Driving the news: The U.S. Supreme Court ruled Monday that a class action suit by charging Apple's App Store with monopolistic behavior could move forward.
The big picture: Here's why "market definitions" are so central to antitrust fights.
- If you are the only restaurant in town – do you have a monopoly?
- If the market is defined as "restaurants" or "dining out," then you do.
- If the market is defined as "meals" or "food," well, people can buy groceries and cook, right?
In the App Store suit
- Apple has argued that, among other things, users can access software and services via the web browsers on their phones, and that the majority of apps accessed from the App Store are free downloads that don't earn it a penny
If you define the market as "iPhone apps," Apple looks a lot like a monopolist – it maintains complete control over the space.
- You can't put a non-app store app on an iPhone without "jail-breaking" it, tampering with the operating system in a way that violates Apple's terms and voids the warranty.
If you define the market as, say, "smartphone apps, " you get a different outcome.
- That's because users are free to buy Android phones and access to very different universe of apps. Users have choice – presto, no monopoly.
apply in the debate on breaking up Facebook.
- In his recent essay arguing that Facebook has become too powerful, co-founder Chris Hughes has become a powerful monopoly, eclipsing all of its rivals and erasing competition from the social networking category. "
- "The social networking category" is a way to define this market that most readily casts Facebook as a monopoly.
- But if you call it "messaging," then Apple, Snapchat, and the cellphone providers all look like hearty competitors.
Similarly, in many countries, Google looks to have a monopoly in the search market. But if you define the market instead of "online information," the case is a lot of trouble.
- Google's Android practices have also come under antitrust scrutiny. Last year an EU ruling that penalized Google for practices involving the Android Play Store stated that Google had a monopoly in that market.
Our thought bubble : In tech, market definitions are unusually fluid because hardware evolves quickly and software is infinitely malleable.
- Lawsuits and antitrust cases move slowly, and in the time they can be tried, the markets tend to have mutated.
- But the tech giants' power has grown so many that many critics see antitrust remedies as the only way to rebalance the industry's game.