it is foolish in only one respect: it so outrageous that it invites legislative and regulatory response.

[grapist420]

nooo aha don’t take away our profit margins haha it was an accident we promise haha

[ksec]

>30% was highway robbery from the start. Pure and simple.

From the Start? Credit where credit's are due, 30% for software was good enough for a lot of independent developers. Even to this day. Handle Processing charges, distribution, Tax etc. For a lot of categories 30% isn't that bad. Especially for Software.

The problem start when they are enforcing 30% on Services and not on Software. Signing up a Teaching Class with Real instructor on iOS? 30% to Apple. Signing up Services like Web Hosting, Video Streaming, or whatever it is, 30% to Apple. Apple had to made exempt to each and every category after people complain. At this point when the whole world is moving to digitisation, 30% no longer becomes a cost of Software but a Tax on all things.

[mattl]

30% was the iTunes deal for apps. On iTunes songs were all 99 cents and Apple got 30 cents.

[Steko]

Iirc Apple ate the credit card fees on their cut which meant they earned a few pennies if you only bought one somg at a time.

[snuxoll]

Go buy a couple of singles off iTunes over a couple of days and see how long it takes to hit your card.

Apple has always deferred charging cards to minimize processing fees by bundling multiple purchases together.

[Steko]

I’m aware of that and don’t see how it changes what I wrote at all.

[eric-hu]

I didn’t downvote you, but I think Apple batching payments together would mean they didn’t “eat costs”. It sounds like batching could result in them turning a profit.

[mattl]

Nope. It was always the deal.

I have artist sales records predating the iPhone.

Edit: Also worth remembering that iTunes is/was/is the iTunes Music Store (itms) and that Apple sold apps via it for the click wheel iPod under the same percentages.

[Steko]

It’s pretty easy to verify that apple paid the credit card feeds from their cut, brief googling reveals many articles like this one:

https://nypost.com/2004/05/07/apple-tunes-up-price-of-hits-m...

[judge2020]

Songs were $1.29 for a long time as well. $0.99 songs seemed to be mostly for radio edits and similar.

[mattl]

That was later after iTunes plus came out (higher fidelity, no DRM in some countries)

[megablast]

> 30% was highway robbery from the start. Pure and simple.

Except it wasn't. Try getting an app published before the app store. It was 70% if you were lucky enough to find someone to publish it.

You have no idea what you are talking about.

[JimDabell]

I was there at the start and people were really happy about the App Store terms. The convenience of Stripe etc. didn’t exist and taking payments on mobile was a big, expensive effort lacking consumer trust. All of a sudden Apple comes in and handles hosting, payments, installation, etc. for you in a way people will actually use, without you having to incorporate or set up a merchant account. It was a huge convenience!

The things people complained about were the opaque, buggy, barely documented code signing processes; inconsistent, undocumented, NDAed rules (no published review guidelines and you couldn’t tell people why your application was rejected!); and incredibly slow review times (weeks!).

The idea that Apple introduced the 30% fee and people recoiled with horror is revisionist history. People jumped in with both feet for that because of the convenience Apple was offering around easily getting people to pay money and having it end up in your bank account.

[askafriend]

Not to mention retailers take a 30% cut of all video game sales still to this day and no one mentions them at all.

[DaiPlusPlus]

PocketGear was 40%, fwiw

[nicoburns]

It seems to me that you're thinking of "market abuse" in terms of intent. But it's not really about, it's about what the practical impact is. The test is "is this significantly impacting users in a negative way". If that sounds like a subjective judgement call, then that's because it is. Anti-competition laws are basically an escape hatch that allow governments to intervene at their discretion when markets fail.

So to answer your question: it potentially crosses over into abusive as soon as you are restricting customers from doing anything. And it gets less likely that you'll get away with it the more dominant your market position (as a scale), and the greater the importance of your product or service to society (which is why game console currently get away with these practices but utilities don't).

[lolsal]

As an apple customer, what you call abuse, I call a feature in this context.

[rscoots]

How is not allowing any 3rd party payment processors a feature may I ask?

[dexterjs]

Safety and trust. I know in app purchases are handled through apple and if I start a subscription, I know how to easily cancel it. I don't need to worry about my payment information being stolen or held hostage behind a convoluted cancellation process.

