Right, the percentage of Apple's cut isn't the key part of this EU case.

Certainly doesn't help that it's the current 30% but it being 15% won't change the fundamental issues being argued - whether Apple is abusing its market power and shutting competitors out of or subjecting them to unfair practices in its iOS ecosystem. E.g. unfairly favoring its own Music app.

I think it's a fairly straightforward case similar to Microsoft's antitrust case for bundling the Internet Explorer in its Windows OS a couple of decades ago. The argument then was that Microsoft favored its own browser and crowded out viable competitors like Netscape. If anything, the case is more obvious here since you can't even install any other music streaming alternatives on your iPhone if it's not in the App Store - in Windows you could download and install another browser (even if most users didn't).

The main difference with Microsoft is that Apple does not have a monopoly in phones like Microsoft had with PCs. Apple phones make up only 13% of the phone market.

Colloquial definitions of monopoly do not matter when it comes to antitrust laws[1]:

> Courts do not require a literal monopoly before applying rules for single firm conduct; that term is used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors. That is how that term is used here: a "monopolist" is a firm with significant and durable market power.

--

> Apple phones make up only 13% of the phone market.

iOS has 60% of the market in the US[2].

[1] https://www.ftc.gov/tips-advice/competition-guidance/guide-a...

[2] https://deviceatlas.com/blog/android-v-ios-market-share

Depends on how one defines "monopoly". Back in the late 1990s, one could theoretically install non-Windows OSes like Linux, Unix or even purchase an Apple Mac. But yes, in practice Microsoft commanded the market and abused its market power.

Also it's market-specific. As the other commenter noted, the market share is region-specific and in the EU higher than 13%. In the U.S. it's even higher at ~47% (https://www.statista.com/statistics/236550/percentage-of-us-...).

You could argue that users technically have a choice to switch to Android but due to network effect (e.g. your family/friends all use iOS) and lock-in features like iMessage and Facetime, it's often a false choice.

Every time App/Play store fees are discussed, it devolves into unproductive hair-splitting over the word monopoly. The proper term is captive market.

> Captive markets are markets where the potential consumers face a severely limited number of competitive suppliers; their only choices are to purchase what is available or to make no purchase at all

Apple has at least 30% market share in EU, you're giving the EMEA number.

Original article didn’t make that case, or present this side of the EU’s argument.

If that were the EU Commission’s line of thought, it would be wrong on the basis of its presuppositions alone by trying to categorize these two companies into what businesses they are in and screwing up the timeline.

Apple has been in the music business longer than the iPhone has existed, even in prototype form, and longer than Spotify or Beats Electronics existed (whose Beats Music service is the direct predecessor of the subscription component of Apple Music).

As said elsewhere, who was there first is not relevant, whereas having prefered treatment because of your monopoly at any stage is. Some are mentioning the App Store being the root of the monopoly, and that is probably true. But speaking from a legal EU point of view, especially as the EU is stating their case in the streaming music area only, wouldn't the simplest way for Apple to get away with it be to externalize 'enough' Apple Music and to have them pay the same fees as Spotify? Therefore, the only way to restrict anticompetitive practices here would be as others like Epic are doing: by proving the monopoly in enough different domains covered by the App Store? Would the antitrust laws in the US similar, that is proving monopoly has to be done by domain, or would a more global view be possible there?

> As said elsewhere, who was there first is not relevant

You want to go back and re-read the comment I directly replied to where bullet point 1 was the EU (hypothetically at this point) making determinations about who was in what market and laid the foundations for bullet point 2 based on its own flawed presupposition and then tell me that the timeline is irrelevant?

I didn’t point this out to make an argument against the claims that Apple has any sort of claim to monopoly status (or that the EU has any basis for making that claim), but that any legal argument at all made on that foundation would crumble because bad facts make bad law.

> whereas having prefered treatment because of your monopoly at any stage is.

Except Apple does not have market dominance, let alone a monopoly, in Music or Phones.

> Some are mentioning the App Store being the root of the monopoly, and that is probably true.

Not having market dominance, let alone a monopoly, in phones, software, or software retail and distribution, that is actually not true.

They have a monopoly on iPhone features, including the App Store, insofar as the iPhone is researched, developed and sold by Apple as a cohesive product, and it does not have out of the box functionality that Apple does not add themselves. You might as well claim Google has a monopoly on YouTube channels or that Amazon has a monopoly on Whole Foods shelves; more accurately, that Nintendo has a monopoly on the eShop and Sony has a monopoly on the PlayStation Store. It was a bad argument 13 years ago, and it is a bad argument today that doesn’t even pass the sniff test.

