Apple Sued by U.S. Department of Justice, Says Lawsuit is 'Wrong'

[weckart]

You seem to have no concept of the vendor subsidies I see in my country. Please provide an example of a locked phone you could buy outright for half price the price of an unlocked phone without also locking yourself into a high priced telecom contract, so I can understand the point you seem to be trying to make. I was not aware that scenario existed, and would be curious to see the exact pricing.

Please provide an example to me of where the base model iPhone 1 (the phone in question) could be sold anywhere for the equivalent of €1000 ($1350) in all seriousness bearing in mind that it was launched in the US for $499/$599 plus contract only for the base model to be withdrawn and the price of the 8GB iPhone to be slashed to $399 plus contract after mere months of decent but not earth shattering sales.

We saw the effect of "vendor subsidies" when the iPhone was launched in Belgium. €0.00.

 

[bgillander]

Please provide an example to me of where the base model iPhone 1 (the phone in question) could be sold anywhere for the equivalent of €1000 ($1350) in all seriousness bearing in mind that it was launched in the US for $499/$599 plus contract only for the base model to be withdrawn and the price of the 8GB iPhone to be slashed to $399 plus contract after mere months of decent but not earth shattering sales.

We saw the effect of "vendor subsidies" when the iPhone was launched in Belgium. €0.00.

Not $499/$599 plus contract, only $499/$599 with contract. You could not get that $499 price without committing to a 24 month contract of at least $59.99 a month. So the total price was $499 + $1439.76 = $1938.76 minimum. They were just paying on an installment.

I'm not saying that it wasn't a larger markup than justified, but was that €1000 iPhone with a contract? If so, then you have a point, otherwise you are comparing Apples and oranges.

AT&T and Apple Announce Simple, Affordable Service Plans for iPhone

www.apple.com

 

[webkit]

Please provide an example to me of where the base model iPhone 1 (the phone in question) could be sold anywhere for the equivalent of €1000 ($1350) in all seriousness bearing in mind that it was launched in the US for $499/$599 plus contract only for the base model to be withdrawn and the price of the 8GB iPhone to be slashed to $399 plus contract after mere months of decent but not earth shattering sales.

The $499/$599 original iPhones required a 2 year AT&T contract. There weren't any "no contract" prices for iPhones in the U.S. in 2007.

AT&T didn't start to offer "no contract" iPhones until 2009 and at that time, prices for the iPhone 3GS ranged from $199/$299 (new customers or existing customers who fulfilled previous agreement, required 2 year contract) to $599/$699 (no contract commitment).

Also keep in mind that the Germany prices you are quoting included VAT while the U.S. prices didn't include sales tax.

 

[spinedoc77]

Yeah, now it’s very hard to implement, but it all started with a refusal by american users to use anything but what was built into apple’s OS. It’s just like the metric system: the US refused to use it when the rest of the world first adopted it and now it would be practically impossible to make the change.

Texting had a completely different trajectory in the US where it was typically included in high quantity and very quickly unlimited use, juxtaposed with the EU and other countries where high text costs drove consumers to seek 3rd party text messaging apps. Most consumers just use what's there out of the box and iMessage was good enough for most consumers to be satisfied. Personally I have no use for anything Meta puts out so Whatsapp and FB messenger are just not options I'd consider.

Don't disagree on the metric system at all, but that's something completely different.

 

[weckart]

The $499/$599 original iPhones required a 2 year AT&T contract. There weren't any "no contract" prices for iPhones in the U.S. in 2007.

AT&T didn't start to offer "no contract" iPhones until 2009 and at that time, prices for the iPhone 3GS ranged from $199/$299 (new customers or existing customers who fulfilled previous agreement, required 2 year contract) to $599/$699 (no contract commitment).

Also keep in mind that the Germany prices you are quoting included VAT while the U.S. prices didn't include sales tax.

Bear in mind that contracts in Europe are a lot cheaper than in the US. It still doesn't begin to account for the ridiculous uplift after the German court case.

 

[weckart]

Not $499/$599 plus contract, only $499/$599 with contract. You could not get that $499 price without committing to a 24 month contract of at least $59.99 a month. So the total price was $499 + $1439.76 = $1938.76 minimum. They were just paying on an installment.

I'm not saying that it wasn't a larger markup than justified, but was that €1000 iPhone with a contract? If so, then you have a point, otherwise you are comparing Apples and oranges.

