In today’s Finshots, we tell you about the latest lawsuit against the iPhone maker in the US.

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The Story

Storytelling is quite a useful skill. You can weave a tale around anything and persuade people to believe you. You can get the reader or listener to side with you.

And that’s what the US Department of Justice has attempted now. When it slapped a lawsuit against Apple a couple of days ago, the 88-page document wasn’t burdened with legalese or jargon.

Rather, the DOJ (Department of Justice) decided to tell us a story. A story of Apple’s dominance which begins like this:

In 2010, a top Apple executive emailed Apple’s then-CEO about an ad for the new Kindle e-reader. The ad began with a woman who was using her iPhone to buy and read books on the Kindle app. She then switches to an Android smartphone and continues to read her book using the same Kindle app.

The executive wrote to Jobs: one “message that can’t be missed is that it is easy to switch from iPhone to Android. Not fun to watch.” Jobs was clear in his response: Apple would “force” developers to use its payment system to lock in both developers and users on its platform. Over many years, Apple has repeatedly responded to competitive threats like this one by making it harder or more expensive for its users and developers to leave than by making it more attractive for them to stay.

And that’s enough to grab our attention and think, “Oh, is Apple’s ecosystem shady and illegal? Is it just a ploy to stop users from switching to Android if they tire of Apple?”

So after planting that seed of doubt, the DOJ doubles down on it and we’re going to tell you about 3 out of the 5 most interesting allegations.

1. Apple degrades cross-platform messaging apps

In 2022, Tim Cook made an off-hand remark at a tech conference. And he’s probably regretting it now because the DOJ has used it to prove a point. We’ll tell you what that was in a minute, but first some background.

See, Apple has its own messaging app called iMessage since 2011. People use it to send texts, images, videos, and locations. And you can sync it to your Apple laptop and iPad too. Unlike a regular SMS which travels over the mobile network provider’s infrastructure, this messaging service would rely on the Internet.

Now the thing is that Apple decided that it would not create an iMessage app for Android users or Windows users. It would just be for Apple users.

Sure, you could argue there are other messaging tools like WhatsApp these days so it shouldn’t matter. But as popular tech YouTuber MKBHD pointed out, most people simply use their default apps — whether it’s for browsing or for sending messages. So when an iPhone user in the US picks up the phone to message someone, they’re probably going to click on iMessage to do this.

And here’s the problem. When the iPhone user messages another iPhone user through iMessage, they get all the features such as the read receipts. And the messages show up in blue bubbles.

But heaven forbid they message an Android user. Because then, the iMessage reverts to a regular SMS that’s not sent over the internet. And it loses all the features — the reactions, emojis, everything. It also means that an Android user can’t really be part of a group chat with other iPhone users either.

What’s worse? Apple discriminates against Android users and shows the messages in a green bubble.

Yup, that’s the infamous Blue Bubble vs Green Bubble debate.

And with nearly 9 out of 10 teenagers in the US carrying an iPhone, you’d be left out of this social communication circle if you were an Android user. You’d be ostracized. And no teen wants to be the odd one out, right?

So it’s no wonder the DOJ said in its lawsuit that Apple sets “obstacle[s] to iPhone families giving their kids Android phones.”

But what did Tim Cook say at the conference?

Ah, one person in the audience asked Cook if Apple would fix the iPhone-to-Android messaging. They said, “It’s tough…not to make it personal but I can’t send my mom certain videos.”

And Cook’s response was, “Buy your mom an iPhone.”

That exchange makes its way into the lawsuit too!

2. Apple banned cloud-streaming game apps

If you’re a mobile gamer, you know that you need to have a top-end device with massive computational power to get the game to run smoothly. Or else, you’ll be left with a poor-quality experience.

And to get that sort of power, you need a high-performing smartphone to go with it. Something like the iPhone of course.

