Linked by Thom Holwerda on Fri 22nd Mar 2013 11:08 UTC
Apple "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.
Order by: Score:
is Apple really that dominant in Europe?
by kristoph on Fri 22nd Mar 2013 14:37 UTC
kristoph
Member since:
2006-01-01

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

Reply Score: 3

kaiwai Member since:
2005-07-06

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?


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.

Reply Score: 2

unclefester Member since:
2007-01-13

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.

Reply Score: 4

kaiwai Member since:
2005-07-06

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

Reply Score: 1

JAlexoid Member since:
2009-05-19

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.

Reply Score: 5

unclefester Member since:
2007-01-13


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.


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.

Reply Score: 3

v Girl Scout, Indeed
by jared_wilkes on Fri 22nd Mar 2013 16:02 UTC
RE: Girl Scout, Indeed
by bram on Fri 22nd Mar 2013 16:15 UTC in reply to "Girl Scout, Indeed"
bram Member since:
2009-04-03

Wow, pretty spot on analysis, Jared :-)

Edited 2013-03-22 16:16 UTC

Reply Score: 3

RE: Girl Scout, Indeed
by Thom_Holwerda on Fri 22nd Mar 2013 16:16 UTC in reply to "Girl Scout, Indeed"
Thom_Holwerda Member since:
2005-06-29

Why are you so hateful?

and to whip out his tired, nonsensical Dutch idiom that no one else cares for or understands.


It's not Dutch. It's American.

Reply Score: 6

v RE[2]: Girl Scout, Indeed
by jared_wilkes on Fri 22nd Mar 2013 19:07 UTC in reply to "RE: Girl Scout, Indeed"
RE[3]: Girl Scout, Indeed
by kaiwai on Sat 23rd Mar 2013 02:15 UTC in reply to "RE[2]: Girl Scout, Indeed"
kaiwai Member since:
2005-07-06

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.


Well blow me off and bugger me with a tea spoon!

Reply Score: 4

big sigh
by bram on Fri 22nd Mar 2013 16:13 UTC
bram
Member since:
2009-04-03

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.

Reply Score: 3

RE: big sigh
by oskeladden on Fri 22nd Mar 2013 18:19 UTC in reply to "big sigh"
oskeladden Member since:
2009-08-05

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

Reply Score: 7

RE[2]: big sigh
by jared_wilkes on Fri 22nd Mar 2013 19:34 UTC in reply to "RE: big sigh"
jared_wilkes Member since:
2011-04-25

(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.

Reply Score: 2

RE[3]: big sigh
by oskeladden on Fri 22nd Mar 2013 20:40 UTC in reply to "RE[2]: big sigh"
oskeladden Member since:
2009-08-05

(a) standard practice. Better clients get better treatment.

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.

(b) that's your personal presumption. The small regional and MNVO carriers in the US certainly have similar terms.

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.

(c) nonsense. Apple is unlikely to have more than 30% market share in a single European market.


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.

Reply Score: 5

RE[4]: big sigh
by jared_wilkes on Fri 22nd Mar 2013 23:07 UTC in reply to "RE[3]: big sigh"
jared_wilkes Member since:
2011-04-25

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.


Neither does it make it necessarily monopolistic; therefore, it's not highly relevant.

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.


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.

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.


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

Reply Score: 1

RE[5]: big sigh
by oskeladden on Sat 23rd Mar 2013 00:11 UTC in reply to "RE[4]: big sigh"
oskeladden Member since:
2009-08-05

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.


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".

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.


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.

Reply Score: 3

RE[6]: big sigh
by jared_wilkes on Sat 23rd Mar 2013 00:20 UTC in reply to "RE[5]: big sigh"
jared_wilkes Member since:
2011-04-25

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.

Reply Score: 1

RE[7]: big sigh
by oskeladden on Sat 23rd Mar 2013 00:29 UTC in reply to "RE[6]: big sigh"
oskeladden Member since:
2009-08-05

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.

Reply Score: 3

RE[6]: big sigh
by jared_wilkes on Sat 23rd Mar 2013 00:27 UTC in reply to "RE[5]: big sigh"
jared_wilkes Member since:
2011-04-25

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.

