By: Julia Milani

Apple Inc. is a massive company that has long dominated the personal gadget market, bringing in $400 billion in annual revenue. Recently, however, it’s been under fire in both the US and the EU for various regulatory issues, with accusations of mistrust and privacy violations as well as harmful competitive strategies. 

Currently, Apple accounts for about 70% of the smartphone market in the US, dominating the market through several successful strategies, many of which are under fire from the US government. Most of the accusations are directed at Apple, accusing the tech giant of boxing out competitors with a “walled-garden” strategy. This means that Apple prices out competitors through various types of fees as well as excluding non-Apple devices from certain features, like making it particularly difficult to pair an Apple watch with a non-Apple smartphone or a non-Apple device text messages being another colour.  

These strategies discourage people from buying other products for fear of being left out, as well as discouraging new companies from entering the market through the high developer fees and exclusive features that limit compatibility with non-Apple products. With these practices, the Department of Justice had reasonable evidence to sue Apple for monopolising the smartphone market.

While being accused of a monopoly has serious legal implications, economically, it resembles the epitome of a successful company. There are other cellphones on the market, many of which are produced by major companies, but only one company is being accused of monopolising the market. Apple has perfected its technology and marketing to a degree where they are considered a threat to the competitive market. Being accused of monopolising a market is, in actuality, a compliment to Apple’s business model by saying that their products and ecosystem are engineered too effectively.

Not only is Apple under fire in the US, but also in the EU, where recent updates in digital privacy laws have serious implications for Apple and the way it configures its products. The Digital Marketing Act is designed to expand consumer choice and loosen the “digital-gatekeeping” from the top six biggest technology companies, including Apple, Google, Amazon, Meta, Tiktok/ByteDance and Microsoft, thus increasing market competition.

For Apple, this means that it will have to reconfigure the way iPhones direct the user to use different apps and search engines. Currently, when going to look something up, the user is automatically directed to Apple’s search engine, Safari, and when downloading an app, the consumer exclusively has to use the App Store. Under the new law, Apple phones will have to give users a choice for search engines, as well as allow Apple products to have other means for downloading applications. This shift aims to break open the closed environment Apple has created, providing consumers with more options and fostering a more competitive market landscape.

The hope in forcing companies to expand the realm of consumer choice is that the EU is helping to foster a wider competitive market. To ensure that companies are compliant with the new regulations, they have set stipulations. By March 24th, 2024, companies must be at least actively working to comply with the new regulations or they could be fined up to 10% of their annual global revenue. 

The European Union did go on to fine Apple €1.8 billion for inhibiting competition on their music distribution platform, ‘Apple Music’ and has continuously thwarted efforts being made to start third party app distributors. Apple has continuously fought fines and warnings, citing that they have little control over the privacy of third party platforms and that they pose a risk to consumer privacy and therefore have to thoroughly check other platforms before allowing them to be on Apple devices. 

If Apple continues to hinder the process of allowing more user choice, there is no telling of the further legal action that could be imposed upon them, including serious fines. Yet on the other hand, even if Apple immediately starts behaving within the EU regulations, it could take years for the reconfiguration of the existing technology. 

Apple is a well positioned titan of the technology industry that has arguably done its job too well, making it so the barriers of entry for the personal device market are now almost impossibly high. This has led to a decline in competitiveness in which regulatory agencies have started to take issue, meaning big trouble for Apple and other technology titans.

The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.  

Image Courtesy of Julian O’hayon via Unsplash