0:01

NPR. This

0:12

is The Indicator for Planet Money. I'm Adrian Ma. And

0:14

I'm Weylan Wang. This week, Apple

0:16

did something that it does every year

0:19

around this time. It announced a new

0:21

iPhone. But this year, there

0:23

are legal clouds hanging over Apple and

0:25

the iPhone. For one thing, the day

0:27

after the announcement, the European Union's top

0:30

court ordered the company to pay about

0:32

$14 billion in

0:34

fat taxes to Ireland. That's

0:36

where Apple's European headquarters are. And

0:39

here in the U.S., federal regulators

0:41

have this outstanding lawsuit against Apple

0:43

for allegedly violating antitrust laws. Today

0:46

on the show, we're going to focus on that.

0:49

Why the DOJ brought this suit, and why

0:51

it matters for the millions of people who

0:53

have a smartphone. This

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change? We'll bring you innovations and

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answers during NPR's Climate Solutions Week.

1:56

Explore with us

1:58

at npr.org/climateweek. Rebecca

2:03

Ha Alansworth is a professor at Vanderbilt

2:06

Law School where she teaches antitrust law.

2:09

She says when the Department of Justice initially brought

2:11

its lawsuit against Apple in March of this year,

2:13

it didn't just come out of nowhere.

2:15

The DOJ and the FTC,

2:17

the enforcers of antitrust under

2:20

the Biden administration, have been

2:22

pretty explicit that they want

2:24

to pursue cases against these

2:26

big tech monopolies. And often

2:28

they're identified as the gaffa,

2:31

the Google, Amazon, Facebook, and

2:33

Apple. Oh, I actually have not heard that

2:35

acronym before. Oh, yeah. Well,

2:38

now we need to call it gamma, I guess, because

2:40

Facebook became meta. Over the

2:42

past couple of years, federal regulators

2:44

have sued Google, Amazon, and Facebook's

2:46

parent company, Meta, for allegedly violating

2:48

antitrust law. And then I

2:51

guess they figured, well, we need to complete the

2:53

set. And so they filed this lawsuit against Apple.

2:55

Got to collect them all. Yeah. I

2:57

think that a little cynically, but I actually think

3:00

this suit is not frivolous. Right.

3:02

But yeah, I think the idea behind these

3:04

suits was that the tech companies have gotten

3:06

really powerful. They've stopped innovating as much as

3:08

we would want them to. And

3:12

antitrust can do something about that. In

3:15

a nutshell, the DOJ accuses

3:17

Apple of violating the Sherman

3:19

Antitrust Act by, quote, monopolizing

3:21

smartphone markets, end quote. And

3:23

how supposedly has it been doing that? Well,

3:25

the iPhone has been around since 2007. And

3:29

ever since it debuted, Apple has

3:31

designed a whole suite of products

3:33

and services to work with the

3:35

iPhone. I'm talking MacBooks, Apple watches,

3:38

apps like iMessage, and a whole

3:40

app store full of games. The

3:42

classic metaphor for this carefully curated

3:45

ecosystem is a walled garden.

3:47

Yeah. But according to the

3:49

DOJ's lawsuit, Apple has constructed its garden

3:52

in such a way that it effectively

3:54

locks users in. One

3:56

example it gives has to do with smartwatches.

4:00

If you have an Apple watch, it's designed

4:02

to really only work with the iPhone.

4:04

Conversely, if you have a smartwatch made

4:07

by some other company, like a Fitbit

4:09

or a Samsung watch, it

4:11

can work with iPhone, but the

4:13

DOJ asserts that Apple purposely limits how

4:15

well those other watches work on the

4:18

iPhone. They're making it harder to switch.

4:21

So what we would call this an

4:23

antitrust is barriers to entry. And

4:26

if there's something I don't like about

4:28

the iPhone, it's very, very difficult for

4:30

me to essentially, it feels like, upend

4:32

my life and switch ecosystems. That

4:35

idea that it's hard for consumers to

4:37

switch fortifies Apple's

4:41

monopoly power, says the government. And

4:43

they have actually taken specific steps, according to

4:46

the government, to make it harder for

4:48

me to switch. Another

4:50

way Apple has allegedly made it harder for

4:52

users to switch has to do with these

4:55

things many iPhone users might not be familiar

4:57

with, super apps and cloud-based

4:59

gaming apps. Basically, super apps combine

5:01

multiple functions into one app. So

5:04

imagine an app that lets you

5:06

text, post videos, order food and

5:08

transfer money all in one. That

5:11

sounds delightful because I never want to stop

5:13

using my smartphone. You're

5:17

like, just press a button. It's like, now

5:19

it's making me french fries. Now it's doing

5:22

my laundry. This sounds delightful in

5:24

a sort of dystopian way. But

5:26

it's not just super apps. The DOJ

5:28

also points to these cloud-based gaming apps,

5:30

which let users stream video games to

5:33

their phones, sort of like you would

5:35

stream a movie. For

5:37

both these kinds of apps, the DOJ says

5:39

Apple has historically stifled their rollout in the

5:42

app store. And both of these claims

5:44

are that consumers, if they

5:46

really started living, not in the

5:48

Apple ecosystem, but in the ecosystem

5:50

of these apps or in the

5:53

ecosystem of these clouds, that

5:55

the hardware becomes kind of irrelevant.

