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Driving the news: The US Supreme Court ruled Monday that a class action brought by users accusing the Apple App Store of monopolistic behavior could go ahead.
The big picture: Here's why "market definitions" are so essential in antitrust struggles.
- Suppose you run the only restaurant in town – do you have a monopoly?
- If the market is defined as "restaurants" or "restaurant restaurants", that's what you do.
- If the market is defined as a "meal" or a "food", well, people can shop and cook, right?
- In one way, you are a monopolist – on the other, you are not.
In the costume of the App Store, users blame Apple for forcing developers to sell applications for iPhone only through the window of Apple and reduce their sales, which drives up prices.
- Apple explained that users can access software and services through their phone's web browsers and that most applications accessible from the App Store are free downloads that do not earn a penny.
If you define the market as "iPhone apps", Apple looks a lot like a monopoly – it keeps total control over the space.
- You can not put a non-App Store application on an iPhone without the "break in jail", by altering the operating system in a manner not in accordance with Apple's terms and canceling the guarantee.
If you define the market instead as, for example, "smartphone apps", you get a different result.
- Indeed, users are free to buy Android phones and access a very different universe of applications. Users have the choice – presto, no monopoly.
The same principles apply in the debate on breaking Facebook.
- In his recent essay claiming that Facebook has become too powerful, co-founder Chris Hughes explained that the company "is a powerful monopoly, eclipsing all of its competitors and erasing competition from the category of social networks."
- "The category of social networks" is a way to define this market in which Facebook is most easily monopolized.
- But if you call it "messaging," then Apple, Snapchat, and mobile phone providers all look like powerful competitors.
Similarly, in many countries, Google seeks to have a monopoly in the research market. But if you define the market as "an information online", the case is much darker.
- Google's practices on Android have also been the subject of an antitrust investigation. Last year, a decision of the EU condemning Google for practices involving Android Play Store said that Google held a monopoly on this market.
Our thought bubble: In technology, the market definitions are particularly fluid because the hardware is changing rapidly and the software is malleable to infinity.
- Litigation and antitrust matters are evolving slowly and, as they can be judged, markets tend to change.
- But the power of the tech giants has grown so much that many critics consider antitrust remedies as the only way to rebalance the game of the industry.
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