Apple antitrust case is surprisingly simple

Getting to point. Apple cannot stand athwart history. So argues U.S. Department of Justice in an antitrust suit it brought against $2.7 trillion iPhone maker on Thursday. Of all lawsuits, fines and legislation lobbed Apple’s way, this case strikes deepest at what is essentially a simple problem. Apple changed world by selling better devices – but its success could hinder next big shift.

Tim Cook’s company makes money from two things: gleaming devices, which users choose of ir own volition, and services, which sometimes y don’t. U.S. trustbusters say firm claims 65% of smartphone market, but that it jealously gates lucrative interactions, like accessing apps or making a payment with a phone. App-makers pay tolls, if Apple even allows m in its app store. Accessing some hardware features, like tap-to-pay, is barred.

Users might well favor Apple’s choices anyway. y might voluntarily opt to have ir searches default to Google, whose owner Alphabet GOOGL.O pays billions of dollars to remain iPhone’s default engine. y might flock to Apple’s own wireless earphones or smartwatches even if it were equally appealing to go with rivals. Until now, that hasn’t been put fully to test.

re’s value at stake if Justice Department prevails. Apple’s services division generated $85.2 billion of sales in 2023, with a gross margin double that of its hardware. “toll” element of that includes perhaps $20 billion from Google, Bernstein analysts reckon. n re’s App Store itself. DOJ suit, along with a case against Alphabet and various European regulatory moves, threatens it all.

But re’s more at stake in future, because in a world of cloud-based services, Apple could look less special. case quotes an Apple employee fretting that someone could buy a $25 phone and “have a solid cloud computing device.” As computing power moves to giant server farms, users can stream apps that far exceed ir devices’ own capabilities. If a phone simply becomes a portal to cloud, Apple has less to offer, notwithstanding its devices’ slick appearance.

Attorney General Merrick Garland has linked new assault on Apple to lawsuit against Microsoft decided in 2001, which helped loosen its restrictions on desktop computers and free independent web. firm run by Satya Nella managed to remain gigantic by offering products and services – from cloud computing to social network LinkedIn – that people use even when y have alternatives. Apple may soon have to do likewise.

Apple cannot stand athwart history. So argues U.S. Department of Justice in an antitrust suit it brought against $2.7 trillion iPhone maker on Thursday. Of all lawsuits, fines and legislation lobbed Apple’s way, this case strikes deepest at what is essentially a simple problem. Apple changed world by selling better devices – but its success could hinder next big shift.

Tim Cook’s company makes money from two things: gleaming devices, which users choose of ir own volition, and services, which sometimes y don’t. U.S. trustbusters say firm claims 65% of smartphone market, but that it jealously gates lucrative interactions, like accessing apps or making a payment with a phone. App-makers pay tolls, if Apple even allows m in its app store. Accessing some hardware features, like tap-to-pay, is barred.

Users might well favor Apple’s choices anyway. y might voluntarily opt to have ir searches default to Google, whose owner Alphabet GOOGL.O pays billions of dollars to remain iPhone’s default engine. y might flock to Apple’s own wireless earphones or smartwatches even if it were equally appealing to go with rivals. Until now, that hasn’t been put fully to test.

re’s value at stake if Justice Department prevails. Apple’s services division generated $85.2 billion of sales in 2023, with a gross margin double that of its hardware. “toll” element of that includes perhaps $20 billion from Google, Bernstein analysts reckon. n re’s App Store itself. DOJ suit, along with a case against Alphabet and various European regulatory moves, threatens it all.

But re’s more at stake in future, because in a world of cloud-based services, Apple could look less special. case quotes an Apple employee fretting that someone could buy a $25 phone and “have a solid cloud computing device.” As computing power moves to giant server farms, users can stream apps that far exceed ir devices’ own capabilities. If a phone simply becomes a portal to cloud, Apple has less to offer, notwithstanding its devices’ slick appearance.

Attorney General Merrick Garland has linked new assault on Apple to lawsuit against Microsoft decided in 2001, which helped loosen its restrictions on desktop computers and free independent web. firm run by Satya Nella managed to remain gigantic by offering products and services – from cloud computing to social network LinkedIn – that people use even when y have alternatives. Apple may soon have to do likewise.