The United States vs. the iPhone

from The New York Times I'm Sabrina. tavernes and this is the. [Music]. daily last week the justice department. took aim at Apple it was the latest and. most Sweeping in a series of. antimonopoly cases against the Titans of. Silicon Valley today my colleague David. McCabe on the United States versus the. iPhone.

it's Tuesday March. [Music]. 26th so David there was big news last. week out of Washington and that was that. the US government filed suit against. apple and this is just one in a series. of cases that the government is making. against big Tech you know the last time.

you and I talked of course Google was. the one that was going on trial so tell. me about this case against. Apple so for five years the federal. government through the Department of. Justice and the Federal Trade Commission. has been pursuing these investigations. and ultimately bringing lawsuits into. whether the biggest tech companies have. broken antitrust laws and these are laws. that are designed to stop companies from. throwing their power around and they. have brought a Spate of these lawsuits. they sued Google for abusing Monopoly in.

online search and advertising technology. they've sued meta which owned Facebook. for allegedly stamping out n competition. when it bought Instagram and WhatsApp. and the government sued Amazon for. allegedly squeezing the third party. Merchants that use its site and while. the individual allegations in each one. of these lawsuits varies the basic. argument is this that these companies. have IL legally maintained monopolies or. otherwise subverted competition that. it's been bad for the economy it's.

reduced choices for consumers it's. limited Innovation and it's led to. higher prices and last week the justice. department filed one of these lawsuits. against apple and this lawsuit is in. some ways the most sweeping we have seen. yet it targets what is one of the most. valuable companies on the planet apple. is worth trillions of dollars and it. takes aim at the heart of Apple's. business a product that is recognizable. to billions of consumers around the. world and has changed daily life as we. know it and that's the iPhone.

so David the last time we talked you. taught me that simply being a monopoly. in and of itself is not illegal right. like if lots of people like a company's. product and it ends up as a monopoly. because of that that's okay but if the. company uses its power of bigness to. keep competitors out that's when a. company kind of crosses into the illegal. territory so what are we seeing the. government argue here that's right if a. monopoly is maintained through. exclusionary or predat means that's when.

a company starts to violate the law and. that's exactly what the government is. arguing Apple has done here and. particularly the theme that they've hit. on again and again is exclusion that. Apple excluded other companies from. offering products that compete with its. own services or excluded other phones or. devices from interacting with the iPhone. in a way that was really good for. consumers and that those things were. designed to make a consumer more reliant. on the iPhone and make it harder for. them to switch away from the iPhone and.

that all of these things built what the. justice department is calling a moat. around the iPhone a moat like a moat. around a castle precisely yeah filled. with alligators drawbridge the whole. deal okay so give me a better sense of. this metaphor so think of Apple as a. medieval Lord of some kind. okay Apple's got its castle in the. castle is the Crown Jewel the iPhone and. also all the people use the iPhone right.

because that's the heart of Apple's. business all the people using the iPhone. using the services Apple sells you right. through the. iPhone and around the castle is this. deep moat with the alligators the. drawbridge is pulled. up and the moat makes it hard to get out. of the castle it also makes it hard for. competitors to get in and get at those. users got it okay so that metaphor is. clear so what exactly does a do jail.

ledge so the first thing the government. argues Apple does to build this mode is. it simply doesn't allow other companies. to offer apps on the iPhone that might. diminish the value of the phone to. users and there are a number of examples. in the lawsuit about this but the first. one that really matters is digital. wallet so it has become increasingly. common for consumers to pay for. something like let's say you go to a. coffee shop uh to pay by tapping their. phone against a little payment terminal.

right rather than taking their credit. card out on the iPhone only apple is. allowed to provide a digital wallet like. that it's called the Apple wallet and. the Department of Justice is saying that. they don't allow other companies to. offer that kind of service because it. might reduce Apple's hold on iPhone. users and make it less costly for those. users to switch to a different phone and. take their digital wallet with them so. that's one example and by less costly. you mean it would be easier to switch. out of an iPhone exactly another way the.

