Is Apple becoming a monopoly?

In the early 19th century the railroad companies had a great monopoly. The railroads were most people’s only form of transportation. Westward expansion was progressing and the railroad companies were booming at the time. The railroad companies controlled the pricing of the railroads and they set ridiculously high prices that the people were forced to pay since they needed to use the railroads. Farmers had a lot of crops they needed to move on the railroads and they could not avoid paying these high prices. A group was created to regulate the rates of the railroads saying the prices had to be reasonable. This railroad monopoly was very large and made an impact on many people in the nineteenth century. Most monopolies are now illegal.

Image result for apple's first computer
Apple’s first home computer. Picture by Ed Uthman.

“The United States antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. They prohibit the creation of a monopoly and the abuse of monopoly power.” In the article “Time to prosecute Apple for monopolization” Glenn B. Manishin writes that Apple obtained its iOS platform monopoly power other than by creating ‘insanely great’ products. What is and should be of antitrust concern is how Apple has used that power in anticompetitive ways, methods which go far beyond what Microsoft did in the 1990s.” Is Apple becoming a monopoly?

 

What is a monopoly? A monopoly is the “exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.” The technology company “Apple” originally started as a computer company in 1976. It was founded by Steve Jobs and Steve Wozniak.

 

When Apple first started with home computers in 1977 their biggest competitors were Atari and Commodore. The company has became much more than just a computer company now. They are now becoming more of a mobile electronic company. I calculated out the percentages and found that in 2012 Apple sold on average 50% iphones, 20% ipads, 15% macs, 8% services and 7% other products. In 2016 they sold on average 63% iphones, 10% ipads, 10% macs, 11% services, and 5% other products. Since Apple’s biggest selling product in the last four years has been the iphone, this product category is likely at the greatest risk for a monopoly. Apple’s biggest mobile phone competitors now are Samsung, Google, Microsoft, and Sony. The first iphone came out in 2007, the first Samsung smartphone came out in 2009, the first Microsoft smartphone came out in 2010, and the first Sony smartphone came out in 2012. Apple had the first smartphone out of its four major competitors.

Acquisitions

Apple & Beats
Apple and Beats. Picture by Janitors

Apple has acquired 43 companies in the past four years. The top 5 acquisitions were Beats Electronics for headphones and music streaming, Beats were acquired by Apple on August 1 2014 for $3,000,000,000. Number 2 was AuthenTec for touch id, AuthenTec was acquired by Apple on July 27 2012 for $356,000,000. Number 3 was Primesense for semiconductors, Primesense was acquired by Apple on November 24 2013 for $345,000,000. Number 4 was Turi for machine learning, Apple acquired Turi on August 5 2016 for $200,000,000. Number 5 was Topsy for analytics, Apple acquired them for $200,000,000 also.

Apple acquired some of these companies to improve their devices and some to increase their company’s product offerings. For example, they acquired Beats Electronics for their headphones, not to beat out their smartphone competitors, but rather to broaden their company. They now own Beats which is a huge headphones company and will help their company grow. They acquired AuthenTec for the touch id to make the iphone better and to maybe draw in more people to buy it with its new feature. They did not acquire any big smartphone companies in the last four years researched.

Value

Forbes global 2000 list ranks Apple number eight on the list of the world’s biggest public companies.

Apple’s market capitalization or market value is $586 billion. One of Apple’s big competitors is Samsung. Samsung Electronics is ranked as number eighteen on this list, their market cap or market value is $161.6 billion. Another one of Apple’s big competitors is Microsoft. Microsoft is number 23 on the list with its market cap or market value at $407 billion. Sony is 192nd on the list and is worth $34.1 billion. Apple is worth the most of these four and it seems as if Microsoft is worth more than Samsung but not ranked higher. Sony is worth the least amount and is the lowest on the list. With Apple having the most value that makes them worth more than other smartphone companies.

Market Share

Samsung has the greatest amount of market share for smartphones for the second quarter of 2016 with 22% of the market share. They shipped 77 million smartphones in the second quarter of 2016. Apple has the next greatest amount of market share for the second quarter of 2016 with 11%, having shipped 40.4 million smartphones in that time period. Apple is not the number one seller in the smartphone industry. When Apple was primarily a computer company their “market share suffered slowly after its peak in 1990 and by 1996, experts believed the company to be doomed. It was not until 1997, when Apple was desperately in need of an operating system, that it bought out NeXT Software (Jobs’ company).” Apple bought a big company to help them become bigger and stay in business. At this time neither Apple, Samsung or Microsoft had released a smartphone yet.

Is Apple becoming a monopoly?

No, Apple is not becoming a monopoly.

A monopoly is the “exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.” Although Apple may be using their powers in anticompetitive ways, they have multiple major competitor companies which makes it hard for them to be a monopoly. They do not own all of the smartphone companies and are not even the most bought smartphone, Samsung is.  Apple has acquired many companies to diversify their company and improve their products, but are not making efforts to eliminate their competition. Overall, Apple is not becoming a monopoly. Currently there are many big companies like Samsung and Microsoft in the way for Apple to become a monopoly. But if they start to become one, the United States Department of Justice could press charges for violation of U.S. antitrust law.

Featured image by Unsplash

 

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