> especially as the EU is stating their case in the streaming music area only

Why only streaming music? Spotify was originally an upstart competitor to iTunes and the iTunes Music Store, and the iTunes Music Store was originally a competitor to record stores.

Music itself is part of the larger News and Entertainment industry where ultimately the resource is someone else’s leisure time and you want to be the one to fill it. Spotify knows this; that’s why they experimented with video and they’re huge into podcasts now.

> wouldn't the simplest way for Apple to get away with it be to externalize 'enough' Apple Music and to have them pay the same fees as Spotify?

Why should they have to? Because they have a competitive advantage? Businesses always look to edge out their competitors by accumulating advantages. Spotify was successfully out-competing iTunes, so Apple acquired Beats and folded Beats Music into iTunes and called it Apple Music.

Spotify has almost 5 times the global market share of streaming music as Apple does, and has almost as many EU subscribers as Apple has total subscribers, that is globally, give or take 10 million.

What Spotify is doing here is trying to lower their costs because they have massive overhead in licensing fees, same as everyone else that licenses music. Part of their growth story is exactly being on the iPhone at the right time to capitalize on its growth, and being featured in the App Store. In order to compete, they offer an ad-supported tier from which Apple sees exactly none of that money. I don’t think you can even subscribe to Spotify from within the iPhone app anymore so Apple is still footing the bill for distribution and any money that Apple sees from prior subscriptions is now at the lower 15% rate that all subscription apps see for customers after their first year subscribed.

> Therefore, the only way to restrict anticompetitive practices here would be as others like Epic are doing: by proving the monopoly in enough different domains covered by the App Store? Would the antitrust laws in the US similar, that is proving monopoly has to be done by domain, or would a more global view be possible there?

I don’t know how to parse this. Clarify and I’ll get back to you.

> You might as well claim Google has a monopoly on YouTube channels or that Amazon has a monopoly on Whole Foods shelves; more accurately, that Nintendo has a monopoly on the eShop and Sony has a monopoly on the PlayStation Store. It was a bad argument 13 years ago, and it is a bad argument today that doesn’t even pass the sniff test.

Apple:iPhone:App Store :: Nintendo:Switch:eShop

Antitrust law focuses on the restraints of trade. Companies that are minor players in the market have been successfully pursued for antitrust violations, because it does not require a monopoly, or even market dominance. Monopoly law was the origin of antitrust law, but today is merely a subset of it. (For example, bid rigging, market allocation, and price fixing are all antitrust violations.)

Antitrust generally requires a substantial market position, and the use of that market position in one of a number of enumerated anti-competitive manners (the list differs between the U.S. and E.U.). One antitrust violation both the U.S. and E.U. have is the abuse of market position in one market (i.e., mobile devices) to anti-competitively establish market position in a different market (i.e., streaming music).

Apple has approximately 1/3 of the EU market for smartphones, which is a substantial enough market position for a single market position that antitrust concerns come into play. (Legally, the comparison is not Apple vs Android; it's Apple vs Samsung, LG, Huawei, etc.) Note that Samsung, etc., would have similar antitrust concerns if they tried to launch their own streaming music services in the same fashion as Apple did.

Note that if Apple had required an industry-standard fee for processing iOS subscription payments (generally, 2% or less depending on territory), or didn't require Spotify to use iPay, then there wouldn't have been any antitrust issues.

I think it's interesting that Microsoft got into hot water in 2001 for (among other things) including Internet Explorer in Windows, thereby abusing its dominant position in the OS market to dominate the browser market.

Microsoft very sensibly argued that including (and indeed integrating) a web browser was a logical evolution of the modern operating system.

In 2021, Apple (Safari/iOS/macOS) and Google (Chrome/Android/ChromeOS) would presumably agree with Microsoft's position. Mozilla might take issue.

I wonder what would have happened if Microsoft hadn't been dissuaded (somewhat at least) from completely integrating Windows and IE in the early 2000s. Perhaps Windows would be a lot closer to ChromeOS. And I wonder if Microsoft would have been more competitive with Google, Apple, and other companies if they hadn't been the target of antitrust action.

Isn’t leveraging the market share with the iPhone/iPad for a lot of other things (Arcade, AirTag, ApplePencil, …) in the same category?

Which is why Epic and Tile are complaining too.

> Now they have an unfair advantage since Spotify must pay 30% to apple while apple music "pays" 0%.

I think this does not account for the opportunity cost. If Apple Music competes with Spotify, then Apple Music implicitly pays the 30% fee of the next best alternative. If Spotify operates at a loss with the fee, and Apple Music is otherwise an identical business, then Apple should prefer Spotify - it makes more money this way. The fee is basically irrelevant.