government says Apple built its mode is. by not allowing users to download game. streaming apps okay what's a game. streaming app a game streaming app lets. you play a video game like you're. watching a show on Netflix instead of. downloading the game directly to your. phone you play it on a remote computer. far away from you so streaming video. games basically exactly streaming video. games and the government says that if. iPhone users were allowed to stream. video games that it would make the phone. less valuable to them because the iPhone.

has a really powerful computer chip it. can play games directly on the phone but. if game streaming makes that unnecessary. the government says why would they need. the expensive powerful iPhone in the. first place got it so basically kind of. trapping them in this kind of more. expensive environment than is needed for. this kind of gaming thing exactly so. what else is the government alleging. here the government says that Apple has. also built its mode by making sure that. the iPhone doesn't work very well with.

other types of devices that aren't made. by Apple and there's two examples of. this one is the Smartwatch so Apple. makes a device called the Apple watch. it's very popular it tracks people's. Fitness it lets them respond to. notifications and send text messages. directly from their risk people's wrists. are beeping all the time now exactly but. other companies make smart watches too. and the government says that the phone. works less well with those other devices.

not made by Apple than it does with the. Apple watch a prime example of this is. that users can respond to Notifications. directly on their Apple watch if they're. using a non-apple smartwatch they can't. do that in the same way and the. government says that that's all an. attempt to make it harder for people to. leave the iPhone because once they own. the expensive Apple watch they're not. going to want to switch phones and the. watch right that would be much more.

costly hundreds of dollars more. costly the next example is messaging. right the green and the blue like. someone doesn't have an iPhone basically. exactly so I have an iPhone and if I'm. talking to someone who also has an. iPhone and Apple's messaging app the. messages are blue there are things like. an indicator of when one of us is typing. the videos that we send are really rich. the conversation is encrypted by default. right which makes it more private but if.

I'm talking to someone who has an. Android their messages are green you. don't have things like that typing. indicator the videos can be more. pixelated the government says the. conversation isn't encrypted and the. government says that Apple has designed. this dichotomy the green bubble blue. bubble dichotomy in order to kind of. create a stigma around phones that are. not the iPhone suggest their lower. status and that indeed non iPhone users. suffer from a social stigma because they. don't have an iPhone and the Department.

of Justice says that this is. particularly cute for teenagers and. presents data that like 88% of teenagers. say their next phone will be an iPhone. then the government quotes someone in. apple saying that making messages. compatible or more compatible across. types of phones would just open the door. to iPhone families giving their kids. Androids interesting so David I have to. tell you this is the point in the. episode where I admit to you that I do.

not have an iPhone I have an Android. phone and you know maybe I suffer from. social stigma I am one of those green. messages in your phone in fact I think I. was this weekend um but you know I guess. it was about five years ago I just kind. of stepped out of the castle and swam. across the moat and it actually wasn't. that hard so I guess I'm wondering you. know how the doj is saying that this. actually harms consumers if you can just. leave like I did what's the actual harm.

well first of all the statistics suggest. switching rates are relatively low from. iPhone to Android that relatively few. people have an iPhone and then they go. and buy an Android so you're saying. first of all Sabrina you're weird not. weird but perhaps statistically. anomalous so while data suggest that not. that many people switch the government. is saying that Apple has a durable. Monopoly over smartphones in the US. they're saying that by Revenue apple has. a more than 65 % share of smartphones.

generally and a More than 70% share of. what they call Performance smartphones. so think about like high-end devices. from companies like Apple or Google or. Samsung and then because Apple has built. this very effective system this. effective Moe for maintaining that. Monopoly that it does not have to. compete with the Samsungs and the. Googles of the world in a full-fledged. way and that the way that that harms. consumers first and foremost is because. they don't have to compete on price that. they can continue to charge high prices. for for the iPhone because there is an.

absence of competition here so. essentially the government is arguing. that Apple by Dent of having this what. it calls Monopoly you know this captive. audience basically is charging more to. Consumers that's right and the. government argues that there are other. harms too ones that might be a little. less material but that Apple's Monopoly. might harm the possibility of future. innovations that they're not allowing. companies to go create and offer an.

