A single typo unmasked the scam.
Back in the Paleolithic Era (the 20th century), a couple of airlines were busy fixing prices. They would deny it, but monopolistic practices often leave a lingering aroma.
The carriers used “fare codes” on their computers and watched as new fares instituted by their competitors appeared on their screens.
One day Airline A unveiled a new fare on a flight straight into a competitor’s hub. A couple of seconds later, Airline B responded by lowering a fare straight into B’s home base. Of 676 choices for a two-digit code with which to label the new fare, the airline selected “FU.” That code could have been chosen by chance. What are the odds?
That legendary “FU” had cropped up because an earlier airline CEO had managed to have his proposed price-fix taped. Airlines then used computers to discuss fares. Not that it helped.
After the Justice Department was read in, the airlines would have to find a new way to agree on fare hikes. They could signal by seat capacity. If airlines could agree to slice the number of seats flying in and out of a city, fare hikes would be sure to follow.
Airlines didn’t actually need to deal. They just followed each other, the same way elephants marched at a circus.
Monopolies, on their own, aren’t illegal. As one judge put it, success doesn’t make it unlawful. One restaurant might offer a more imaginative menu. Another might stay open later, with hard-to-copy drink specials. A competitor could innovate, offering a new methodology. Many used apps, which brings us to Apple, locked in a lengthy and revelatory battle with Epic Games, which makes the popular “Fortnite.”
A company’s prices often produce the telltale monopoly aroma. Apple’s customary commission of 30% on apps sold through the App Store qualifies. The basis of this monopoly, legal or not, is that Apple’s App Store is the primary way an iPhone can access an app.
Epic’s complaint is like the little rip in a finger which becomes infected. Epic suggested to customers that they bypass the App Store in paying for Fortnite and Apple’s 30% commission. Apple responded by kicking the game out of the App Store, sparking the lawsuit that won’t go away. The stakes are now far higher. Google has become a similar antitrust target. A House report in Congress concluded Apple is acting like a monopolist, and a Senate inquiry took a similar angle.
Apple has agreed to bend its rules, but not much. It cut the 30% commission for certain transactions, notable app-makers earning under $1 million in annual revenues. Apple would appear to be able to afford the concession: its own annual haul from such fees is $20 billion.
Lawyers and judges predictably aren’t in lockstep in arguing over the iPhone app market, but some agree it’s only a matter of time before a key ruling simply tags Apple as an illegal monopolist. One judge has already come close. The jurists are engaged In an extended battle over exactly how to define the marketplace.
Aspenites recall the “marketplace” fight erupting over the case between Aspen Ski Corp. and Aspen Highlands, in the days when Highlands was separately owned. To escape a looming monopoly verdict, the SkiCo searched for an escape hatch from the “relevant” market as skiers arriving in Aspen and deciding on a place to ski. SKiCo tried defining the market instead as all U.S. destination ski areas. But the bid didn’t fly.
In the Apple case, participants are already anticipating an appeal to the U.S. Supreme Court by the potential loser. Already one judge in the Apple-Epic case has issued a partial negative ruling against Apple, but its market definition wasn’t cut and dried.
But a buildup of toxic aromas may come to bedevil Apple. The stock market has already nodded, knocking 3% off its stock price one day last week. Apple has long used its image as a technical innovator to muffle the swelling grumbles over its unpleasant practices, including its 30% app commission and a rising tide of investigations that now includes the European Union.
The current stages of monopoly law are now beyond the simple days when a carelessly taped call or a misplaced code notation of “FU” could produce a stink from which there was little escape.
The writer (email@example.com) is a founder of the Aspen Daily News and his column appears here Sundays.