AT&T and Apple Announce Simple, Affordable Service Plans for iPhone

www.apple.com

After the iPhone was launched in Germany, it came to the UK. Cost was £269 plus an 18month contract. Fully unlimited data came at £35 a month (tax included). Total for the full package was £899, approx €1200. By Apple's reckoning the provider O2 would have been offering fully unlimited data for the equivalent of €11 a month. At the same time, O2 launched a cheap sim only tariff for £15/€20 monthly giving 200 mins and 400 texts no mention of data. No way were the carriers subsidising Apple out of their own pockets. By far the bulk of that carrier contract would have stayed with the carriers. If Apple got a hundred euros out of that as a kickback, it was doing well.

You need to look how much the sim only tariffs were in the US when the iPhone launched and make your own calculations as to how much Apple was profiteering back then. That €1000 price tag was nuts and when the iPhone went unlocked in all of Europe it wouldn't come near that cost for a very long time.

That was my point. Apple's behaviour showed it wasn't any better than Microsoft and there is no need for anyone here to white night Apple.

 

[bgillander]

After the iPhone was launched in Germany, it came to the UK. Cost was £269 plus an 18month contract. Fully unlimited data came at £35 a month (tax included). Total for the full package was £899, approx €1200. By Apple's reckoning the provider O2 would have been offering fully unlimited data for the equivalent of €11 a month. At the same time, O2 launched a cheap sim only tariff for £15/€20 monthly giving 200 mins and 400 texts no mention of data. No way were the carriers subsidising Apple out of their own pockets. By far the bulk of that carrier contract would have stayed with the carriers. If Apple got a hundred euros out of that as a kickback, it was doing well.

You need to look how much the sim only tariffs were in the US when the iPhone launched and make your own calculations as to how much Apple was profiteering back then. That €1000 price tag was nuts and when the iPhone went unlocked in all of Europe it wouldn't come near that cost for a very long time.

That was my point. Apple's behaviour showed it wasn't any better than Microsoft and there is no need for anyone here to white night Apple.

UK iPhone introduction date: Sept 19, 2007
Value of Pound Sterling to USD on Sept 19, 2007: 1.9983
O2 iPhone price: £269
O2 18 Month contract + iPhone price: £899
O2 total cost in USD at time of launch: $1796.47 USD

This was also 2 weeks after Apple dropped the price of the iPhone to $399 USD, while the subsidized O2 price was then equivalent to $537.54 USD. The Pound was quite high in 2007.

Federal Reserve Board - Foreign Exchange Rates - H.10 - April 29, 2024

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

U.S. Dollar / British Pound Historical Reference Rates from Bank of England for 2007

www.poundsterlinglive.com

UK iPhone unveiled on O2 network at London Apple Store

The wait is over. Today Apple launched the iPhone in London -- and it's the standard 8GB, non-3G version. Prepare to be disappointed if you're not on O2 and don't have £269

www.cnet.com

 

[bgillander]

I despair of this complete lack of logic. Apple did not want to sell an unlocked phone, so they made the price deliberately exorbitant to discourage others from demanding and buying unlocked phones. It had zero relation to the actual cost or Apple's bottom line. I suppose it was one way to stop phones being exported to countries where Apple had yet to agree terms with the relevant authorities but that is putting a generous spin on things as touts were in force when the queues formed to buy the newest model when they were put on sale.

When Apple entered the Belgian market, the Belgians were charged the same as buyers in other countries buying locked phones. The lock went pretty swiftly after that right across Europe.

Since you keep arguing this, I just want to point out the complete lack of logic in thinking Apple did not want to sell an unlocked phone only for the sake of not wanting to sell an unlocked phone. If you honestly believe Apple did not get any cash from the telecoms, why would Apple care if the iPhones were locked or not?

 

[weckart]

Since you keep arguing this, I just want to point out the complete lack of logic in thinking Apple did not want to sell an unlocked phone only for the sake of not wanting to sell an unlocked phone. If you honestly believe Apple did not get any cash from the telecoms, why would Apple care if the iPhones were locked or not?

Apple got an extra bung for the lock in. Of course it did. It was Apple's reaction when the courts in Germany wagged their finger, which was my point.

 

[weckart]

UK iPhone introduction date: Sept 19, 2007
Value of Pound Sterling to USD on Sept 19, 2007: 1.9983
O2 iPhone price: £269
O2 18 Month contract + iPhone price: £899
O2 total cost in USD at time of launch: $1796.47 USD

This was also 2 weeks after Apple dropped the price of the iPhone to $399 USD, while the subsidized O2 price was then equivalent to $537.54 USD. The Pound was quite high in 2007.

The pound to Euro rate swung between 1.3 to 1.4. That USD value you calculated for the UK contract still includes tax and is a consequently lot less than the USD contract total of nearly $2k net of sales tax. It doesn't justify the €1k price tag Apple demanded at the time and wouldn't repeat for subsequent unlocked models for a very long time.

 

[webkit]

Bear in mind that contracts in Europe are a lot cheaper than in the US. It still doesn't begin to account for the ridiculous uplift after the German court case.

