Wednesday, October 7, 2020

House Report on Competition in Digital Markets

John Gruber:

The House Judiciary subcommittee that held a hearing with the CEOs of Amazon, Apple, Facebook, and Google back in July has issued a 449-page report on its findings and recommendations.

The report is here. Some of the parts I found interesting:

Apple’s market power is durable due to high switching costs, ecosystem lock-in, and brand loyalty. It is unlikely that there will be successful market entry to contest the dominance of iOS and Android.


In response to these concerns, Apple has not produced any evidence that the App Store is not the sole means of distributing apps on iOS devices and that it does not exert monopoly power over app distribution. Apple says it does not create—nor is it aware of third-party data—that tracks market share in the app distribution market.


Apple’s monopoly power over software distribution on iOS devices appears to allow it to generate supra-normal profits from the App Store and its Services business. Apple CEO Tim Cook set a goal in 2017 to rapidly double the size of the Services business by the end of 2020. Apple met this goal by July 2020, six months ahead of schedule.


Apple also makes some exceptions to its rules and may change or update its rules.


Industry observers have also challenged Apple’s implicit claim that the iPhone was the start of the online software distribution market.


In an interview with Subcommittee staff, Phillip Shoemaker, former director of app review for the App Store, estimated that Apple’s costs for running the App Store is less than $100 million. […] Although only estimates, these figures indicate that as the mobile app economy has grown, Apple’s monopoly power over app distribution on iPhones permits the App Store to generate supra-normal profits. These profits are derived by extracting rents from developers, who either pass on price increases to consumers, or reduce investments in innovative new services. Apple’s ban on rival app stores and alternative payment processing locks out competition, boosting Apple’s profits from a captured ecosystem of developers and consumers.


In Apple’s internal documents and communications, the company’s senior executives previously acknowledged that IAP requirement would stifle competition and limit the apps available to Apple’s customers.

Juli Clover:

Apple in a statement to MacRumors said that it strongly disagrees with the conclusions reached in the report in respect to Apple, and that Apple does not have dominant market share in categories where it does business.

See also: Hacker News, Steve Troughton-Smith, Steve Streza, Brent Simmons, Michael Love, Matt Birchler, Ben Thompson.


Update (2020-10-09): James O’Leary:

here’s the landing page for all the docs they referenced, segmented by company

6 Comments RSS · Twitter

They've done a great job diagnosing the many problems with Apple's behavior. I'm surprised and impressed.

Who knows what solutions will end up being implemented. There's a lot of political variables between now and whenever that happens. I expect this to get more problematic from here on out, but at least they are starting with a very solid diagnosis as a foundation.

I for one always championed Apple as "Services first" company, based on their stellar track record: eWorld, iTools, Dot Mac.

Any old company can create another iPod or Macintosh. Only Apple has the talent to create Ping.

In my ideal world, iOS and Mac OS should be whittled down further. They should provide two roles, and two alone: to be a conduit to iCloud, and to present the user with "Sign up to iCloud" calls-to-action.

Old Unix Geek

I'm actually very pleasantly surprised at this document. Congress seems to have understood the problem we are facing.

I just hope this good work doesn't fall victim to political bickering or corruption. Given the staggering amounts of money involved, this seems like a reasonable concern. So it's one step in a good direction, but the journey is far from over.

"I just hope this good work doesn't fall victim to political bickering or corruption."

From the U.S. Congress? Not a chance! These are the same unified progressive folks who gave us the Metric Conversion Act of 1975.

I'm sure we'll see tangible results from their latest report any day now.

"I don’t expect the Federal Government to break up Microsoft. For a lot of reasons, the least of which is the Federal Government is a monopoly. I mean, they’re buddies!" -- Steve Jobs, 1997

The "only web apps" shit sandwich from 2007 maybe was not so bad...

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