But over the years, the idea of gaming changed. Gaming moved on to the cloud with Microsoft’s Xbox Cloud Gaming and Nvidia’s GeForce. Suddenly, you didn’t need a top-of-the-line phone to game anymore. All the processing would take place in a data centre somewhere. And you could game easily with a low-end piece of hardware with a fast internet connection.

That was a problem for Apple.

Because as the DOJ said in its lawsuit, Apple feared a world where “all that matters is who has the cheapest hardware”. And consumers could “buy [] a [expletive] Android for 25 bux at a garage sale and . . . have a solid cloud computing device” that “works fine.”

Apple was afraid that cloud gaming would mean that people didn’t need high-end devices for gaming. And people wouldn’t find a reason to upgrade their phones to one with new high-speed processors as well. So the iPhone 15 ad saying "next level performance and mobile gaming" just wouldn't have the same effect.

But it wasn’t just that.

It was also about revenues.

Because a user could simply subscribe to the cloud gaming service and get access to multiple games. That means Apple would get less of a cut of the game revenue. It would get a cut of subscription revenue but lose out on the more lucrative in-app purchases for individual games.

So Apple did the unthinkable — it simply banned cloud-based games.

Now that doesn’t seem right, does it?

3. Apple suppressed key functions of third-party smartwatches

Look around you and tell us, when was the last time you saw someone wear a regular analogue watch? You know, the one with proper numbers inscribed on the face of it and with two moving hands at least?

I don’t remember.

Everyone wants a smartwatch. And if you own an iPhone and want a smartwatch, you’re going to have to get an Apple smartwatch. And no, it’s not because you really want it. But it’s because Apple has ensured that other smartwatches don’t work well with the iPhone.

See, in 2013, when Apple started offering users the ability to connect their iPhones with third-party smartwatches. And they provided access to those developers to the Apple Notification Center Service, Calendar, Contacts, and Geolocation.

But in 2014, Apple began its journey with the Apple Watch and dialled back on all this access. So third-party smartwatch users connected to the iPhone can’t respond to notifications or accept a calendar invite from their watch.

But it’s not just about watches, to be honest. Here’s something from a podcast featuring tech writer Casey Newton who says:

… if you’ve ever tried to use non-AirPod Bluetooth headphones with an iPhone, it’s not easy. I do this every day, because the AirPods — they don’t stick in my ears…So I use these Sony earbuds, and it truly always feels like a coin flip whether they are going to connect to my phone or not. I have to pray every time I want to listen to a podcast. So I am living through this every day.

Yup, Apple does seem to come across as pretty petty.

And once you realise that the Apple Watch isn’t compatible with Android, then you can see how Apple’s using its ecosystem of hardware to prevent people from ever making a switch from the iPhone.

Anyway, the only question that remains is will the DOJ win against Apple?

Well, we don’t know. Because no matter what good a story you weave, you still need to convince the court that the facts are on your side.

What we can tell us is that DOJ has opted to tread a different path in a bid to win this lawsuit.

See, most recent lawsuits against Apple have hinged on highlighting how the tech giant uses its dominance in smartphones to squeeze app developers. Apple tells developers, “Listen, we’re giving you insanely wide and immediate distribution via our App Store. So you better pay us a 30% commission.”

Naturally, developers hate that.

But when Epic Games, which created the popular game Fortnite, took on the might of Apple and complained about Apple’s app store monopoly, they didn’t score a big win. Rather, the judge’s decision favoured Apple in 10 of the 11 counts.

So, as Ben Thompson who writes Stratechery theorised, maybe the DOJ realised that attacking the App Store monopoly wasn’t going to be enough. And instead of flogging a dead horse, it launched an attack on the very thing that brought success to Apple — its integration.

Across hardware and software, from computers to phones to watches to iTunes, Apple has built its foundational ecosystem over decades. And the DOJ wants everyone to believe that such an “integrated experience is illegal.”

So now we will have to wait and see how this strategy pans out for the DOJ.

Until then…

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