[bryceacc]

> convoluted cancellation process

probably the most important thing here. One press in the settings app vs calling some retention person that tries to keep you paying or something that can only be cancelled via fax or carrier pidgeon

[__warlord__]

But having choices doesn't mean that the "Safety and trust" of the app store will go away it simply means that I can choose another option as well.

[rscoots]

Couldnt Apple just say apple pay is required but other processors are allowed? Think you're being a bit obtuse here.

[lolsal]

How is allowing many 3P payment processors a feature? It's a complication and an added risk with no upside for me as the consumer. No thanks.

[nodamage]

In the United States the courts have consistently said this determination is based on how much market power the competitor wields:

Of course where the seller has no control or dominance over the tying product so that it does not represent an effectual weapon to pressure buyers into taking the tied item any restraint of trade attributable to such tying arrangements would obviously be insignificant at most. As a simple example, if one of a dozen food stores in a community were to refuse to sell flour unless the buyer also took sugar it would hardly tend to restrain competition in sugar if its competitors were ready and able to sell flour by itself. (https://casetext.com/case/northern-pac-r-co-v-united-states)

Whether Apple has enough dominance over the smartphone market to cause an unreasonable restraint of trade in the app distribution market is up to a court to decide at this point.

[yholio]

You are framing this as if there is a magical "growth curve" that must take you from an inovative startup to a 800 pound gorilla that has a complete chokehold over the market.

No, if regulators do their job, nobody gets to ask that question because there is continuous competition. Getting to that monopoly or oligopoly requires sustained effort from would be monopolists, it's a strategy they have been executing for more than a decade. And if you do that, you must expect there is a moment where society says: ok, it's time to regulate it and not let company X extract economic rent solely based on market dominance.

[simonh]

Not at all, there was nothing inevitable about Apple's success, many analysts, pundits and their competitors have been adamant Apple would fail for the first decade or so of the iPhone. After that these claims started looking a bit thin.

You're presuming that market abuse has occurred and that market abuse is the only way to get popular, but I don't see that's a given. Maybe people simply genuinely like iPhones just the way they are, and maybe network effects just legitimately lead to the most popular platforms dominating.

Apple don't have a monopoly on the phone market anyway, they only have 27% of the South Korean phone market. In the US it's 65%, high but not a monopoly, but it only went over 50% in 2020.

What changed to make them a market abuser and when did it happen, as you allege? That's the question OP is asking.

[hutzlibu]

"What changed to make them a market abuser and when did it happen, as you allege? That's the question OP is asking. "

There is no clear line or answer, as the topic is incredibly complex.

Electronic devices are not just gadgets anymore, but tools to participate in modern life. We never had that situation before.

So by traditional meassures like absolute market share, apple might not be a monopolist, but because of the massive lock in and market dominance (of the luxory segment), with all its implications, I surely would say they abuse their power since a long time. But I also do not believe in regulations as the magic bullet to really solve it, exactly because the lines are too blurry.

[kbenson]

They've expressed anti-competitive behavior from the beginning, but it's advanced over time. It's the confluence of factors that makes it particularly bad in Apple's case. You can't chance the software (OS) on the device. You can't run iOS on a different set of hardware. You can't run any store but the App Store on iOS. You can't deliver software to customers without using the App Store (or jumping through hoops for very limited methods of getting it on there otherwise). It's not that 30% was ever good or bad, but that initially there was no competition, and at every step Apple has taken steps to make sure competing is extremely hard to do, by tying you to an entire ecosystem.

Android is better in some respects, but is mostly happy to not actually compete on a lot of levels because that would possibly endanger the 30% industry standard. What we have is two extremely large players, so large and so establishes and in a market that takes so much money to enter that new competitors are at an extreme disadvantage agreeing, even if tacitly, that the fees for their stores are not something they will compete on.

That's not better than when they agreed they wouldn't hire each other's employees (which they were punished for). It benefits only themselves at the detriment of everyone else, and through market manipulation. If they actually cared to compete, we would see competition in store fees.

[simonh]

>You can't chance the software (OS) on the device. You can't run iOS on a different set of hardware.

There is no reason why Apple should have to support any of that. They design and build the product, and they decide what features it has. The vendors don't provide support for running an alternate OS on Symbian phons, or the Gameboy, or an XBOX, or your car's infotainment system. You either like the features the product has and buy it, or you don't.

