And
You’re both right if you’re arguing about your opinions, and both sort of right if you’re arguing about antitrust law in the US as applied to Apple’s App Store.
I’ll keep this extremely brief, hopefully not uselessly so.
Identifying a market (market definition) is one of the steps courts use when examining an antitrust matter. Reasonable interchangeability of use or sufficient cross-elasticity of demand, and the responsiveness of the sales of one product to price changes of another.
Kodak (photocopier machines) had an argument that said a single brand of a product or service can never be a relevant market under the Sherman act. They lost that particular argument.
As a result aftermarkets are examined the same way as markets.
And this was examined by the 9th circuit opinion in Epic v Apple. In some instances one brand of a product can constitute a separate market. Kodak’s aftermarket had a high switching cost, high information cost, and a substantial ability to exploit ignorant customers.
And while it is possible to have an antitrust market that is a smartphone operating system, customers in the foremarket knowingly restrict their aftermarket options when they purchase an iPhone.
All the same the “market” that was established for antitrust purposes was “mobile-game transactions.” So it stands to reason, iOS applications could become a market (or they are a market).
Unfortunately for Epic (the nearest example we have):
Step one of the ‘rule of reason’ is the challenged restraint (of mobile game transactions) has a substantial anticompetitive effect that harms the consumers. The district court found Apple has extracted ‘supracompetitive commission’ that was both set by near accident and without regard for its own costs, producing near 75% operating margins. And that Apple had wielded its market power to exclude Epic from offering app-distribution and payment processing alternatives. 9th circuit pretty much agreed (Epic wins step 1).
Step 2: When deciding whether Apple implement procompetitive rationales for its restrictions, the district court found Apple had two cognizable reasons: (1) to improve security and privacy, providing an appeal to consumers and to differentiate iOS from competitors, and (2) restrictions were designed to compensate Apple for its IP investment. The 9th circuit more or less agreed with the district court’s (more or less) two reasons accepted (Epic ‘loses’ (didn’t shift) step 2).
Step 3: And the district court found epic failed to established a substantially less restrictive means to achieve step 2. Antitrust law does not require businesses to use the least restrictive means of achieving their legitimate business objectives; instead, substantially, must be virtually as effective in serving Apple’s step 2 without significantly increasing costs. (Epic loses step 3).
Step 4 (if step 4 even exists): Finally, balancing the anticompetitive effect of Apple’s step 2 (procompetitive benefits), district court considered that the step 2 have pro- effects that offset anti- effects. (Epic ‘loses’ step 4)
As you might have guessed the analysis doesn’t stop there, but you can see how maybe you’re both “right”.