Again, the price differences were largely determined by what carriers were willing to discount phones in order to be able to lock customers into long-term plan contracts. When/if that choice was available, customers decided if they wanted to pay "full price" with no contract or the carrier discounted price with a long-term contract.

These kinds of promotions still go on in the U.S. today. For example, the pre-sales tax retail price of a new 128GB iPhone 14 is $729 but through AT&T you can get it for over $500 less with the discount spread over 36 months. This is AT&T's way of trying to keep the customer locked in for three years.

 

[bgillander]

Apple got an extra bung for the lock in. Of course it did. It was Apple's reaction when the courts in Germany wagged their finger, which was my point.

Then it is very hard to see your point at all.

 

[Mrkevinfinnerty]

I expect the lawsuit to go one of two ways.

1) Apple succeeds in getting this antitrust complaint dismissed. It's business as usual.

2) Even if Apple does go to trial, it will likely take several years to play out. During this time, a lot of things can happen. I suspect many of the complaints will end up being made irrelevant by market forces. For example, we already see RCS coming to iMessage and game streaming apps being allowed on iOS (though the irony of the latter is that it came only after the shuttering of Google Stadia). Either way, it's still business as usual for Apple. They are no stranger to lawsuits after all.

Win, lose, life goes on.

None of this is 'market forces' it was Apple trying to stave of government sanctions.

The discovery in this case is going to be horrible for Apple.

 

[Abazigal]

None of this is 'market forces' it was Apple trying to stave of government sanctions.

The discovery in this case is going to be horrible for Apple.

There's a fine line between "I don't like what Apple is doing" and "What Apple is doing is clearly against the law".

I am confident that the majority, if not all, of the accusations being levelled at Apple will end up not having the teeth people here think they will. I mean - seriously? Expecting Apple to give every other competitor making a smartwatch the same level of API access they do to their own Apple Watch offering? Do these people even understand technology, or are they just trying to make populist statements that sound good on a tech blog?

 

[Mrkevinfinnerty]

There's a fine line between "I don't like what Apple is doing" and "What Apple is doing is clearly against the law".

I am confident that the majority, if not all, of the accusations being levelled at Apple will end up not having the teeth people here think they will. I mean - seriously? Expecting Apple to give every other competitor making a smartwatch the same level of API access they do to their own Apple Watch offering? Do these people even understand technology, or are they just trying to make populist statements that sound good on a tech blog?

Agree. There is also a difference between peoples perception and what is deemed to be legal.

The discovery in this case won't cast Apple in a good light.

 

[Abazigal]

Agree. There is also a difference between peoples perception and what is deemed to be legal.

The discovery in this case won't cast Apple in a good light.

Ah, you replied as I was about to edit my earlier post.

My guess is that nothing will change. Those with an axe to grind against Apple to continue to latch on every single “revelation” and argue how it’s further proof that Apple is ripping off its users. Same with tech blogs looking for salacious headlines to draw in the clicks and views.

Those who don’t care, or who think there’s nothing amiss with these findings, won’t care. And the reason why I don’t think there will be much fallout is because the majority of these findings impact developers, while its consumers who buy Apple products. The reason why so many people use Apple devices is because they do enjoy the using them, and they enjoy using them because of the things that regulators are complaining about (such as Apple Pay being the default on iPhones), not despite them.

And that’s precisely how an aggregator works, and that’s how an aggregator wins - by delivering a legitimately better experience through leveraging one’s ownership of end users to exert control over suppliers (developers in this case). You can’t improve one without also worsening the other.

We have all known this from day one, so I don’t see what new revelation can be so heaven-shaking.

 

[dk001]

There's a fine line between "I don't like what Apple is doing" and "What Apple is doing is clearly against the law".

I am confident that the majority, if not all, of the accusations being levelled at Apple will end up not having the teeth people here think they will. I mean - seriously? Expecting Apple to give every other competitor making a smartwatch the same level of API access they do to their own Apple Watch offering? Do these people even understand technology, or are they just trying to make populist statements that sound good on a tech blog?

But why not? Except for some specific Apple only proprietary functions, why not grant them access instead of saying “you can link your smartwatch to an iPhone but we are going to deliberately cripple it.”.

 

[Mrkevinfinnerty]

But why not? Except for some specific Apple only proprietary functions, why not grant them access instead of saying “you can link your smartwatch to an iPhone but we are going to deliberately cripple it.”.

This is the crux of the issue.

It's one thing to make using say an Apple Watch a better experience if used with an iPhone but it's another to cripple it without Apples phone.

Same with the messaging, they talk privacy and security but that goes out of the window if someone in the group chat uses Android.