That ignores the 'operate at a loss to kill competition then jack up prices/lower quality' strategy that the EU is directly trying to fight here. It's a common trope; Monopolies are great for the consumer; until they aren't held accountable.

Imagine that Apple charges a 0% fee. They could still undercut the pricing of Spotify, using their vast resources, and accomplish the same.

So then if Apple Music internally pays 30% to App Store, we're all good by this definition.

That’s good for internal bookkeeping but it’s not enough to prevent the unfair advantage.

Take this example: Apple Music “pays” 30% to parent Apple Corp. That 30% payment cuts into Music’s revenue and now they’re operating at a 25% loss.

However, that rough calculation still allows parent Apple Corp to consider Music to be profitable, since it’s a net profit for Apple Corp. It’s happy to take the 25% “loss” in the music division because it’s just a paper loss. In cash terms, the Music division increases Apple Corps profit.

The only real way for this division to be fair is to spin Apple Music off into its own company that is not owned by Apple Corp.

I don't think you considered the loss of the 30% from each apple music customer's previous subscription to a competitor. There's no unfair advantage, the maximum profit apple can make by switching a customer away from spotify is spotify's profit.

This assertion ignores that apple makes a profit off the 30% cut. In other words: it doesn't correspond to a real cost to Apple.

It's known that music licensing costs are about 50% of gross subscription prices. So a subscription to spotify is about 50% to rightsholders, 30% to apple, and 20% to spotify as their profit. A subscription to Apple music is 50% to rightsholders, and 50% to apple. The additional profit Apple makes from converting a Spotify customer is only 20% (50%-30%), the same profit that any other competitor to Spotify (such as Tidal) would make on a conversion. Now, Apple could afford to lower their subscription costs to below Spotify's, selling below "cost" at say 75% rate. So they are still "making money" per subscription, but at a price which is unsustainable to Spotify, which seems at first glance unfair and is what I think the comment chain is picturing. But what's happening here is that Apple as a whole is actually making less money on an Apple Music customer (25% margin) than a Spotify customer (30% margin), so it's not profitable or a good business decision versus the alternative. And we don't see apple doing that, at least where I live both subscriptions are the same price. It only works if you are able to drive Spotify out of business, then jack up the prices, but that anticompetitive opportunity to "dump" is possible for Apple in essentially any market due to their vast vast cash reserves.

In my view the potentially anti-trust advantages Apple has over Spotify mainly come from the fact Apple Music is preinstalled and is promoted to iOS users through push notifications.

Disagree. If Apple only had their Music app, they wouldn’t have to maintain the whole ecosystem that comes along with the app store that allows Spotify to exist as an iOS app. Maintaining that system is where the 30% goes. Would anyone then say Apple had an unfair advantage as to who could have a streaming platform on iOS?

Spotify would be free then and are now to make a web based player like youtube or soundcloud.

Strange how Spotify managed to create and distribute their app entirely without Apple's "help" on macOS, but would somehow be incapable of doing the same on iOS.

> Maintaining that system is where the 30% goes.

Let's be honest here, the 30% spent by Europeans is mostly going to anonymous bank accounts in Jersey.

What if spotify can get 1 customer at $1, but apple can get 2 customers at $0.7, to get $1.4.

Alternatively, if for some reason there's just a single lump of music streaming revenue to be earned, maybe it's still shitty if Apple steals spotify's business but breaks even on the opportunity cost.

With that accounting methodology, between the 30% apple store cut and the 70% music publishers cut, Apple music is left with no revenue whatsoever to fund their service, therefore running it at a 100% loss and thus price dumping which is also illegal.

I think dumping is only illegal in the context of international trade. Not sure of the nuances but operating at a loss certainly isn't illegal in most contexts.

Not entirely sure about legality within country, but anyway Spotify is a Swedish company ( https://en.wikipedia.org/wiki/Spotify ) .

So it is international already.

It is technically illegal but thanks to a lack of appetite from antitrust prosecutors to do... well, anything very much combined with a high barrier of proof it's essentially allowed.

But this is an excellent accounting methodology then: Each sub-business should run as a separate business.

It picks my interest: Companies internally run as communist economies, all resources are merged and shared, employees are not individually associated with a revenue because the group is worth more than its sum, on the outer, liberal economy. At what size / on which criteria should a group inside a company be considered an independent product-and-loss entity, in order to avoid supercorporations to make use of monopolistic behaviors? Should a 100-billion-dollars marketing operation inside Apple be allowed to function at a loss if it pumps interest in all of Apple’s other products? Can Apple Music be disguised as a marketing operation instead of as an independent entity?

Whenever a company of significant size branches into another market where it has some unfair advantage thanks to it's dominance other industry it should come under scrutiny.

