> 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.
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.
The matter under contention is the pricing of in-app purchases, not the pricing of phones. By disallowing app stores other than Apple's App Store, Apple is coercing users to pay an inflated price for in-app purchases, since it takes a 42.8% price hike to negate Apple's 30% fee.
Both are relevant, because in order to successfully win an antitrust tying claim under US law you need to prove the seller had sufficient market power in a tying product in order to coerce buyers into buying the tied product.
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.
Epic's lawsuit does not accuse Apple of tying App Store sales to phone sales. Two of the nine counts are about allegedly tying in-app purchases to app sales, and the rest don't involve tying.
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.
So what’s the true value of those cool Carlton dance moves I can get on Fortnite? How much less would the coins and loot boxes cost? Just imagine the overhead that Epic has to charge to reproduce the $18 billion of virtual goods it sales.
This article is about WordPress, not Fortnite. For WordPress.com to cancel out Apple's 30% fee, its monthly prices for its paid plans would need to increase from $4 to $5.71, from $8 to $11.43, from $25 to $35.71, and from $45 to $64.29.
I'm not sure that they are. I did say that something smells rotten (products getting worse and prices going up), but this alone is not justification for punitive measures.
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.
> Wouldn't an antitrust claim against Apple likely fail if the plaintiff cannot establish they actually have market power in the smartphone market?
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.)
IANAL, but if the lawsuit was about selling smartphones, then yes I think so.
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.
Do you think that a court will permit a plaintiff to claim Apple has a "monopoly" over app distribution without an examination of its market power in the greater smartphone market?
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.
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.