The smartest take I’ve seen on Apple v. Pepper

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“To be frank,” writes Ben Thompson, “Apple is an abusive monopoly in terms of iOS apps.”

 

From Antitrust, the App Store, and Apple, posted on Stratechery Tuesday morning:

If I am right, and the case is dismissed because the plaintiffs do not have standing, that does not mean Apple and the App Store are out of the antitrust hot water…

Apple has every right to the outsized profits it makes on the iPhone. Consumers could buy cheaper Android devices but they don’t because they value Apple’s hardware, or iOS, or the integration between the two. I have a hard time believing, though, that anyone buys iOS because that makes it harder to buy ebooks!

To put it another way, Apple profits handsomely from having a monopoly on iOS: if you want the Apple software experience, you have no choice but to buy Apple hardware. That is perfectly legitimate. The company, though, is leveraging that monopoly into an adjacent market — the digital content market — and rent-seeking. Apple does nothing to increase the value of Netflix shows or Spotify music or Amazon books or any number of digital services from any number of app providers; they simply skim off 30% because they can.

To be clear, Apple absolutely did create the modern app marketplace, and, as the company loves to brag, an entire new economy full of new types of jobs. That, though, is precisely the problem: the App Store is not a fun side diversion; it is one of the largest platforms we have ever seen, on which hundreds of thousands of people are seeking to build real businesses, and that carries different types of responsibilities — and legal limitations — than an OS feature. It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population.

My take: Agree or disagree with his take, Thomson has a handle on the economic forces at work here. That’s more than I can say, based on yesterday’s back and forth, about the nine justices who will decide this strange case.