>at every step Apple has taken steps to make sure competing is extremely hard to do.

How exactly? There was and is nothing to stop a competitor bringing out an alternate platform, in fact that's exactly what Google did. MS and did as well, and at that time smartphones were a small minority of phones overall.

The thing is what Apple, and Google did is very, very hard. It takes massive investment and very sophisticated technology. Once you have a platform and services and apps, network effects kick in and it becomes beneficial for people to converge on platforms used by their friends and family, but there's nothing manipulative or illegal about network effects, there's no coercion. It's just rational customers acting in their own interests to prefer one product over another. How do you regulate that away, or make it illegal? Why would you even want to?

[kbenson]

> There is no reason why Apple should have to support any of that.

No one's asking them to support it, but there's a large difference between not supporting and actively thwarting.

> How exactly? There was and is nothing to stop a competitor bringing out an alternate platform

The answer is in your own phrasing. You talk about platforms. Apple has so restricted their products that the only way to compete is to build a whole platform. You can't build an app store, there's nothing to run it on. You can't build hardware to compete with Apple, iOS won't run on it, you can't replace the OS because the hardware requires signed code. The only place to compete without bringing a whole platform is Android. If Android didn't exist, there would be zero question as to whether Apple is a monopoly based on their actions, and I don't think that the fact that there's one other provider necessarily absolves them of the responsibilities for their actions. The anticompetitive behavior underneath is the same regardless.

> The thing is what Apple, and Google did is very, very hard. It takes massive investment and very sophisticated technology.

Not nearly as hard as you make out. The market is so lucrative that it makes sense for investors to throw some billions at a capable competitor and eke out some percentage of the market, but they don't. They don't because everyone is so locked into their ecosystems that any competition is at a real disadvantage. That's why the behavior is anticompetitive. It prevents competitors from entering the market to provide choice. A duopoly is obviously not enough if there's no competition at all in some areas.

> It's just rational customers acting in their own interests to prefer one product over another.

Is it? What if a separate app store existed that guaranteed that if the app existed on multiple platforms, your purchase was good for all platforms? How many more people might feel free to switch platforms and try new things if they knew they could get most or even all their purchases moved with them?

I generally buy Samsung phones, ranging from top of the line to budget models over time. There's a Samsung app store. I've never once been inclined to use it when the Google play store exists and means if I get a non Samsung phone that my purchases are still good. If there was an app store that worked on iOS and Android, I'd likely us that instead. That would be one more barrier preventing me from getting an iPhone at some point if I thought it was worth the switch. The same goes the other direction.

[judge2020]

> They've expressed anti-competitive behavior from the beginning, but it's advanced over time.

But is anticompetitive behavior in itself illegal? If so, why is it only being investigated now, 10+ years later?

[kbenson]

> But is anticompetitive behavior in itself illegal?

Yes. See https://www.ftc.gov/enforcement/anticompetitive-practices

> If so, why is it only being investigated now, 10+ years later?

By it's nature and the nature of our system it's often hard to prove or hard to actually prosecute, as those that engage in it are often large and powerful.

We have laws regarding monopolies not because they're "monopolies", but because it's a specific subset of anticompetitive behavior that was seen that the legislative body wanted to make it easier to prosecute, and easier to prevent before it actually happens (which is why the government rejects some mergers as bad for consumers).

That we didn't prosecute this before likely has many causes. From the token appearance of competition between iOS and Android to an unwillingness of politicians to go after companies that are seen favorably in the public eye and/or that have lots of money and contribute a lot of funds to reelection campaigns. Until a sizable chunk of the public is behind them, few politicians have the desire to be the first to call for reform that would be a major impact to some of the largest companies in the world, for multiple obvious reasons ranging from funded competitors to worried stockholders to how many people that company employs and if it will affect that.

Edit: Also, there's not usually a rush to investigate small or medium size businesses, or markets that are so new that it's plausible that competitors haven't shown up yet. That's the other half of the "Android and iOS aren't really competing" point. Initially it looked like competitors were around, but it wasn't always obvious that certain things just weren't on the take as competition until it became impossible to ignore. That everyone charged 30% and then all of a sudden there was massive change just as legislation was being considered is a dead giveaway, but also not something those companies could afford to not try in appeasement.