The reason products like Alexa and the Fire tablet have been so successful for Amazon is basically because they have been able to promote them for free on the worlds largest marketplace and then sell them at a loss offset by the profits generate from other segments of their business like ecommerce and AWS. I've been so underwhelmed by every Amazon product I've ever brought I'm 100% convinced their success in hardware has been almost entirely due to their cannibalistic business practises than their ability to make solid hardware that people want to buy.

This means in basically any market Amazon enters they don't need to make the best product, they just need to undercut and promote their products enough to kill off the competition. Google and Apple can also run this strategy very effectively with Google Search promoting Google products and Apple's hardware/appstore ecosystem promoting then locking users into their own hardware and software.

Since you mentioned that this piques your interest: There is an body of research and literature about this topic. The Theory of the Firm [0] is a good starting point.

[0] https://en.wikipedia.org/wiki/Theory_of_the_firm

In theory and superficially that makes sense, but they are the same company so it wouldn't make a difference in the end. It's not like Spotify can pay itself that 30%.

> it wouldn't make a difference in the end

Yes it would.

I think the problem is with 'internally'. As I understand it, the antitrust regulations could force Apple to spin Apple Music out.

Let's take a step and ponder wouldn't you find it bizarre to have this sequence of events:

1. Apple creates iPod, and iTunes serves as its music store.

2. Apple creates iPhone, which has an iPod app.

3. Apple introduces App Store so other apps can be used on the iPhone.

4. iPod (Apple Music) competitors emerge.

5. EU says "that's it, Apple can't have iPod anymore on the phone unless iPod (Apple Music) becomes a separate company".

No one (successfully) sued Apple for anti-competitive practices on iPod. Ergo if the iPhone never had an App Store, they'd be allowed to have 100% of the revenue of iTunes, and ban competitors out completely.

By opening the iPhone platform to third parties, EU sees them as another type of entity completely. In effect the EU penalizes the creation of market places, because once you're market place, you lose control over your own products to the government.

Apple didn't invent music players, nor appstores, nor smartphones, nor digital music or music streaming. The entire argument is a red herring.

But even if we take this absurd argument at face value, it's still wrong: third party applications add value to iPhone and make them worth bying. If you could not install games, bank app, etc. On an iphone, iPhones would be useless and noone would buy them in the face of competition. The whole reason Windoes Phone died is that there were no apps. iPhone would simply follow

Third party apps have been dominant on PCs and Macs on the open web for a decade prior to the iPhone. Third party apps such as FB.Connor even Spotify.com still run on the iPhone built on HTML5. Of course, I will concede that the desktop publishing industry and the banking, finance, spreadsheet industries benefited from native computer apps in the decades prior to that.

Counter to the narrative of Windows phone’s failure, why were BlackBerry and Nokia successful despite not having third party apps at the scale iPhone does?

Third party apps add value to the iPhone — you’re right. They can also add confusion, adware, and bundleware if allowed to reign free; a curated, expensive gatekeeper is the cheap way to keep the crappy third party apps out; not a foolproof way, just a cheap way.

> "why were BlackBerry and Nokia successful despite not having third party apps at the scale iPhone does?"

They were in the process of dying around the same time as Windows Phone was and all for the same reason: the iOS/Android duopoly.

> No one (successfully) sued Apple for anti-competitive practices on iPod

Because they never had the market share and power in the music market that they have now on the mobile market that's why. You kind of answered why they are getting sued now yourself.

You're in effect saying "no, EU didn't sue iPhone because it added an App Store to iPhone, it sued iPhone because it was successful".

Is that better? Become successful, get sued? Android has 87% market share, iOS has 13%. That's not even a monopoly.

Of course we can define arbitrary categories like "Apple has monopoly on the iOS market". Which makes the concept of monopoly absolutely nonsensical, because then everyone has a monopoly. I have a monopoly on the slver username on HN, so I guess EU might sue me any moment now.

Also, let's recall EU suing Microsoft and forcing them to offer Windows without a media player. So what did this result in? It resulted in lots of nephews children and grandchildren having to visit their relatives and help them install Windows Media Player. I'm from EU and I want to like all their decisions, I'm team EU. But they're complete idiots sometimes when dealing with tech.

What a moot argument, there's absolutely zero competition in the mobile market. The living proof of that is that the only tariff changes Apple ever made in their whole mobile history was because ... of a real threat of an anti-trust lawsuit. They basically admitting the fact themselves, you can't even make this up.

Yes it's a duopoly and yes they are both abusing their market power. It got so bad that you have to get testimonials of mobile developers anonymously against those two companies because they are fearing retaliation against them (yes that does sound like a mafia).

