“European Union regulators are examining the contracts Apple strikes with cellphone carriers that sell its iPhone for possible antitrust violations after several carriers complained that the deals throttled competition.” Well paint me red and call me a girl scout.
This issue has arisen (as an anti-trust concern) because carriers believe they MUST be able to sell the iPhone to remain competitive and they don’t like the terms Apple requires of them, especially the smaller carriers apparently.
“Carriers are petrified at the thought of not having the smartphone because it remains a huge hit with the public, driving waves of customers to their stores, especially in the months after the latest models are introduced and heavily advertised.”
Apple obviously has this level of control in the US market but I always though it was much weaker in Europe.
]{
PS. Why can’t I block quote text from an article?
Edited 2013-03-22 14:42 UTC
I don’t know what is happening in the EU but you can buy an iPhone either directly from Apple via their store or through Telecom or Vodafone then use it on either Telecom, 2 Degrees or Vodafone. 2 Degrees isn’t an official reseller for Apple and yet people go out and buy an iPhone off contract (many times the retailer offering 12 months interest free if you can’t afford it all up front at once). Assuming that such availability exists in the EU I can’t work out why there is this push for anti-trust against Apple when in reality it is badly run carriers whining with dumb customers too lazy to actually shop around for the best deal – yes, you can buy phones from retail stores and choose your carrier.
Because the carriers have to pay Apple twice as much as they pay for competing phones. The carriers effectively lose $300-500 per Apple phone sold.
Which is a load of crap – Telecom provide a $0 iPhone 5 32Gb at $159 per month and over its life (minus GST) it brings in $3318 to the company with the cost of the phone being $1042 (GST excluded) meaning that Telecom NZ makes $2000+ over the life of the contract off the consumer if he or she chooses the $0 offer. I’d like you to actually back up what you said with some evidence – you know, provide a link to a company providing the phone on contract at a low price and them not being able to recuperate the cost and make a profit – I’m here waiting and it’s time for you to either put up or shut up.
Edited 2013-03-23 13:22 UTC
A) Apple requires minimal purchase agreements.
B) We are talking about EU here. Take a look at the prices in EU before spouting irrelevant facts about NZ.
C) Price for an iPhone in EU is about €650. Plans including iPhone are usually about €40 for 24 months. 24*40 = 960. That includes a cut to the salesperson(30-50), maintenance of the network and the device itself. Let’s count it up? Apple’s ASP for iPhone is $628 = €483(€580 with avg EU VAT).
960 – 580 – 35 => €345 – VAT = €287.5 before any operating expenses for 2 years. I know first hand that Apple is not the favourite vendor for EU operators to deal with. Now add to that minimal purchase agreements and you’ll see that Apple is cutting deep into profits at the expense of other device makers.
Though I don’t see on what grounds Apple could be found to violate TFEU Article 101 or 102, or any interpretations made by CJEU.
You’re obviously a complete moron. New Zealand is probably the only country in the world where anyone pays such massive prices.
In Australia phones are typically sold on 24 month plans costing only $30-60/month [sometimes with a small handset fee].
In Australia (Vodafone) total cost on a 24 month contract:
iPhone 5 16GB -$1584 (~$800 gross margin)
Galaxy SIII 16GB – $1400 (~$1100 gross margin)
http://shop.vodafone.com.au/all-mobiles?type=Contract&pid=v:pers:ho…
Australian carriers also pay far more than other countries for spectrum. This further erodes profits.
Many Australian phone shops don’t display iPhones. In fact the staff basically pretend they don’t exist. The reason is because they aren’t very profitable.
This sounds like a couple of puny, ineffectual carriers in France asking for a handout from the EU, not like anything that’s problematic on Apple’s end. Of course, Thom will use the opportunity to bash Apple (even though he hates the carriers and claims Apple is getting crushed in Europe) and to whip out his tired, nonsensical Dutch idiom that no one else cares for or understands.
Wow, pretty spot on analysis, Jared 🙂
Edited 2013-03-22 16:16 UTC
Why are you so hateful?
It’s not Dutch. It’s American.
I don’t see my comment as any more hateful than your faux-surprise/dismay.
I’ll call it a Dutch idiom as you are the sole perpetrator and person who thinks its actually funny/interesting/apropos/worth using/worth trying to get people to appreciate despite the fact that the 10,000 kids that watched Cow & Chicken a decade ago have completely forgotten about it.
Edited 2013-03-22 19:08 UTC
Well blow me off and bugger me with a tea spoon!
This makes me sigh out loud.
Please….
Don’t those EU nitwits not remember what it was like BEFORE the iPhone? All the power residing with carriers eff-ing over the customers.
Let’s go back to that era, and see more carrier abuse? What a great idea. If you think Apple’s products are expensive, try using a dataplan abroad and come home to $30K bills.
Carriers need to be controlled, and what better way than to play them against eachother.
As the article says, it is not about carriers. It’s about competitors. There seem to be three allegations:
(a) Apple’s contracts with (at least some) smaller carriers are on terms that are more onerous than their contracts with larger companies.
