Apple’s walled garden is under attack as France found it breached Anti-trust regulations. The Autorité de la Concurrence also fined Apple’s two distributors – Ingram Micro and Tech Data for supporting cartel arrangements.
The fine is €1.1 billion for Apple, €76.1 million for Tech Data and €62.9 million for Ingram Micro. This is not petty cash for the disties.
Apple defence – “Yes, we did, but we have always worked that way.”
An Apple spokesman, Josh Rosenstock, said that it would appeal the decision.
“The French Competition Authority’s decision is disheartening. It relates to practices from over a decade ago and discards 30 years of legal precedent that all companies in France rely on with an order that will cause chaos for companies across all industries.”
Apple has finally been held to account for 30 years of ‘bullying’ – price-fixing, market sterilisation, and unconscionable market behaviour.
And France is not alone – Apple’s anti-competitive behaviour is under the global microscope. So, too all of its services – App Store, TV+, News+, Games, Music and more. Expect masses of litigation.
The Commissioner said that Apple and its partners violated:
First, Apple and the two wholesalers agreed not to compete and to prevent other distributors to compete on price, “thereby sterilising the wholesale market for Apple products.”
Secondly, premium distributors were forced to keep prices at the same level as those of integrated distributors (price-fixing).
Third, Apple has “abused the economic dependence” of these premium distributors, by subjecting them to unfair and unfavourable commercial conditions compared to its network of integrated distributors. (These last two points relate specifically to the accusations eBizcuss had lodged against the company.)
Finally, that, during the launch of new products, the Approved Apple Resellers were starved of stocks so that they could not supply orders placed with them. While the network of Apple Stores and retailers was regularly supplied. This resulted in a loss of customers, including regular customers (monopoly and first-party forcing).
The commission notes that Apple’s actions resulted in “supply difficulties, discriminatory treatment, unstable conditions of remuneration for their activity (discounts and in progress),” which in turn influenced squeezing their margins.
GadgetGuy analysis – Apple fined is just the start of a global movement to ethical business
Apple exists, at least in its present form under CEO Tim Cook, because of a staunchly fortified and defended walled garden. That keeps users in – not because it makes especially great products.
In fact, Microsoft this week confirmed that 100% of the US Fortune 500 now use Windows 10 devices. Global active use of Windows 10 is more than 1 billion units or around 90% market share to macOS at 10%. I guess that is what freedom of choice means and it drives considerably more innovation and competition than a walled garden.
Apple was founded in 1976 by Steve Jobs (deceased) and Steve Wozniak (happily long gone) and went from strength to weakness.
Cook joined Apple in 1988 after 12 years at IBM. Revenue had tanked from US$11 billion in 1995 to less than $6 billion. Apple was on its last legs. Cook closed factories and warehouses and replaced them with contract manufacturers and started building the walls.
Cook has a reputation keeping costs under control and combined with the company’s marketing savvy, generated huge profits and rescued the company from its death spiral. By 2011 he was CE0.
But analysts state that design innovation died under Cook – it is purely his business savvy that keeps it a trillion-dollar (market cap) company. Cook has an intense focus on exponential value creation (making money while you sleep a.k.a. services). And that is what Apple shareholders want. Consumers want innovation and design, but this costs too much.
That walled garden – 100% control of design, manufacturing, distribution and sales – means Apple can set and maintain prices that are significantly above others.
It has no like competitors for iOS and macOS. A list of Apple criticism is here.
If any wholesale distributor, approved Apple reseller (or repairer) dares compete on price with Apple’s stores, then the consequences, as France found, are dire. You are out of the Apple tent.
Then we see the absolute determination to stop the right to repair movement. Soldered RAM, battery glued to chassis, expensive large-scale modules instead of discreet parts, phone locking if repaired by a third party – all to stop self-repair. Maybe Apple just thinks we rent its products!
And its ecosystem – iTunes (now Music) has highly restrictive use terms. So too, with all its services. Once Apple has you in the tent inside its walled garden, it is challenging and often expensive to get out. Plus, we see Siri keeping Google and Amazon out, no one else allowed to make licenced Apple products, unreasonable App store fees (forcing Spotify et al. out), removal of apps that compete…
As France found Apple’s walled garden goes against modern business ethics – you can’t keep doing things the same way just because you always have.
This litigation is the tip of the iceberg. And perhaps France knows something else the world does not – it also fined Apple €25 million for deliberately slowing down older iPhones without informing customers.
But then Apple fanboys will simply mobilise to attack this editorial. Bring it on!
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