 

[bgillander]

But why not? Except for some specific Apple only proprietary functions, why not grant them access instead of saying “you can link your smartwatch to an iPhone but we are going to deliberately cripple it.”.

Creating an API is a large undertaking versus simply using current functionality in house. The early iOS APIs were fluid, to say the least, and that was rather painful as a programmer, and generated quite a few complaints. The theory is that once you actually expose a function in an API, you shouldn't just change it.

I'm not saying they don't/shouldn't have an API with that level of functionality for the third party watches, just responding with one reason to your "why not?"

 

[Abazigal]

But why not? Except for some specific Apple only proprietary functions, why not grant them access instead of saying “you can link your smartwatch to an iPhone but we are going to deliberately cripple it.”.

Well, on one hand, I suspect it would be harder to prepare a API for public access vs using it privately (where Apple can move fast and break stuff and not have to explain their actions to anyone but themselves). It’s like having all this tacit knowledge inside your head vs having to take the time to document everything for an audience, and then updating the slides every time something changes.

Second, if Apple doesn’t think they can sufficiently differentiate their products from the rest of the competition, they might simply not bother with it in the first place. So rather than a situation where every smartphone is as integrated as the Apple Watch, we may not even have an Apple Watch at all, and other smartwatches continue to be as crippled.

Equality can sometimes mean everything is equally bad, not necessarily everything being equally good.

 

[dk001]

Well, on one hand, I suspect it would be harder to prepare a API for public access vs using it privately (where Apple can move fast and break stuff and not have to explain their actions to anyone but themselves). It’s like having all this tacit knowledge inside your head vs having to take the time to document everything for an audience, and then updating the slides every time something changes.

Second, if Apple doesn’t think they can sufficiently differentiate their products from the rest of the competition, they might simply not bother with it in the first place. So rather than a situation where every smartphone is as integrated as the Apple Watch, we may not even have an Apple Watch at all, and other smartwatches continue to be as crippled.

Equality can sometimes mean everything is equally bad, not necessarily everything being equally good.

While yes there are a number of API’s that Apple will not list as public as they want to keep those features for its products only in the iOS world. I’ll use my Garmin as an example. It has more functionality on Android than iOS and is missing some basic stuff my AWU has (but the Garmin has it on Android).

For differentiation, I really like my AWU. Unfortunately I can’t hook to anything other than an iPhone.

This sort of says that Apple is unsure about competing in a world other than the one they control.

 

[bgillander]

While yes there are a number of API’s that Apple will not list as public as they want to keep those features for its products only in the iOS world. I’ll use my Garmin as an example. It has more functionality on Android than iOS and is missing some basic stuff my AWU has (but the Garmin has it on Android).

For differentiation, I really like my AWU. Unfortunately I can’t hook to anything other than an iPhone.

This sort of says that Apple is unsure about competing in a world other than the one they control.

I have a couple of Android Wear watches and an Apple Watch, and you sound similarly agnostic, but considering the vehement ”us versus them” tone of most of the Android and iPhone posts, I’m not sure I disagree with Apple just sticking to Apple, as they have enough trouble pleasing Apple customers. I guess it would be a nice bonus if I could use my Apple Watch with Android, but it wouldn’t have been a huge selling point for me. Considering the low percentage of the population it would actually appeal to, it would be a very interesting precedent if the government told them they had to add compatibility.

 

[webkit]

There's a fine line between "I don't like what Apple is doing" and "What Apple is doing is clearly against the law".

An issue here is that one of Apple's ways of trying to compete in the smartwatch market is by handicapping the competition through functionality restrictions of their products on iPhone/iOS. In the 1990s, one of Microsoft's ways of trying to compete in the browser market was to handicap Netscape and others by incentivizing computer makers not to offer or pre-install competitor browses on Windows machines. Microsoft was being anticompetitive then (and the DOJ went after them for it) and Apple is being anticompetitive now.

 

[BaldiMac]

An issue here is that one of Apple's ways of trying to compete in the smartwatch market is by handicapping the competition through functionality restrictions of their products on iPhone/iOS. In the 1990s, one of Microsoft's ways of trying to compete in the browser market was to handicap Netscape and others by incentivizing computer makers not to offer or pre-install competitor browses on Windows machines. Microsoft was being anticompetitive then (and the DOJ went after them for it) and Apple is being anticompetitive now.

Of course, you are begging the question here. You don't know if Apple is intentionally handicapping the competition or if there are technical reasons that Apple is not fully supporting them.

 

[I7guy]

Of course, you are begging the question here. You don't know if Apple is intentionally handicapping the competition or if there are technical reasons that Apple is not fully supporting them.

It’s easy to say apple is being anticompetitive and words are cheap.