(b) These terms are unusually strict (presumably, in comparison with industry practice). They do not apply to the US.
(c) The effect of the terms is to make it difficult for other handset makers to compete.
The last is, of course, key. Using your market power to impose terms that restrict your counterparties from dealing with your competitors is a textbook definition of an anticompetitive practice. If the allegations are true, there probably is a case to answer.
Edited 2013-03-22 18:21 UTC
(a) standard practice. Better clients get better treatment.
(b) that’s your personal presumption. The small regional and MNVO carriers in the US certainly have similar terms.
(c) nonsense. Apple is unlikely to have more than 30% market share in a single European market. To say that Apple is so desirable that they can’t not do business with them, but that doing business with Apple is so onerous that it prevents them from doing business with other clients is wanting to have your cake and eat it too … and simply not supported by reality.
That isn’t relevant in determining whether it’s a violation of competition law. Price discrimination is standard practice, but can be a violation of competition law if it amounts to an abuse of market power.
It’s not my personal presumption. It’s what the article in the NYT said, and without meaning any disrespect, I think the (anonymous) sources on whom they relied probably know more about Apple’s contracts than either you or I do.
Market share isn’t the sole factor that’s relevant in EU competition law to assess dominance, and in any event the EU has for many years had a concept of ‘unilateral market power’ that has much broader applicability. If you have a conclusive argument that irrefutably demonstrates that Apple doesn’t have market power for the purposes of EU Competition law, there are a number of peer reviewed journals which will be interested in hearing from you. This is a much debated question, on which existing cases don’t give sufficient clarity.
Neither does it make it necessarily monopolistic; therefore, it’s not highly relevant.
The article reads as if the source(s) are the complainant(s) so I find no reason to find their opinions highly credible. The NYT article shows the greatest amount of objectivity in pointing out that small carriers in the US are in the same situation and yet seem to be satisfied… so it was my point that you are making up details about contracts you are not a party to and which you have never seen.
I’m not suggesting that Apple needs to have dominant market share. I am stating as a fact that a company with less than 30% market share is clearly not a “necessary” business partner that can exert undue force. I am stating that in a market where “others” represent 70% or greater market share, it should be impossible for anyone to argue that Apple is preventing them from doing business with others.
If you can somehow form a cogent argument to suggest otherwise, I’d be happy to entertain it.
Edited 2013-03-22 23:08 UTC
Here’s the exact quote from the article:
“The issues do not appear to apply to carriers in the United States; an executive at an American carrier said the terms of its contract with Apple were aggressive but not unreasonable.”
Given that quote, I’ll leave it to others to judge whether I was “making up” the detail that these terms do not apply to the US.
And, just to be clear, the NYT states that the source is “a person briefed on the communications with the carriers”. That is obviously a reference to a person in the Commission – an employee of one of the carriers is hardly likely to be described as “a person briefed on the communications with the carriers”.
As a matter of law, that isn’t correct. European competition law distinguishes between differentiated and homogenous product markets. The point is that differentiated markets are characterised by subjective prefences between products which cannot be reduced to matters of price and quality. If you read the article, you’ll see that this precisely what the carriers are contending in relation to the iPhone.
This matters quite a bit in legal terms. For one, in differentiated markets market share is assessed with reference to value, not volume. I don’t have the exact figures to hand – I can’t access the reports from home – but my recollection is that Apple’s market share by value for smartphones is around 40%. That is significant. More fundamentally, in a differentiated product market, the ordinary rules in relation to market share can be waived. The Commission has always stressed that it is possible for a company with a small market share to have market power in a differentiated product market. The usual 25% de minimis threshold won’t apply and, as happened in the United Brands case, the strength of the company’s brand is often treated as a more relevant factor in assessing whether it had market power than the quantitative tests such as cross-elasticity of demand which you seem to have in mind.
That’s the law, not my personal opinion.
Yes, that is the quote, and I think you are projecting your own meaning on it. When the carrier rep says “that is not the case” I do not presume that he’s referring to differences in contracts when he clearly hasn’t seen the other contracts to speak of. I think it means: we are not dissatisfied and feel that Apple is acting in a monopolistic fashion.
I’m baffled. The article says:
“The issues do not appear to apply to carriers in the United States”
I genuinely do not understand how you can read that to mean:
“small carriers in the US are in the same situation”
Anyway, you can have the last word.
I’m baffled as well. I don’t think the situation is the same: US carriers are content and don’t think anything illegal is occurring whereas a couple of French carriers are complaining.
To you “issues” means “differences in contracts” — to me, “issues” means small carriers complaining.
I’m also unclear as to what parallel you see with Chiquita where they clearly did have a massive monopoly and the EU needed to create new trade restrictions to control their business by artificially limiting imports based on region to prevent too many bananas from coming in from South America where the majority of Chiquita’s production lies.
The argument in that case was that bananas (where Chiquita was dominant) should be seen as part of an overall market for fresh fruits (where they were not, and where they did not have market power). What was important about the case at the time was that it recognised a principle that consumer preferences for one product (bananas) above others (oranges) would be taken into account in determining whether a person had market power.
