Trustbusters will not be able to smash down Apple, or its Big Tech rivals

Competition case in the United States against iphone maker looks like thin gruel and lacks punch

When you come for the King, Machiavelli warned, you’d better not miss. By suing Apple, the US government has made a bold swing. The embodiment of American aspirational style, it has been ranked the world’s most admired corporation for 17 years and is the most valuable brand on the planet – with a market capitalisation of $3trillion (£2.4trillion), they don’t come much bigger. But does it pack a punch?

The lawsuit filed last Thursday portrays the iphone business as a forbidding citadel. Among the industries the suit claims have suffered from Apple’s “anticompetitive and exclusionary conduct” are “financial services, fitness, gaming, social media, news media, entertainment”.

Lawyers say that no other digital wallet is permitted on Apple devices. Third party smart watches don’t work as well as they should because Apple doesn’t share the information they need to match Apple’s Watch. In short, the company is riddled with problems.

Several factors, however, make this argument more difficult. For a start, Apple enjoys a little over 50pc market share in the United States, and a much lower share in other markets.

Monopolisation is rarely found when the defendant’s share of the relevant market is below 70 per cent, a now-archived explainer on the Department of Justice website informs us. The smartphone world is really a duopoly, not a monopoly, and it’s Google’s Android that dominates in most markets. Here, Google controls its key technologies just as tightly as Apple. It’s also squeezed the hardware manufacturers hard, removing much of their ability to differentiate or develop their own services.

More of a problem is that iphone owners seem fairly happy with the proposition that they pay more up front for a more invigilated and controlled experience. It means Apple’s devices work more smoothly together, are more secure, and tap into a range of superior Apple accessories.

When consumers can afford to, they choose Apple: market share seems closely correlated with income.

Nor is the premium price tag quite what it seems. Apple supports its devices for five years, and thanks to robust design and engineering, they often keep going for even longer. So the entry ticket to Apple’s ecosystem is a refurbished iphone that costs around £150 second hand. That’s good enough for many and a market that is booming in the UK. Apple has used some of these counterpoints effectively in a series of competition cases.

So, it isn’t clear that the bunker buster of a government anti-trust suit is the most effective tool. Surgical strikes may be more effective, such as the UK’S ongoing probe into the Apple app store and forays under the umbrella of the EU’S Digital Markets Act.

For example, after competition action users of Windows in the EEA (European Economic Area) no longer need to sign into Microsoft Bing, or have Microsoft’s Edge browser rammed down their throats. In fact, they can uninstall both completely.

Covering technology cases for two decades, I’ve never seen one so bereft of the damning, jaw-dropping quotes from executives that the discovery process can unearth, and which give us journalists so much pleasure. Where are the Apple insiders bragging that they have crushed their rivals?

Announcing the lawsuit, US Attorney General Merrick Garland grasped for big historical comparisons but his attempt only highlighted the lack of punch in this case.

The problem with giant technology platforms today is both deeper and more subtle: they have replaced open markets with something much closer to a Soviet-style planned economy: not socialism in one country but a market in one company. This allows them to do something unprecedented; to manipulate both supply and demand.

Free market orthodoxy is struggling to adjust to this new world. Apple, however, engages in such practices only a little compared with say Amazon Marketplace or the closed box auctions that have earned Meta and Alphabet their fortunes. It doesn’t have to.

What next for Apple? As with any successful outfit, its worst enemy is not the government but itself. The iphone barely changes from year to year. Growth comes from eking out service revenue and selling accessories. Competition regulators have been able to argue that previous technology lawsuits have invigorated the market and stimulated innovation.

Decades of litigation against IBM allowed the PC to flourish: Big Blue was obliged to create an open design for its first microcomputer, creating a machine that could be cloned. It was Bill Gates’s biggest break. Two decades later, concerns about Microsoft’s dominance of the newly emerging internet encouraged start-ups such as Google to grow with confidence

It’s difficult, however, to imagine how tweaks to Apple’s platform can have similar results. Apple is the fourth tech giant to be sued since 2020 and, perhaps for the Government, it’s another box ticked. One thing is sure: a new era of competition regulation is now in full swing. So whether Republican or Democrat wins the White House this November, Big Tech’s wrangles have only just begun.