> The living proof of that is that the only tariff changes Apple ever made in their whole mobile history was because ... of a real threat of an anti-trust lawsuit.

Not only that, this change highlighted the App Store and Play Store cartel[1] that engages in price fixing[2]. Google also dropped their prices to match Apple's, but not any more or less.

Instead of mobile app distribution prices being dictated by the free market, they're dictated by the cartel. Prices have only changed once in a decade, and not in response to the market at all, but by the whims of the app store cartel.

[1] https://en.wikipedia.org/wiki/Cartel

[2] https://en.wikipedia.org/wiki/Price_fixing

All these laws are not about "monopolies", that is just the wording people commenting use. So, yes the "concept of monopoly" is wrong here, which is why nobody is actually doing that and you are attacking a strawman.

Note: back in the iPod days, iTunes did serve as a music store for the iPod, but you could buy MP3 files from other providers as well, and transfer them to the iPod via iTunes. This whole process didn't "cost" the provider or user any extra.

Now, it's true that iTunes did get significant traction because of convenience for users of iPods, however there were definitely options for other music distributors. In fact, back in those days, I tended to still buy CDs because they were DRM-free and similarly priced, and I could rip the songs at my selected quality settings to transfer to my iPod.

If Apple never had an App Store, then this wouldn't be a problem, true. There would be no "30% cut for almost nothing".

But would people buy as many iPhones if they were restricted to Apple-only services? Some might. I would expect more people would buy into more "open" ecosystems. I could be wrong -- and Apple has every right to shut down their App Store to find out.

> In effect the EU penalizes the creation of market places

Nope. EU only forces you to compete in the marketplace on the same terms regardless of who owns the marketplace or the product.

> because once you're market place, you lose control over your own products to the government.

This is bog standard anti-trust. Yes, if you become massively successful, in a market, then you are now no longer allowed to do certain things. That is how anti-trust law works.

If you take over a market, or become massively successful, you become a monopoly/duopoly, and have to follow certain laws.

These laws aren't hard to follow though. You just have to allow competitors to use your stuff, and you can't use your market power against them.

>In effect the EU penalizes the creation of market places, because once you're market place, you lose control over your own products to the government.

Operating a marketplace generates billions for Apple, and without the Apple Store I doubt the iPhone would have any value today. This comes with legal duties. Apple can't do whatever with their marketplace, but must compete fairly within it.

Oh I’m sure they bill their branch in Ireland for this. In order to make sure to avoid any tax they own us.

That like how startbucks UK pays it's company in a different country a fee for using it's brand, and therefore has no profits in Uk and pays no tax here

Totally legit

The law says that the fees paid for IP in this way have to be plausible. Franchising is a long-established business model and nobody would run a franchise if the franchise fee ate all the profit. So Starbucks' franchise fees are not plausible. Why doesn't HMRC challenge this? I've no idea.

I am sure they are doing that already. And I don't think that's the law works.

It's often how law works. For example companies often create subsidiaries in order to limit liability of the parent company.

You have a point.

That's the same as "The cocaine was in my left pocket your honor. See I have nothing in my right pocket :)"

Apple have been in the music business much longer than Spotify.

This observation only further solidifies the issue and directly supports the preceding comments.

I'm not sure that's relevant is it?

Yes, considering apple have been in the music business longer than App Stores have even existed.

I don't think that can be right. On the surface you're suggesting that if a company worked in a particular area before another company then the first company is entitled to use anti-competitive practices, which clearly isn't true.

I think the main point the (grand?) parent is saying is that "Apple is in the phone business" isn't a reasonable description of Apple. I agree that Apple hosting itself on its own platform is an abuse of market position (especially for something as peripheral as music), but to claim that music/audio isn't a/hasn't been core part of Apple's business model is ridiculous.

Ah, gotcha. Yes, that does make more sense, thanks. But I still don't think it really addresses the second point, which is the crux of the argument as far as I can see.

Is Apple charging 30% on all Spotify transactions through their phone/tablet App Store giving them an economic advantage for their own Music store?

It’s irrelevant for the example whether Apple was already in that space.

I guess he meant music streaming?

Why does it matter "who came first"?

I haven’t read the EU report, but I’m guessing they’re either talking about the streaming business, or they didn’t care about the iPod.

Exactly, it's time they let others use the phone they built in Shenzhen to listen to music with apps not made by Apple.

There's 0 reason to over tax Spotify as punishment for trying to do it better. The capitalist thing to do would be to allow and enjoy fair competition in a pure and perfect market.