This principle has since been extended to preferences for individual brands in cases involving cosmetics and pharmaceuticals, amongst other things, to the extent that commentators on the topic now tend to the view that the traditional market definition is pretty much irrelevant in these cases.
Again, I don’t think there’s very much more I can say on this point – the law is what it is, regardless of whether or not you accept it. I don’t particularly care whether Apple win or lose, but a decision from the Commission either way would be welcome (even if it’s only a decision not to investigate), as it’ll provide much needed clarity on how the ‘differentiated product’ jurisprudence applies to electronics.
I’ll let you have the last word on this too.
Edited 2013-03-23 00:45 UTC
Claiming “the argument” in United Brands was just a question of market definition is patently absurd. There were numerous issues and pretty much across the board Chiquita’s arguments were weak. Defining the market as “bananas” rather than “all fruits” seems perfectly logical and noncontroversial to me… and not particular relevant to this case.
So United Brands is not applicable (the difference between defining a market as a particular fruit rather than all fruits is quite different than defining a market as a single brand) and you can cite other cases which involve defining a market by a single brand? Or are you conflating the definition of the market with dominance of the market? It’s unclear, your argument has become very muddy.
Edited 2013-03-23 01:24 UTC
“a person briefed on the communications with the carriers” is exactly how I would expect an agent from a PR firm representing the carriers to be described. In fact, I can’t think of a better “journalistic” way to describe such a scenario.
C) Oh look… You apparently have read the explanations for the competition rules by CJEU that say that sizeable market share does not need to be very high for violation of the TFEU Art. 101&102. Oh wait…
Wrong. It is illegal to offer discriminatory pricing (apart from volume discounts) to different customers. By law all carriers should pay the same price for handsets because they would all buy sufficient numbers to qualify for a bulk discount (eg >1,000 handsets).
What nonsense! Greater than 1,000 is bulk? That’s less than a couple of hours of opening day sales.
Apple’s pricing is very similar to what they do with Macs: you are obligated to buy x number of devices at y price. The price is not highly variable but the x number is based on the size of the carriers themselves.
These are rather vague accusations … kind of hard to comment on them without knowing what the actual disputed terms are.
I’m guessing it’s not about letting carriers load the iPhone down with crapware though. I’m a strong believer in letting manufacturers dictate to carriers/OEMs what can and cannot be included with the default setup; we see what happened to Android and Windows when manufacturers lose this ability. End users end up with all kinds of shit on their devices, some of which cannot be removed.
And Apple doesn’t because…they’re all fluffy puppies and rainbows and really care about our well-being and are not ever anti-competitive?
Apple is out the get the most money it can. That does not mean that they don’t care (possibly more then anyone else) about the products they make.
So they’re exactly like the carriers yet only one of them should apparently be controlled.
These EU nitwits made sure that we don’t pay thousands of Euro in roaming fees, that our devices are cross compatible between all networks within Europe and demand that devices be unlockable.
PS: iPhone in Europe is one of the rare devices that is locked. So I don’t know what EU you are talking about, but Apple brought more American carrier bull*** over to EU than there was right before iPhone.
My iPhone isn’t locked. I bought it like that in The Netherlands (Europe).
You can even buy them unlocked in the Amsterdam Apple store.
I think we would all prefer that Apple bend over for the carriers, just like Google. Then it would be the same situation as Android; wait 5 or 6 months for updates or even for ever, meanwhile you’re stuck with bugs and security holes.
Except, that’s not at all what this is about.
So what’s it about?
Clue is in the title,
EU examines Apple for antitrust violations in carrier deals
You are correct in some respect.
Carriers have been bleeding us dry for years now, while giving us horrible service: bad coverage, very small data caps, miserable speed.
The story here is that the carriers signed deals with Apple because the iPhone resembled pure gold.
Now that Android has matured, these same carriers are running to the EU and complaining about the deals They made.
Yes, justice for the carriers.
Edited 2013-03-22 23:36 UTC
Sensible middle-ground? Ain’t nobody got time fo’ that.
Now your just talking nonsense.
On the one hand, Apple is being heavy handed here. I can see how over the years they’ve gotten carried away with their influence.
On the other hand, I really do not feel bad that carriers are being knocked down a notch. I do worry about the effects it has on the budgets for competing platforms — which is definitely a valid issue.
This fits nicely with my assertion that there are certain structural market inefficiencies that hinder the adoption of emerging platforms. This hurts Windows Phone (much to the delight of many here, it makes it easy to blame Ballmer or Elop) and it hurts BlackBerry’s chances as well.
I really think that were we in a market that was functioning normally we’d have a more diverse lineup of OSes. Windows Phone sells millions despite these conditions, after exhaustive amounts of money and greasing by MS/Nokia.
What worries me more is not someone like MS who can afford to stick it out a few years, but more vulnerable companies like Nokia who has the livelihood of thousands of employees at stake, similarly with BlackBerry.