It hinders innovation. Reduced consumer choice. Expanding dominance into other markets.
This is an accusation from the Justice Department, accusing the tech giants of operating illegal monopolies. But it doesn't come from an antitrust lawsuit filed against Apple this week. It comes from a lawsuit filed by Apple against Microsoft in 1998.
The action against Apple, along with the search-related lawsuit the Justice Department filed against Google in 2020, is perhaps the most ambitious tech antitrust battle since the Clinton administration sought to release Microsoft's Windows operating system.
And federal prosecutors are explicitly linking the Apple lawsuit to the previous fight. “They’re really presenting this case as a successor to Microsoft 2.0,” said Gus Hurwitz, a senior research fellow at the University of Pennsylvania’s Carey School of Law.
However, the comparison is not perfect. And it's not clear whether the Justice Department can accomplish here what it claims it did by suing Microsoft.
The Justice Department sees a direct connection between the two cases. “Microsoft” appears 26 times in Apple’s complaint. And prosecutors say Apple wouldn't have achieved the enormous success it has today if the government hadn't fought back against Microsoft.
The iPod did not become widely adopted until Apple developed cross-platform versions of the iPod and iTunes for Microsoft's Windows operating system, which was the dominant operating system for personal computers at the time. Without the United States v. Microsoft consent decree, it would have been more difficult for Apple to achieve this success and ultimately launch the iPhone.
In the 1998 case, the Justice Department alleged that Microsoft illegally sought to protect its Windows software from competition such as the Netscape Navigator browser and Apple's QuickTime multimedia software.
This week, the agency said Apple was doing something similar, illegally restricting competition by denying rivals access to key features of the iPhone, such as its contactless payment chip. “Each step of Apple’s conduct built and strengthened the moat surrounding its smartphone monopoly,” prosecutors wrote in Thursday’s lawsuit.
The Justice Department sees another opportunity. Any influence Microsoft had over the emerging Internet economy has collapsed, allowing companies like Google, Facebook and Apple to prosper, the agency says.
“Today, we stand here once again to protect competition and innovation for the next generation of technologies,” Justice Department antitrust director Jonathan Cantor said at a news conference Thursday.
Others say the legacy of Microsoft's case is less clear. Hurwitz told DealBook the reality is more complicated. Netscape failed in part because poor upgrades lost users, and Microsoft missed the launch of its Internet 2.0 services because of poor strategic decisions.
“I think this has achieved very little in terms of actual industry change,” Hurwitz said.
Comparisons of lawsuits fall short in many ways. For one, Apple's case is more ambitious, said William Kovacic, a law professor at George Washington University and former chairman of the Federal Trade Commission. Both cases accused the company of using its monopoly power to disrupt competing technologies, but the most recent case calls for Apple to relax operability across platforms, including ensuring that text messaging on iPhone and Android devices work the same. I did.
Next, there is the issue of defining market share. In 1998, more than 80% of Intel-based personal computers used Windows software. By contrast, the iPhone held about 64% of the U.S. smartphone market at the end of last year, according to one estimate. (Globally, it's closer to 20%.) But federal prosecutors say Apple controls 70% of the so-called “high-performance” smartphone market. This also includes high-end devices from Samsung and Google.
And technology is advancing faster than it was in 1998. Until Apple's case is finalized, smartphones may evolve in unexpected directions, potentially limiting the case's impact on innovation. “Technology is racing ahead like a Formula 1 car, and antitrust law is riding a bicycle to catch up,” Kovacic said.
Microsoft's fight highlights the risks facing Apple. Regardless of what previous antitrust lawsuits achieved, Microsoft has been tied up in lawsuits for years and it has been costly. Apple, which is already fighting tougher regulations around the world, will have to invest significant resources into defending itself here.
“This could open up opportunities for our competitors,” Hurwitz said. But he added: “That's not necessarily the best way to promote competition in the market.” —Michael J. de la Merced and Sarah Kessler
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How China Views America's New Crackdown on TikTok
Dan Wang is a leading observer of modern China. As a technology analyst at research firm Gavekal Dragonomics, Wang's well-read newsletter charts the country's rise as a fast-growing high-tech economy and its recent slowdown and rising tensions with the United States.
Mr. Wang is currently a visiting scholar at the Paul Tsai China Center at Yale Law School and is writing a book on relations between China and the United States. The interview has been edited and condensed.
How does China view the latest TikTok fight?
Chinese state media and government have made it clear that this is highly unwelcome. China thinks ByteDance is a very successful company that is being harassed in the US because it is Chinese. The Chinese people are angry when the U.S. government declares that it threatens national security. And Beijing has passed a law stating that recommendation algorithms are subject to Chinese export controls, meaning the government will not allow their sale.
Is the Chinese government using this incident as a propaganda tool?
State media is being kept in the dark as there are still several steps left before ByteDance may have to sell TikTok in the United States. This includes passage by the Senate, signature by the White House, and the legal challenges ByteDance will bring. Before this seems imminent, the state media does not rally too many citizens against it.
What does it look like when state media mobilizes the public?
In 2022, Congress passed the Uyghur Forced Labor Prevention Act, and many Western companies issued pain relief statements. Chinese state media seized one company, H&M. The company has made fairly typical statements that it does not source its products from the Xinjiang region and does not tolerate forced labor in its supply chain. The Chinese Communist Party Youth League again posted a statement on social media saying that they cannot make money in China or criticize China. This sparked a consumer boycott. H&M products disappeared from almost all e-commerce sites, and H&M stores disappeared from online maps. The company was essentially erased from the Chinese internet, and it was really difficult to buy their products or find a physical store.
How can China retaliate against American companies?
The more important question is whether the Chinese government deems this action worthy of retaliation. I spent all four years of President Trump's trade war in China, and China has been very tolerant of American companies.
First, China is realizing that not only Tesla but also American giants such as Apple through Foxconn are major employers in China. Second, China realizes that American companies are its last remaining best friends in Washington, and it prefers that American companies continue to lobby Congress to maintain the relationship. Also, it would be nice if Elon Musk didn't tweet all day about how terrible China is.
Is China fighting a long war?
If the U.S. government forces or actually bans the sale of TikTok, China might see this as a pretty real propaganda victory. Saying that the United States has been talking about freedom of expression for a long time may play into China's hands, but it shows that the United States is a hypocrite.
How is it perceived that former Treasury Secretary Steven Mnuchin is participating in a bid to acquire TikTok?
If it succeeds, it would be considered in bad taste not only in China but pretty much everywhere that the official who ordered the sale actually owns it. For Beijing, this would be the icing on the cake in terms of propaganda.
Read a longer version of this interview here.
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