> Apple have been in the music business much longer than Spotify

Since 1968 https://en.m.wikipedia.org/wiki/Apple_Records

This has no connection with the computer company. There have been numerous disputes over the confusion.

https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer

Your assumption is wrong and this is precisely why "The Beatles Apple" attacked "Steve Jobs Apple" on the Trademark front.

Source : a part of the article you linked to : https://en.m.wikipedia.org/wiki/Apple_Corps#Apple_Corps_v._A...

I think you missed the joke about first-isms.

If there was a joke I did miss it, that's for sure. And I still do :)

Apple Corp was a company started by the Beatles back in the 1960s. The later Beatles albums were released on Apple Records as well. This Apple was also a source of much legal litigation between the Fab Four and the Apple company being discussed in this post. See:

https://en.wikipedia.org/wiki/Apple_Corps

They have both been successful business ventures and interestingly the original idea for the Beatles' Apple Corp is actually very close to what Cupertino's Apple is today electronics, music and movies and retail:

"On the founding of Apple John Lennon commented: "Our accountant came up and said 'We got this amount of money. Do you want to give it to the government or do something with it?' So we decided to play businessmen for a bit because we've got to run our own affairs now. So we've got this thing called 'Apple' which is going to be records, films, and electronics – which all tie up"

Same. I have no idea what the joke is.

Apple is now a monopoly.

They shouldn't be allowed to run an App Store, and they should probably have their services division peeled away into a separate company.

All of the mega tech monopolies need to be broken up. What business do any of them have being movie studios, advertising firms, car dealerships (Apple?), banks, and fifteen different marketplaces rolled into one? This is absurd.

Tech would be better if neither Apple nor Google ran their app stores, Amazon/Apple/Google weren't in the media business, and Google couldn't run a browser.

Break them up.

I’m not sure you understand what monopoly means.

Nobody is mad that Apple/Amazon/Netflix/etc are creating competition for banks, movie studios, car dealers, etc.

The complaints about these companies are the specific areas where they hold a dominant position and unfair advantage over other companies. The App Store in the case of Apple/Google, advertising in the case of Google, etc. The areas where these companies have a stranglehold on distribution is the problem.

Amazon and Apple having movie studios and banking aspirations makes competition BETTER, not worse. Literally nobody is mad at Apple for having a credit card or funding movie productions.

Apple has zero control over credit card distribution or automobile purchasing. Why the hell would you want to protect the big banks and lazy old car companies from having to compete with Apple?

The reason you don't want a platform monopoly operating a payment service isn't that they (currently) have a monopoly on payment services. It's that they would leverage the platform monopoly into one, and then there would be less competition in payment services. Prohibiting vertical integration prevents that sort of leveraging without having to micromanage every multinational conglomerate.

The platform company should instead return their profits to the shareholders, some of which will invest them in upstart payment services or movie studios or car dealers. The reason they don't do it this way is that they lose the "advantage" of leveraging the platform monopoly. (There are also perverse tax differences, but that's a different problem.)

> Prohibiting vertical integration prevents that sort of leveraging without having to micromanage every multinational conglomerate.

How is policing all forms of vertical integration in the corporate world not micromanagement of all businesses?

It's macromanagement. It's a big clear fault line that regulators can see from outer space, instead of trying to evaluate whether Apple App Store charging Spotify a given percentage is anti-competitive based on a detailed analysis of their cost structure and having to argue about the allocation of fixed costs between business units.

It also has the advantage of creating a de facto limit on entity size so we don't end up with corporations more powerful than elected governments.

And it's not a prohibition on vertical integration whatsoever, only on vertical integration for companies with market power in any market.

> It's a big clear fault line that regulators can see from outer space

Nothing in the world of regulation is a clear fault line. You're just creating different points for regulators and lawyers to fight about. How are you defining "market power in any market?" Is it just if a company gets 20% of a market? 50%? 70%? 90%?

This also gets extremely sticky in markets that are still developing.

Take Saas for example. Mailchimp arguably has "market power" in email marketing (70%). Should they have been allowed to get into the social post scheduling business? Using your argument, you could call that unfair competition for social post schedulers like Buffer, since Mailchimp already holds market power over one area of the marketing stack.

But what if it's more efficient for all businesses to keep their email marketing and social post scheduling in one tool? Are you going to force everybody to be inefficient and use separate tools for everything because you think it's better the for the "social media management Saas" market?

Should that even be a market? How granular are you going to get over what's a market and what's just a product feature? Social post scheduling is both a feature, and a market of companies. This solves nothing and only creates more micromanagement headaches for regulators.

> How are you defining "market power in any market?"

This is already a concept that exists under established antitrust law. It's complicated and ugly and could probably use some reform, but it's also a different part of the equation. "Does this company have market power" is a separate question from what do we do if they do, for which the proposal is to prohibit vertical integration.