[HatchedLake721]

It doesn’t make sense.

Companies that build their own hardware are not and should not be required to somehow care about a <0.01% minority that want to run a different OS on their hardware.

It’s been done for decades with consoles, cars, TVs, etc space and now suddenly they’re all anti-competitive from the get go?

[8ytecoder]

Ask yourself - is there a difference between a small company acquiring another competitor and a large monopoly acquiring a competitor? They’re both acquisitions. Same event at two different market conditions attract two different reactions by regulators.

To answer your question - when developing for Apple went from being a choice to a necessity to run your business.

[rawgabbit]

There are two issues at play here.

First, with regards to the App store or Music store, Apple is the Market maker. It controls who gets to sell Apps on their market similar to how NASDAQ or the NY Stock Exchange controls which stocks are listed. Korea is saying Apple you already control the market, but you shouldn't dictate the payment systems too. I expect Apple will start raising the fees it charges to list Apps on their App store.

Second, this article is about South Korea. South Korea doesn't care about the historical context of the US. Korea is saying if the Apple App store want access to South Korean customers, you must play by our rules. This is not unlike the European Union saying if you want to store data about EU citizens, then you must comply with GDPR.

For the past few decades, we had assumed there was a monolithic global market for software apps. We are seeing now the fragmentation of the internet and the software market as countries assert their power over big tech.

[criddell]

There's no definable line that Apple crossed. It's a long, slow transition.

[amelius]

This is an incorrect argument. If group of people A refused to use Apple, but group B made Apple the most popular option, then group A still suffers from Apple being monopolist.

[yyyk]

>So in terms of the framing of "market abuse", at what point between the launch of these rules and now did Apple cross that threshold between free-market competitor who can legally control their own platform to monopolist abusing its power?

When Apple launched Apple Pay (in 2014, not that long ago), its App Store rules turned from dubious to outright market abuse by using one market where it had a strong position to infiltrate another very different market of payment processing (there are other issues, but this story is about payment processors).

By the way, 'monopoly' has little to do with it. It's about market power, monopoly is an nigh irrelevant term to the issue.

[guerrilla]

> So in terms of the framing of "market abuse", at what point between the launch of these rules and now did Apple cross that threshold between free-market competitor who can legally control their own platform to monopolist abusing its power?

I'd presume that would be when they became a monopoly, which may be seen as something that comes with new responsibilities. "With great [market] power, comes great responsibility" would probably make a lot of sense to a lot of people. We wouldn't hold tiny entrants to the same standards as those who can set prices, sue into dust or buy almost all of the competition.

[fsckboy]

abuse of monopoly power is a big area, there's no one answer, but you're asking good questions. It's not really going to help future companies though, because any company in a position to think about this problem has the type and quality of attorneys who already best know the answers.

In any case, though, that's not what's going on with this Korean law. Antitrust violations of existing law are generally determined by courts and or regulatory agencies, whereas this is a new law from a legislature signalling that they want to encourage a competitive marketplace in this manner. Of course, with lobbying and nationalism, it's quite possible that this law was guided by powerful Korean interests or nationalist parties who simply want to hobble foreign entities in favor of local companies: still not an example of antitrust, except possibly in the other direction.

in any case, in the US it's not monopoly that's against the law, it's that market power being used to abuse market participants or influence prices. And there is no clearcut answer, but there are "guidelines", for example if you control 70% of a market and your major competitor controls 25%, you have a good basis to say that you are not a monopoly. Notice that Microsoft invested to prop up Apple when Apple was on the ropes in the late 90's. That type of action shows how tricky and pernicious these regulations can be, Microsoft gets the excuse "we have a major competitor" and also benefits from the success of the competitor.

But that's the market share part of the equation. The additional aspects are "can it be shown that the price of the good is being manipulated upward?" So, Microsoft offering big discounts to PC manufacturers to get them to exclusively offer MS OSes on their platform: are those discounts abuse of the market?

I'm not a particular expert on this, there are many places to quibble with what I've said, I'm just trying to offer the flavor of what I thought when I read your questions.