iPhone cloud gaming service that they're. not allowing companies to go and create. an awesome digital wallet for the iPhone. that effectively they're making it. impossible for companies to go out and. invent new good things for consumers so. the government offers one idea here. which is you could imagine another. company let's say it's a bank or venmo. would offer its own digital wallet on. the iPhone and and could offer a benefit. to users like cashback every time they. use that digital wallet and if you play.

that out there could be a competitive. process where apple offers its own. rewards to get people to use the Apple. wallet but what the government argues. here is that basically that whole. process of competition that leads to new. benefits for consumers has been short. circuited by Apple when it denied the. ability of other companies to put their. own digital Wallets on the phone because. the companies who would be inventing. those new good things can't go to the. main platform they'd be selling it on. because they're blocked right that. they're denied from accessing that. product to a big part of the market and.

so it's not worth doing so David just. listening to you lay all of this out I. mean it really seems like apple is doing. what every company tries to do which is. to make it hard to leave their own. products right and switch to a. competitor's products I mean keeping. itself kind of sticky but I guess I'm. wondering is that actually illegal like. isn't that just smart business well and. that will be the question for the judge. who is hearing this. case.

they will have to look at the arguments. laid out by the doj at the arguments. laid out by Apple and figure out did. this cross a line right from Simply. aggressively competing to something that. was against the. law and always these cases come down to. two stories one that the government. tells about a company that has. perniciously stepped over the line and. one the companies tell about how in fact. they're providing benefits to Consumers. and competing fairly and apple already.

tells a very different story here it. says that what the Department of Justice. presents as this evil moat around the. iPhone that bundle of practices are in. fact one of the company's greatest. strengths we'll be right. [Music]. back.

okay so David you just said that apple. is arguing that you know its defenses. this Mo that they've built that the. government is arguing is unfair and. illegal is actually one of its greatest. strengths so tell me about that what is. Apple saying exactly apple is saying. that the steps that it's taken that the. Department of Justice is painting as. illegal are in fact designed to create. an experience that consumers love and. that keeps them safe a major argument. for and a lot of these practices are.

good for security and you've probably. noticed that Apple has sort of marketed. itself as a more private option A more. secure option they run ads about the. privacy of the iPhone right they've. gotten into a big fight with the. government over encryption in the San. Bernardino shooting several years ago I. remember this the FBI actually got the. guy's phone the phone of this Mass. shooter but then couldn't get into it. because the encryption software was so. strong on the iPhone exactly and apple. is saying that that commitment to. security lives in a lot of these.

practices that the government is. targeting a great example is the wallet. so the way they exclude other companies. from making digital wallets is they. don't let them access the physical chip. that interacts with the technology at. the coffee shop to make the payment and. apple says they don't do that because. they want to create the safest and most. secure experience for users when they go. to pay for their coffee with their. sensitive banking. information but more broadly the. argument that apple is making here is. that all of these practices to control.

the system around the iPhone to control. the experience for users on the iPhone. is about creating a sort of magical. Experience for iPhone users where. everything works together and apple is. saying that users love the end result. they love this experience and that apple. is going to defend that experience from. government intervention so apple is. basically saying look they're not. trapped they can leave anytime they want. they want to be here that's right and. they want to be there because they love. their Apple products right they want an.

iPhone right exactly so what about the. Topline argument that doj is making that. Apple actually has an illegal Monopoly. on smartphones like you know that Apple. kind of has cornered the. market so Apple says that's just not. true so you may remember the Department. of Justice is arguing that Apple has by. Revenue in the United States a more than. 65% share of the total smartphone market. Apple says no no no the way to.

understand this is a global market. because outside the United States. iPhones are far less popular Androids. are more popular and so apple is saying. if you count the whole world we have. about a 20% share of the smartphone. market we don't have a monopoly at all. oh interesting so Apple's saying look. you got the wrong Universe right the. universe is not the United States the. universe is the world that's where we're. competing right that's exactly what. they're saying so David how do we think. this is actually going to go for Apple I. mean it's been in court on some of these.