> Is it just if a company gets 20% of a market? 50%? 70%? 90%?

Market power has very little to do with what percentage of the market the company holds. For example, in a market with two local ISPs where one has 95% of the market and the other has 5%, they could both have market power because the market is so consolidated that the company with 5% could still be able to dictate terms to customers. On the other hand, a company with 99% market share might not have market power, if barriers to entry are low and any attempt to raise prices would cause new competitors to enter the market, as is the case with e.g. Walmart.

> Mailchimp arguably has "market power" in email marketing (70%). Should they have been allowed to get into the social post scheduling business? Using your argument, you could call that unfair competition for social media management Saas tools like Buffer, since Mailchimp already holds market power over one area of the marketing stack.

I don't see the trouble here. Mailchimp may or may not have market power (I don't know enough about that specific market to evaluate it), but knowing 70% isn't really that informative. If they do have market power then preventing them from leveraging it to destroy Buffer is good. If they don't then they wouldn't be prevented from entering the other market.

> I’m not sure you understand what monopoly means.

Well, you'd best take that up with the EU and the US Department of Justice, then. You might be a little late.

> Nobody is mad

Half the people in this thread are mad. Companies putting up with app store bullshit and extortion are mad. Furthermore, this will only get worse as the mega monopolies extend their reach into more industries and force people to use their rails for everything, taking their pound of flesh with every interaction. Apple customers aren't even your customers in their model, for Christ's sake. Why do they get the monopoly on that? It's beyond evil and makes it hard to survive, let alone thrive.

Having an iPhone, working for one of these companies, or owning their stock shouldn't cloud your judgment as to what's happening to our industry. Open your eyes and see.

>They shouldn't be allowed to run an App Store, and they should probably have their services division peeled away into a separate company.

I think the ship has sailed on App stores. They're just better than the alternative and consumers are used to them. I'd consider them an integral part of the OS.

The problem is the fees. 30% is excessive especially so for in-app purchases where the customer is already acquired. The easiest and cleanest solution is to just cap these to something more reasonable. Something like 5% or maybe CC transaction costs + a couple percent.

> I think the ship has sailed on App stores. They're just better than the alternative and consumers are used to them. I'd consider them an integral part of the OS.

If customers really want app stores then prohibit platform companies from operating them and third parties will do it. But they'll compete with each other instead of abusing a monopoly into high fees and prohibitions on apps that compete with the platform's business interests.

Or if app stores fall out of favor as soon as they're not imposed on everyone by platform monopolies then it disproves your theory that most people independently want them.

30% is industry standard. Spotify takes 50% fee from Anchor; Tencent takes 50% fee in its China Android App Store and owns 48% of Epic Games.

If you mention Tencent fee in Tim Sweeny Twitter you'll get instantly banned.

Amazon's Twitch also takes 50%. But everyone's mad at Apple since they produce products and services everyone buys, even Google engineers mostly use iPhones and Macbooks.

% of revenue shouldn't be a thing. They're offering a service for distributing apps - there should be a standard fee and transaction costs. When I go to get tires on my car they don't charge me based on my income. When I purchase a book they don't charge a percentage of my income. On the app store suddenly you owe them a % of your revenue and you have to use them to get apps on iphone.

Your position is ridiculous and unworkable.

By your definition companies like Sony, Microsoft, Nintendo, Epic Games, Intel, AMD, Nvidia, IBM, Stripe, Facebook, Samsung, Adobe etc would all need to be broken up as like Apple they are in multiple markets with similar market shares.

YC itself would need to be broken up given your criteria.

I don't see the problem with separating every platform company from every app store. They can obviously be operated by two separate entities, like Steam on Windows.

I agree with this principle but in this specific case it’s not true because Apple started their music business long before the iPhone and Spotify existed. In fact they started with the iPod and their music business with the iPod is what lead them to invent the iPhone and the AppStore. It’s rich from other music businesses like Spotify to want to benefit from all of the R&D and innovation cost from Apple and the market they created whilst dismissing that in fact they entered the music market with the goal to eat shares from Apple and not the other way around.

starting first does not mean you are not abusing your monopoly.

Another way of looking at this is that a 30% margin is preventing a lot of businesses from happening until Apple do it. The 30% is less of a concern that the fact that they can shut you down on a whim.

Apple doesn’t get a cut of their advertising revenue, and according to Apple was only paid 15% on subscriptions. With credit card processing fees and other associated costs it’s far from 100% profit.

30 percent fee is not a 30 percent margin. You are factoring in any costs of running and developing the service.

