How Apple uses its App Store platform to envelop and bully small developers.
Platform envelopment cases are often brushed aside as being part of normal business. After all, we cannot stop an existing platform, just by virtue of its size and “success”, to stop adding new features that their customers clearly desire. Taking the example of Apple, one of the most aggressive cases of a company using its closed ecosystem platform to ward off any competition, and you see the term “Sherlocking” come into play. The term originated when Apple added features of a third-party software called Watson into Apple’s Sherlock feature, and over the years have seen hundreds of more such instances occur.
Many try to argue that it is the normal progression that occurs with all technology, and features are meant to updated over the life of a company and product, and in an open competitive market, the person who develops the best product should win, rendering moot the need for any outside check. However, when it comes to huge platforms like Apple’s App Store (one of the best two-sided market platforms to ever exist), you must keep in mind this one essential fact: “Apple is not only a competitor, but it also sets the rules of the marketplace.” This is said by Rick VanMeter, the executive director of the advocacy group Coalition for App Fairness, which represents more than 80 popular apps, including Spotify, Match Group and Epic Games (Allyn, 2024). This makes the case of Apple so uniquely scary for small time developers, as: Apple has access to a huge chunk of your app usage data; Apple controls the rules and regulations which govern your app’s existence on their platform; Apple has no oversight on the decisions its make; and developers for the longest time had no way to dispute the decisions made by Apple.
A two-sided market platform, where user data is the main currency, means that Apple’s reign cannot be challenged by any competitor, no matter how meritorious (Condorelli and Padilla, 2020). Apple maintains this position by bundling, self-preferencing and leveraging its position as the owner of the platform itself. Defending against such envelopment attacks are very difficult. Patent applications and litigation are extremely costly endeavours for small developers. Moreover, even making sure all the paperwork is fully taken care of is not sufficient, when facing off against Apple’s lawyers. Apple’s playbook includes attacking multiple patents owned by companies that accuse Apple of violating those company’s patents. More egregiously, Apple even goes after the patents which are not even part of the dispute to begin with (Tilley, 2023)! Apple is getting a reputation in the industry for reaching out to smaller companies to show interest in their products, only to turn around and completely copy the products of those small developers, and sometimes even go ahead and poach the company’s top talents. Small developers had no recourse during these actions, and developers are sometimes very clearly told that the only way to exist is by following Apple’s rules, which it can change and apply in whatever inconsistent manner that conveniences them (Kastrenakes, 2020) (Statt, 2020). Developers share stories of how it is inevitable that their own success is not followed by an attempt to envelop their product, but what makes it worse is the way they cannot even speak up about how unfair this battle is, lest they make Apple furious (Gallagher, 2019).
Thus, it is extremely important for regulators, and antitrust laws, to focus on targeting big tech for the unfair advantages it has built by virtue of developing and running these huge platforms, as Apple is far from the only player who is engaging in their own unique flavour of anti-competitive behaviour.
References:
Allyn, B. (2024, June 17). Apple just made your app obsolete? You’ve been ‘Sherlocked’. NPR https://www.npr.org/2024/06/17/g-s1-4912/apple-app-store-obsolete-sherlocked-tapeacall-watson-copy
Condorelli, D., and Padilla, J. (2020, May 21). Harnessing Platform Envelopment in the Digital World. Journal of Competition Law & Economics, 00(00), 1–45. doi: 10.1093/joclec/nhaa006
Gallagher, W. (2019, June 6) Developers talk about being ‘Sherlocked’ as Apple uses them ‘for market research’. Appleinsider.com, https://appleinsider.com/articles/19/06/06/developers-talk-about-being-sherlocked-as-apple-uses-them-for-market-research
Tilley, A (2023, April 20). When Apple Comes Calling, ‘It’s the Kiss of Death’. WSJ. https://www.wsj.com/articles/apple-watch-patents-5b52cda0
Kastrenakes, J. (2020, June 17). Hey.com exec says Apple is acting like ‘gangsters,’ rejecting App Store updates and demanding cut of sales. The Verge. https://www.theverge.com/2020/6/16/21293419/hey-apple-rejection-ios-app-store-dhh-gangsters-antitrust
Statt, N. (2020, June 18). Apple doubles down on controversial decision to reject email app Hey. The Verge. https://www.theverge.com/2020/6/18/21296180/apple-hey-email-app-basecamp-rejection-response-controversy-antitrust-regulation
Johnson, A. (2024, August 25). European iPhones are more fun now. The Verge. https://www.theverge.com/2024/8/24/24226946/iphone-eu-regulation-app-stores-fortnite