issues before right so what do those. cases tell us what they tell us is that. Apple fights back hard and when it does. make changes they're largely around the. margins of the business they've not. radically changed their business in. response to government pressure or. pressure from court cases so there's a. couple examples of. this one really contentious point over. the last several years has been that the. only way for a developer to get their. app onto the iPhone is to sell an Apple. Store and if you sell an Apple Store.

once you offer some sort of inapp. purchase imagine a subscription or some. other digital good that you buy in the. app you have to use Apple's payment. system which takes a commission as high. as 30% now apple has a new high-profile. lawsuit on its hands the game developer. epic games has filed a lawsuit against. apple and so epic games Epic Games they. make fortnite and fortnite is hyper. popular which makes a very popular game. fortnite sued apple and they alleged. that this whole system was anti.

competitive now the legal complaint. seeks to establish Apple's App Store as. a monopoly Apple says you can't go. around our system and buy directly from. epic games from fortnite you have to buy. through us they were trying to basically. bypass the payment system not pay that. potentially as high as 30%. commission well Apple stock tumbled a. little over 3% today after a judge's. ruling in the company's Court battle. with fortnite and the judge in the case. did require Apple to ease some of its.

restrictions on app developers under the. ruling app developers will now be. allowed to send users to other payment. systems but it wasn't all bad for Apple. but the judge didn't make them abandon. their business model entirely the judge. also sided with the Tech Giant on every. other key point in the case Okay so. that's kind of a win for Apple although. slightly mixed one apple did make. changes but they didn't have to abandon. in the golden goof entirely right.

another example is in Europe where the. company faces fresh charges from the. European commission over its App Store. practices the European commission fined. Apple 1.8 billion EUR in early March for. allegedly thwarting competition among. its music streaming Rivals and this was. driven by complaints from companies like. Spotify which say that Apple exerts an. unfair amount of control over the. relationship that they have with their. consumers the competition commissioner. said the company had for a decade abused.

its dominant position in music streaming. apps but it's an example of Apple. fighting back they say they're going to. appeal this fine and it's expected that. process will go on for some. time so this is again Rivals alleging. that apple is kind of abusing its. Privileges and bigness with the App. Store and this is being investigated by. the European Union exactly the pattern. has been relatively clear over and over. again software developers have accused. Apple of taking onerous fees and.

applying unfair policies to their. businesses Apple has fought back when. Apple has lost those fights they've. agreed to make minor concessions but. often they have continued to push back. and continued to fight now all of this. of course is the App Store we've been. talking about that's not the doj case. right the doj case is much bigger that's. right so effectively the kind of. aggressive control that Apple exerts. over app developers that Spotify and. epic games have been arguing about the. government is saying that Apple uses.

that control in all kinds of different. ways to build this moat that protects. the thing it really cares about the. iPhone right and it's probably worth. noting here that Apple says that they. are changing some of the practices that. are laid out in this lawsuit that. they're going to make it easier for. messaging apps on different phones to. talk to each other and become more. permissive for gaming apps but it's. unclear how those changes might impact. the case David how much of an uphill. battle does the doj face here I mean I'm. thinking back to the case we talked.

about you know against Google and it did. seem like quite a climb for the doj to. actually prove its case against this. Tech Giant proving these cases is. difficult and you're dealing with a. company with almost Limitless legal. resources they're going to fight back. hard and it will take a long time these. cases usually drag on before trial for. multiple years apple is expected to file. a motion to dismiss the doj lawsuit so. that will provide an early sense of how.

strong the case is but the truth is the. current leadership of the justice. department may not be in place when this. case finally goes to trial so they filed. something that may well outlive them and. how does that political change affect. the case presumably they'll continue it. right well a new Administration could do. what they wanted to with the case this. investigation started under a Republican. president so it's possible a new. Administration would keep things going. but they could also settle with Apple or. withdraw the case all those things.