That argument leads to the logical conclusion that Apple needs to be broken up so their music subsidiary have to pay their app store subsidiary the same 30% as Spotify do. Still not a logical defense.

How is that a logical conclusion? It's just one conclusion.

It’s hardly abuse if Apple was the first to invent an iPod and iTunes and the online music business and then evolved their own products around their own offerings. They decided to let others into their own platform to enrich it, not to crush them. Spotify entered knowing that Apple already had a competing product. Why did they enter and start competing if they thought it was an unfair competition from the start? I find it hard to believe given the history of events. If it was in any way different then perhaps I could understand but to me it feels that Spotify just decided that now is the time to look for avenues to increase their profits and see the AppStore as the first opportunity to attack after never having had a problem before. Only a fool would start a business in a platform which tries to crush them so clearly that was never the case.

EDIT (cannot reply):

So if Apple would basically not have an AppStore for third parties and only distribute their own apps then it would be fair.

If Apple was to not allow other Music apps on their AppStore then it would be fair.

But when Apple allows others to distribute a competing product to Apple on Apple’s own platform for a fee then it is considered unfair?

I honestly don’t understand this logic.

It is not about who is first, is about fair competition, If Apple is the best then they should not be afraid to compete fair, let other web browsers exist, let alternative stores exist, let free apps show a Patreon link, let apps show the user the information that they have the choice to buy outside the store (defend this please, this information can harm the user somehow or it harms the pockets of some rich guy)

I don’t think EU cares about fair competition, rather being petty about not having their own FAANG.

But you could be wrong right? Maybe we should analyze if there is actual any merit for the complaints on Apple or about the tracking on the web instead of inventing some conspiracy.

I would show you the example with Microsoft or Intel, this companies were found guilty and all the US nerds did not complain that EU is anti-american.(they were found guilty in US too)

You know what? The funny thing is that all of FAANG has their international HQs in the EU (Dublin, Ireland) for tax evasion purposes. I’d argue they are more reliant on the EU then.

Tax evasion is illegal. Tax avoidance is rational. Other EU countries have the ability to lower taxes right? It’s ironic that the EU is suing Apple because Spotify doesn’t want to pay 15% to Apple, yet the same people complaining of that have no problem with Apple attempting to avoid higher costs by having a non-Irish EU headquarters.

Government taxes are a different ballgame than private company (Apple) profits. Interesting that you see them as the same thing. :/

Yeah , the Apple tax makes Apple lazy and focus on how to suck even more, also makes some rich dudes richer while government tax goes into research, schools, roads etc.

Apple tax should not exist, you should pay for what you use or have freedom to chose exactly how you can chose web hosting companies and plans.

Nobody thinks of FAANG as EU creations. Even if Nintendo is headquartered in the USA, it’s still considered Japanese. IKEA is Swedish and so on. Where the companies were founded seems to play the largest role in their national identities.

I was making a comment more about how the socialist EU can offer better corporate taxes than the more "capitalist" country (USA).

Apple are in the wrong here.

> So if Apple would basically not have an AppStore for third parties and only distribute their own apps then it would be fair.

> If Apple was to not allow other Music apps on their AppStore then it would be fair.

> But when Apple allows others to distribute a competing product to Apple on Apple’s own platform for a fee then it is considered unfair?

> I honestly don’t understand this logic.

I mean, it's kind of textbook vertical monopoly.

Selling Windows is fine - you're competing over who makes the better OS. Selling Internet Explorer is fine - you're competing over who makes the better web browser.

But using Windows to push Internet Explorer is not fine - you're using your unrelated OS superiority to fight off Netscape Navigator.

It's a distorted market because the consumer is induced to go with iTunes over Spotify not because iTunes has the more appealing product, but because Apple makes iPhones. If the exact same software as iTunes was made by a non-Apple company, it wouldn't necessarily compete.

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And I'm not sure it would be "fair" if AppStore didn't allow music apps, either. With web browsers and app stores, there's a decent case to be made that allowing those apps would compromise the iPhone product/ecosystem as a whole (although I'm personally of the "It's my phone and I demand to be able to install whatever the hell I want on it" philosophy and loathe walled gardens in all forms). Banning music apps simply because they compete with their own product would likely attract Vestager's ire just as well.

Of course Apple's music business was a whole separate legal minefield for decades

https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer

They bought out the name rights 8 years after iTunes launched.

That payment was $500 million, but they were printing money from iPod+iTunes at that point (revenues of $9.5 billion in 2006, $10.5 billion in 2007). I'd call it an ongoing headache more than a minefield.

When they started have no bearing. It’s using their power in one market to strongarm others in another. It’s not about what is fair, it’s about making sure the market is healthy.