Market power is the ability to coerce people into paying more for something via a mechanism other than actually offering a better product or service. A textbook example which most people would agree is bad is a trust/cartel situation where a few players artificially limit supply, and then can raise the price on consumers because there are no competitors. But if a firm is able to drive up prices with impunity for any reason, it's likely they possess market power.
When a firm possesses excess market power it's good for that firm, but bad for the market, consumers, and society. By definition a firm with a lot of market power has very little competition, so even as their margins grow, product quality will decline and price will increase. (Sound like Apple in 2020?) And new firms will find it difficult to compete in that market even as the firm with market power grows very rich, which exacerbates the problem of wealth inequality. (Sound like America in 2020?)
A society which doesn't place some sort of checks on a firm's ability to acquire market power ends up being a place where the way to get ahead is to find an unfair advantage, abuse it, and screw everyone else. (Again, sound familiar?)
At this point it's almost certain that Google is violating antitrust regulation by abusing its market power (proven in the EU, and the US looks poised to start filing lawsuits this year). Apple, Amazon and a few others are up for debate and it's also fair to say that antitrust regulations should evolve to address the tech industry more effectively. The antitrust problem isn't limited to tech however, anti-competitive behaviors of questionable legality have proliferated all over the US since the 80s due to a lax regulatory environment.
If you want to learn more about this topic, Matt Stoller's newsletter "BIG" on Substack is a phenomenal place to start.
How exactly does Apple "coerce people into paying more for their phones via a mechanism other than actually offering a better product or service", and what is that mechanism?
> But if a firm is able to drive up prices with impunity for any reason, it's likely they possess market power.
How is Apple actually able to "drive up prices with impunity for any reason"? It seems to me, the more Apple raises iPhone prices, the more people are priced out and decide to switch to a cheaper phone instead.
In this case, once you buy an iPhone, you're forced to use Apple's system to make in-app purchases. The tying product is the phone, and the tied product is the in-app purchase.
So you need to show that Apple has sufficient market power in the smartphone market, and that is where the question of the ability to control prices of phones comes in.
(Neither does Apple v. Pepper.)
But since you mentioned it, I'm not really sure that Epic will succeed with their argument that the "iOS App Distribution" market is the relevant tying product market absent an analysis of the overall smartphone market.
The government playbook in this sort of situation is normally to start subpoena'ing emails, execs etc. and look for hard evidence of actual anti-competitive practices. They're not only interested in a business model as it's described in the media, they want to know what company execs actually did. If they find something they file a suit.
Well, assuming it is one based on abuse of market power and not the other kinds of antitrust violations (e.g., combination in restraint of trade, etc.), it would fail if the plaintiff couldn't establish that Apple had market power in the market for the product for which they allegedly abused market power. If that was iPhones, for instance, that would be the market for iPhones plus whatever products empirically people substitute for iPhones in response to pricing changes. (Of course, if Apple has market power, there is some range in which the “plus...” part is “none”, since market or pricing power is the ability to raise prices without driving sales to a competing good.)
If the lawsuit was about selling some popular class of app in which Apple leveraged its monopoly over app distribution, I think the plaintiff could have a pretty strong case.
Keep in mind that even if Apple only had 1% market share in the smartphone market they would still have a "monopoly" over app distribution on their own phones.
If price increases for Fortnite IAP don't, empirically, drive people to stop buying them in favor of alternatives of some kind, yes. Or, rather, you can't define the market that way, but if there is no substitution effect a US court considering an anti-trust claim is likely to see that as the relevant market, not some broader, say, battle royale game IAP market in which price-driven substitution does not occur.
I’m much more worried about the government deciding what happens to people randomly than a corporation. I don’t have to buy Apple products. It’s a lot harder for me not to have to deal with a capricious government.