Reply Score: 2

RE[7]: big sigh
by oskeladden on Sat 23rd Mar 2013 00:43 UTC in reply to "RE[6]: big sigh"
oskeladden Member since:
2009-08-05

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

Reply Score: 3

RE[6]: big sigh
by jared_wilkes on Sat 23rd Mar 2013 00:39 UTC in reply to "RE[5]: big sigh"
jared_wilkes Member since:
2011-04-25

"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.

Reply Score: 2

RE[3]: big sigh
by JAlexoid on Sat 23rd Mar 2013 17:52 UTC in reply to "RE[2]: big sigh"
JAlexoid Member since:
2009-05-19

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...

Reply Score: 3

RE[3]: big sigh
by unclefester on Sun 24th Mar 2013 06:10 UTC in reply to "RE[2]: big sigh"
unclefester Member since:
2007-01-13

(a) standard practice. Better clients get better treatment.


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).

Reply Score: 3

RE[4]: big sigh
by jared_wilkes on Sun 24th Mar 2013 17:04 UTC in reply to "RE[3]: big sigh"
jared_wilkes Member since:
2011-04-25

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.

Reply Score: 1

RE[2]: big sigh
by WorknMan on Fri 22nd Mar 2013 23:10 UTC in reply to "RE: big sigh"
WorknMan Member since:
2005-11-13

(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.


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.

Reply Score: 3

RE: big sigh
by Soulbender on Sat 23rd Mar 2013 03:03 UTC in reply to "big sigh"
Soulbender Member since:
2005-08-18

Carriers need to be controlled, and what better way than to play them against eachother.


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?

Reply Score: 7

RE[2]: big sigh
by kristoph on Sun 24th Mar 2013 00:42 UTC in reply to "RE: big sigh"
kristoph Member since:
2006-01-01

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.

Reply Score: 2

RE[3]: big sigh
by Soulbender on Sun 24th Mar 2013 02:16 UTC in reply to "RE[2]: big sigh"
Soulbender Member since:
2005-08-18

So they're exactly like the carriers yet only one of them should apparently be controlled.

Reply Score: 4

RE: big sigh
by JAlexoid on Sat 23rd Mar 2013 17:47 UTC in reply to "big sigh"
JAlexoid Member since:
2009-05-19

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.

Reply Score: 3

RE[2]: big sigh
by MOS6510 on Sat 23rd Mar 2013 19:41 UTC in reply to "RE: big sigh"
MOS6510 Member since:
2011-05-12

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.

Reply Score: 2

I'd rather
by bowkota on Fri 22nd Mar 2013 16:29 UTC
bowkota
Member since:
2011-10-12

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.

Reply Score: 3

RE: I'd rather
by Thom_Holwerda on Fri 22nd Mar 2013 16:32 UTC in reply to "I'd rather"
Thom_Holwerda Member since:
2005-06-29

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.

Reply Score: 5

RE[2]: I'd rather
by Tony Swash on Fri 22nd Mar 2013 17:19 UTC in reply to "RE: I'd rather"
Tony Swash Member since:
2009-08-22

"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?

Reply Score: 2

RE[3]: I'd rather
by Beta on Sat 23rd Mar 2013 14:44 UTC in reply to "RE[2]: I'd rather"
Beta Member since:
2005-07-06

"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

Reply Score: 5

RE[2]: I'd rather
by bowkota on Fri 22nd Mar 2013 23:34 UTC in reply to "RE: I'd rather"
bowkota Member since:
2011-10-12



Except, that's not at all what this is about.

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

Reply Score: 2

RE: I'd rather
by Soulbender on Sat 23rd Mar 2013 04:24 UTC in reply to "I'd rather"
Soulbender Member since:
2005-08-18

I think we would all prefer that Apple bend over for the carriers, just like Google.


Sensible middle-ground? Ain't nobody got time fo' that.

Reply Score: 3

RE[2]: I'd rather
by kristoph on Sun 24th Mar 2013 00:41 UTC in reply to "RE: I'd rather"
kristoph Member since:
2006-01-01

Now your just talking nonsense.

Reply Score: 1

Comment by Nelson
by Nelson on Fri 22nd Mar 2013 19:23 UTC
Nelson
Member since:
2005-11-29

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.

Reply Score: 3