remain options as they go to trial got. it and what is the doj's kind of dream. scenario here I mean what does it want. to have happen with Apple so the justice. department has asked first and foremost. for the court to stop them from doing. the things described in the lawsuit stop. them from excluding certain types of. apps or making certain products less. compatible with the iPhone than Apple's. own products but the devil will really. be in the details of the judge's ruling. if the judge rules that broke the law in. a lot of different ways that may.

influence how the Department of Justice. ultimately asks the judge to fix matters. in this case so they could ask for. changes to Apple's Behavior they could. ask for changes to the structure of. Apple but they really are holding their. cards fairly close to the vest while. they wait to see how a court rules on. the substance of the allegations so. David I just want to step back here for. a second and really kind of think about. what the government is doing here it's. taking one of the single most valuable. companies in the the world and is trying.

to fundamentally change the way that. company operates I mean that strikes me. as kind of a potentially risky thing to. do right it could be very damaging to. this valuable American company and as a. result to the US economy well the. government says that it's worth it that. enforcing the competition laws in this. country is good for the economy and. they've really leaned on the Justice. or's Long litigation with Microsoft at. the turn of this century basically. they've been arguing that Microsoft.

would force to allow things like Apple's. own iTunes product onto windows and as a. result it opened the door for Apple to. build this whole ecosystem that resulted. in the iPhone so what the government. believes is that yes they are accusing a. major company of. wrongdoing but that in doing so they. will open the door to innovations that. we can't even conceive of so there would. be a net benefit for both American. society and for the economy right but.

David there's an interesting tension. here right I mean of course the. government is arguing that you know all. of these things are in service of a. better brighter future in the American. economy but a lot of people would say. they choose Apple products because they. like them better like they like Apple's. you know ecosystem they like being in. the castle so I guess there's a real. contrast there with what the. government's trying to do because. fundamentally at the end of the day this. company is quite popular with.

consumers well and the government. presents itself first and foremost as a. law enforcement agency that here is a. company that regardless of how popular. its products are has broken the law and. needs to be held to account but this is. a really fascinating moment for reasons. that go beyond any one case think about. what's Happening Here the government has. filed lawsuits against the biggest. defining American tech companies of our. era and it's promising that this will. lead to an Era of new innovation of.

better choices for consumers even lower. prices and now we're going to see. whether or not they were right and. consumers will see it in the way that. these products change in the way that. this industry which defines so many. aspects of American Life operates going. [Music]. forward David thank you thank you for. having.

me we'll be right. [Music]. back here's what else you should know. today I shall put the draft resolution. to the vote now on Monday the United. Nations security Council passed a. resolution calling for an immediate. ceasefire in Gaza breaking a 5-month. impass in which the United States vetoed.

multiple calls for a halt to the. fighting the us abstained from the vote. allowing the resolution to pass the. result of the Voting is as follows 14. votes in favor zero vote against one. abstention the draft resolution has been. adopted at resolution. 2728. 2024 the us faced immediate criticism. from Israel's prime minister Benjamin.

Netanyahu who canceled meetings in. Washington between an Israeli delegation. and US officials a public rebuke to. President Biden who had asked for the. meetings and President Vladimir Putin of. Russia acknowledged for the first time. that the bloody assault on a concert. hall near Moscow was executed by quote. radical islamists however he continued. to assert that Ukraine probably played a.

role Putin said that the tragedy was. likely ordered by Ukraine asserting that. the asants were on their way there after. their attack and saying quote the. question is who benefited from. it finally Donald Trump is all but. certain to become the first former US. president to stand trial on criminal. charges after a judge on Monday denied. his effort to delay the proceedings. the trial in which Trump will be accused.

of orchestrating the coverup of a sex. scandal surrounding his 2016. presidential campaign will begin on. April. 15th today's episode was produced by. Carlos prido muj zadii and Eric krupy. with help from Summer tamod it was. edited by Liz oalen contains original. music by Brad fiser Dan Powell Marian. Lozano Diane Wong and Alicia butu and. was engineered by Alyssa.

Moxley our theme music is by Jim runberg. and Ben lansberg of. [Music]. wonderly that's it for the daily I'm. Sabrina Tavern see you. tomorrow.