Oh, at what point did Apple cross the line? Has Apple even crossed the line now? Is not really the question. By the time enforcement actions are taken, companies are generally well over the line. The real question is "how much can we abuse our market power and get away with it before the clamor to regulate us gets too strong for politicians to ignore? And what is the temperament of the administration in office?"

[2OEH8eoCRo0]

When the App Store launched was it automatically rolled out in an update and pre-installed in new phones?

[ksec]

1. Not only were iPhone a niche in the market in pre 2010, Smartphone itself were a niche. Apple sold more iPhone in its iPhone 11 launch quarter than all of iPhone from 2007 to 2010 combined.

2. iPhone was really, a phone, an internet communicator, and a wide screen iPod. That was arguably true all the way until 2014 when the larger screen iPhone 6 Plus was introduced.

3. But today's Smartphone are more like Pocket Computer. Games, Video Consumption, Facebook. At a point when some people were laughing about phablet. Now vast majority of phones on the planet are phablet. They replaces consumer computing. They are no longer a phone in the sense of phone in 2007.

4. You now have a phone that replaces everything, Smartphone becomes a pocket computer that is the centre of our modern society. Access to everything digital.

5. The problem starts when Apple decided to focus on Services Revenue. Remember before the success of iPhone Plus, people were writing off Apple as their sales number did not grow as much as the Smartphone market. And Wall Street was putting pressure on Apple. Service Revenue was Tim Cook's answer ( or middle finger ) to shut these people up.

6. So Apple start breaking out services revenue, stopped reporting iPhone Unit sales, rework iOS, macOS, Map, iCloud and other cost from their product segment to paying $10 per unit to Services Revenue. And announce their target of Services Revenue by 2020.

7. Apple started enforcing rules on 30% as access fees. If it was coming from iPhone, Apple want 30% of it. It wasn't much of a problem with an App. It is much more problematic with services that use App as access. Wordpress blog, Domain Name, Teaching Class, Video Streaming Site, Creator Selling Digital Asset. Until someone complain, Apple started adding exemption to their rules of collecting 30%.

8. Services Sector works different to products. Software like Pixelmator or Photoshop are Software products. Netflix, or some Cartoon Network are Services. Apple used to turn a blind eye on many of these services. Once they start enforcing it because they had to chase their services revenue target. You start seeing lots of complaining.

9. Why should Apple dictate everything that goes through iPhone? If the world is going digitisation, does that mean everything that goes through iPhone will be charged 30% more? How is that not a tax? When it is Applied the same ( or nearly the same ) everywhere. How is this even sustainable?

10. Customer signing up a Email, when majority of cost are in Server. Or Signing a Real Person tutoring, where the cost is the Teacher in front of Screen. Why does Apple demand 30% of it? And how did this 30% number came from for their industry?

11. Lots of argument about Apple wrongly focus on consumer and completely ignore business. SMB are still large part of our society. And they are complaining just as much as big companies like Netflix or Spotify.

12. It is made worst when COVID hit, it speed up the whole digitisation of our society by at least 5 years if not 10 years. Explosive growth in e-commerce and other Digital goods or services. Why is it so hard to deal with Apple?

13. And they are not a niche anymore, they have anywhere from 20% to over 60% in key markets. Despite Tim Cook flat out lie about this. ( His likely defence is the term Market Share could be defined as Unit Sales and not unit usage ). And despite court doesn't like to define market themselves, if iPhone's owner are higher spending group and vast majority of your customer are iPhone customer, is that 30% an abuse of their market power?

[jandrese]

> Apple made these rules when they were not a monopoly by any definition

Didn't Apple have the only app store for iOS devices at that point? For that matter the competing app stores of the time (for Symbian devices) were dreadful and all of them are long gone.

[jimnotgym]

Didn't they become a monopoly when they stopped allowing other app stores. From that point they were a monopoly on iPhone. But being a monopoly is not enough to warrant action, it's abusing the monopoly position that is market abuse, i would have thought?

[tshaddox]

When did they ever allow other app stores?

[MrStonedOne]

> I'm mentioning all of this history to make this point: Apple made these rules when they were not a monopoly by any definition.

They are a monopoly for getting your app on ios phones and in front of ios users.

This is why bundling is part of anti-trust law.

Bundling their app store as the only way to install applications on ios devices should have been stopped years ago.

[simondotau]

Selling a device that does multiple things isn't bundling under anti-trust rules.