6:00

run these sorts of apps on any old

6:02

phone, you might not shell out a thousand

6:04

bucks for the latest iPhone. Yeah,

6:06

I'm going to do it on my rotary phone. That

6:08

I would love to see how you play Angry Birds

6:10

on a rotary phone. Yeah,

6:13

like five hours later, I did it. I

6:17

launched one bird. We

6:19

reached out to Apple. They said basically

6:21

the DOJ is wrong. They

6:23

do have super apps like WeChat

6:26

on iPhone. And when it

6:28

comes to cloud gaming services, they do have

6:30

them in the app store. Although it's worth

6:32

noting that's a more recent development. Now

6:34

one more thing that the DOJ points

6:37

to as evidence of Apple's allegedly anti-competitive

6:39

conduct is the fact that text

6:41

messaging between iPhones and Androids has always been

6:43

a little wonky. Like

6:46

if you have an iPhone, you know when

6:49

somebody's texting you from an Android because it

6:51

appears in like a little green bubble instead

6:53

of a blue one. Or like the way

6:55

that when somebody sends you a picture or

6:57

a video, it looks all shrunken and grainy.

7:00

Yeah, it's like you never know what the quality is going to

7:02

be. Yeah. To somebody who's

7:04

in the Apple ecosystem, Android looks pretty

7:06

bad. And the idea is

7:08

that that's an artificial thing that Apple is doing. So

7:11

to summarize the DOJ's case against

7:13

Apple. What the DOJ is sort

7:15

of arguing is that it's one

7:17

thing if Apple constructed a really beautiful

7:19

walled garden and it says, don't you

7:21

love it in here? Isn't it great?

7:24

But in addition to what

7:26

it's doing in constructing this walled

7:28

garden is keeping other potentially nice

7:31

things out and making stuff

7:33

outside the garden seem worse than it really

7:35

is. Exactly. And

7:37

it's not just about keeping the stuff out, but it's

7:39

also keeping you in. You know, when

7:41

it's time for a new phone, it's an opportunity maybe for

7:43

you to think about getting out of that garden and finding

7:45

a new one. But if they've

7:47

built up the walls so high that

7:49

you're not actually making a real choice,

7:52

it's antitrust harm right there. Apple

7:55

says the DOJ is wrong on the facts

7:57

and the law. It says the suit will

7:59

threaten Apple's ability to keep making products

8:01

that consumers love in a highly

8:03

competitive smartphone market. Maybe worth

8:05

noting here that iPhone sales have not

8:07

been stellar overseas in recent months, especially

8:09

in China. Well, I saw, didn't

8:11

the Chinese company reveal this tri-fold phone? I

8:14

mean, that's pretty cool. I haven't seen anything

8:16

like that here. Not from

8:18

Apple. Just saying. Rebecca,

8:22

for her part, thinks the DOJ has

8:24

a strong case, but she's hesitant to

8:26

call it a slam dunk. Do

8:28

you see any weaknesses in the Department of

8:31

Justice's case? Oh

8:33

yeah, lots of weaknesses. One

8:36

challenge will be proving that all

8:38

these alleged tactics by Apple translate

8:40

into actual monopoly power. According

8:42

to the DOJ, iPhones account for about 65

8:44

to 70 percent of

8:46

the U.S. smartphone market. Is

8:48

that enough to say that Apple has a

8:50

monopoly market share? Rebecca says

8:52

it's debatable. Apple says

8:55

that number is inflated because the DOJ

8:57

is basing it on revenue rather than

8:59

the number of phones. And

9:01

from Apple's point of view, the better view

9:03

of its market power is global sales. Worldwide,

9:06

sales of Android phones far exceed

9:08

iPhone sales, and iPhones only make

9:10

up about 20 percent of smartphones.

9:13

So both sides of this case are

9:16

clearly digging in for some protracted litigation.

9:19

And you've got to wonder, by the end of

9:21

it, what is the government hoping to accomplish? So

9:24

we put that question to Jonathan Cantor. He's

9:26

Assistant Attorney General who heads up antitrust litigation

9:28

at the DOJ. I

9:30

can't speak to the specific lawsuit because that

9:32

is live litigation and we don't

9:35

talk about live cases. But I can

9:37

tell you more broadly that the remedy

9:39

in an antitrust case really depends on

9:41

the nature of the violation. And ultimately,

9:43

our goal is to make sure that

9:45

we're prying open competition because

9:47

we believe that when competition

9:50

is alive and well, it doesn't just make the

9:54

smaller companies challenging them and hopefully

9:56

better. The competitive spirit is what

9:59

drives innovation. In the case

10:01

of US vs. Apple, it could take a

10:03

very long time before we see a final

10:05

resolution. Long enough even that

10:07

we might sooner see another iPhone 17

10:09

or 18. Or

10:12

a 19. Or

10:14

a 20. Should we just keep counting?

10:16

Look at us counting higher and higher. This

10:20

episode was produced by Cooper Katz McKim with engineering

10:22

by Neil Rauch. It was fact-checked by Sierra Juarez.

10:25

Macon Kennan edits the show and the indicators production

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