Call me a turncoat, a snitch, an informant — I don't care. I'm siding with the government in their lawsuit against Apple. Yes, I want my phone and Apple services to be cheaper, not blood pressure high. Some people might view me as a deadbeat, freeloading customer, but I believe technology should provide more bells, more whistles, and more galaxy bending features, at a cheaper price, over time.
The Department of Justice (DOJ) alleges that Apple is using their market power in smartphones to prevent other companies from competing against them, and this stifling of competition is preventing consumers from having better prices and technology on their smartphones.
Click the link below to read the full lawsuit.
Areas Targeted by the DOJ
In the lawsuit, the DOJ says Apple is blocking progress in 5 areas.
Messaging Apps: The DOJ says when IPhone users text non-IPhone users, the security and quality of the messages drop. I didn't know that when IPhone users text each other, the message is encrypted, but when IPhone and non-IPhone users text each other, the message is not encrypted, and is less safe.
(More details are in paragraph 90 of the lawsuit.)
Smartwatches: People with non-Apple smartwatches cannot respond to messages on their smartwatch, and the Bluetooth connection between the phone and non-Apple smartwatch is spotty.
(More details are in paragraphs 101—102 of the lawsuit.)
Digital Wallets: Only Apple can create a digital wallet with the ability to tap and pay for items.
(More details are in paragraphs 111—112 of the lawsuit.)
Super Apps: These are apps that contain multiple apps within them. WeChat is an example of a super app. The DOJ says Apple created hurdles for companies that create supper apps because it would make people less reliant on Apple.
(More details are on pages 29—32 of the lawsuit.)
Cloud Streaming Apps: These apps make it possible for people to play games on a lower quality IPhone, because the technology needed to process the game's data is done in a faraway data center instead of on the IPhone. The DOJ says Apple blocked this feature for years because they wanted people to keep buying more expensive IPhones.
(More details are on pages 32—34 of the lawsuit.)
Real Problems I've Had With Apple Products
I want to touch on the messaging part of the complaint because I have more experience dealing with this problem. Prior to reading the lawsuit, I knew there was a quality difference when an IPhone user texted a non-IPhone user. I use the word "difference" because that's how I viewed the situation all these years. The lawsuit made me realize that I shouldn't use the word "difference" but "degradation" when describing the quality of text messages between IPhone and non-IPhone users. A degradation that is intentionally caused by Apple. I remember texting people PDF documents from my IPhone, and the message "Not Delivered" would appear. I would send it again, "Not Delivered." I would send it again. Same message.
After a few more attempts, I would give up and just email the document to the person. Later, I would find out that they had an Android phone, and they couldn't receive PDF files from me. I thought it was a technical difference between Apple and non-Apple phones that could not be fixed, but the DOJ is saying no, it's not a technical glitch, and it can be fixed, but Apple is preventing the two platforms from working together.
Another example I can give is with one of the websites that I built. The site works 100% on Chrome, but the videos give problems on Safari. The people at Wix say they cannot fix the problem because it's difficult to configure things for Safari. Prior to the lawsuit, I thought this was just how things worked. Now I realize that Apple might be playing an active role in my videos glitching.
Counting My Blessings
Trust me when I say that I realize my blessings. It is a blessing that I can send someone a message, whether by text or email, and they receive it in a few seconds. A few decades ago, I would have needed to mail the documents. The things I am complaining about are first world, rich people ain't never satisfied problems. I get it. But this is the playing field we are in, where the name of the game is constant innovation, constant progress, constant competition, and if progress is slowing down because a company wants to suppress competition, then the law of the land says that company needs to get touched.
Not Everyone Is Happy About the Lawsuit
Critics of the lawsuit say app developers should not pressure Apple to give them more access to Apple's platform. They believe the company built a successful product, and they should reap the full rewards of their success. One investor said it's a "privilege" not a "right" to be in the App Store. But one thing that was mentioned in the lawsuit that I found interesting was when the first IPhone came out, it had limited apps, and Apple encouraged app developers to create apps for the phone. So, developers played a crucial role in Apple's success. Now they're getting the stiff arm. It reminds me of when I'm with a company before they get popular, and when they become successful, they want to charge me some crazy price to remain a member.
It's interesting that Apple complained about Microsoft being anticompetitive in the late 90's, and when the government stepped in, Microsoft had to reduce some of their barriers, which allowed Apple to place ITunes on Windows based computers. The government basically took away Microsoft's monopoly power, and helped Apple build up theirs.
Sherman Act
Below is the section of the Sherman Act the DOJ says Apple violated. The Sherman Act is used to create fair competition in business.
SEC. 2. ø15 U.S.C. 2¿ Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony,...
Based on the actions described in the lawsuit, and my own experience with Apple, it seems they are at least attempting to monopolize, or completely control, some parts of the phone ecosystem.
I Save Money Because of Competition
In the right context, competition can be a good thing because it forces us to sharpen our skills, and in business, it forces companies to offer better products, at better prices. Because of competition, I pay less than $70 per month for my Verizon phone bill, and my plan comes with a lot of bells and whistles. I remember my phone bill being over $100 back in the day, but because of competition between Verizon, AT&T, Sprint, and T-Mobile, my bill is less than $70 per month, and if Verizon gives me problems, I can switch to AT&T for a better deal.
Customers Are Happy, But Also in the Dark About Apple
Some investors and media personalities believe customers are overwhelmingly happy with Apple. I don't think this is 100% accurate. I believe people don't realize what they're missing out on, and they don't understand the technical details of what's going on behind the scenes with Apple and their competitors. We accept what we are given, and believe we are experiencing the height of technology. The DOJ is doing the public a favor because they are letting us know that society is currently at an 8.5 on the quality of technology scale, but in a freer market, we can reach 9.5. That's what I'm getting from the lawsuit.
Investment Lesson
Investors like to buy companies that are dominant in their industry and have a strong advantage over the competition. In the investment world, a company's competitive advantage is called its moat.
A moat is a surrounding body of water, sometimes filled with alligators, that protects a castle from outside invaders. In investing, this moat is supposed to protect companies' business, and allow them to enjoy high profits for a long time.
A castle with a moat around it.
The lawsuit against Apple highlights the need for investors to not only analyze "if" a company has a moat, but "how" is the company maintaining and growing their moat. If it's through anti-competitive means, long term investors need to factor into their calculations the possibility of the government forcing the company to lower their drawbridge and allow their competitors to cross over the moat they have built.
Conclusion
I know there might be things I'm missing with the Apple case, and I'm open to being enlightened. Jim Cramer knows way more about business and investing than I do, and he is enraged with the DOJ for coming against Apple.
Video of Jim Cramer from his CNBC show "Mad Money"
If you believe that I am missing something with Apple's case, and the DOJ should not come after them, email me and let me know what I'm missing:
ov@myinvestmentdreams.com
Also, if you have time, please read the lawsuit. The DOJ did a great job of simplifying their case so people could understand their perspective.
Stay strong, stay blessed, and God willing, I will see you next week.
””Blessed are they who observe justice, who do righteousness at all times!“
Psalm 106:3 ESV
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