United States v. Apple: A Triumph of Politics Over Economic Analysis

The Department of Justice’s recent antitrust suit against Apple has garnered significant attention, but a new paper by the economic staff of the Phoenix Center for Advanced Legal and Economic Public Policy Studies reveals serious flaws in the DOJ’s case. As the Phoenix Center’s economists demonstrate, the DOJ’s core argument—that Apple deliberately degrades its products’ quality to increase switching costs and maintain monopoly power—contradicts both market evidence and basic economic logic.

First, the threshold requirements for a monopolization case under Section 2 of the Sherman Act are “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” The Phoenix Center study points out that Apple’s global market share of less than 30% falls well below any reasonable standard for monopoly status. And while the DOJ emphasizes Apple’s higher U.S. market share of 57%, even this figure is insufficient to demonstrate monopoly power under established antitrust precedent. The Ninth Circuit’s decision last year in Epic Games v. Apple confirms that market shares between 50-70% rarely support monopolization claims absent extraordinary circumstances that are not present here.

Second, the Phoenix Center study demonstrates that the DOJ’s theory of consumer harm through quality degradation contradicts empirical evidence. Customer satisfaction data consistently show that Apple products receive industry-leading ratings. Particularly telling is the behavior of enterprise customers—sophisticated buyers highly sensitive to switching costs and product quality. These customers overwhelmingly prefer Apple devices, with 56% rating them superior to competitors and 76% considering them more secure. This real-world evidence directly contradicts the DOJ’s quality degradation theory.

Third, the Phoenix Center study explains that the DOJ’s claims about “extraordinary profits” has no sound basis. Apple’s 36% gross margin is below the cross-industry average of 39.3% and well below the 65.5% average for comparable technology companies. Even regulated utilities maintain higher margins at 47.1%. Besides, basic economic theory tells us that higher margins combined with higher market share can simply reflect superior efficiency rather than anticompetitive conduct.

Perhaps most importantly, the Phoenix Center study shows that the DOJ’s theory fails to account for the uniform nature of Apple’s design choices and pricing across global markets. If Apple were truly exploiting monopoly power through degraded quality and excessive prices, then we would expect to see variation correlated with market share differences across countries. The data show no such correlation. Apple’s design choices are uniform across nations despite large market share differences. Likewise, statistical analysis reveals U.S. prices are actually 6% lower than international averages, directly contradicting the DOJ’s monopoly exploitation theory.

The explanation for Apple’s higher U.S. market share appears far simpler: income effects. Regression analysis demonstrates a clear positive correlation between GDP per capita and iOS market share across 58 nations. The higher U.S. market share is fully explained by the nation’s higher relative income. This result strongly suggests that Apple’s U.S. success reflects legitimate consumer preferences rather than anticompetitive conduct.

It is axiomatic that antitrust law exists to protect competition, not competitors. Yet the DOJ’s case against Apple appears to exemplify a troubling trend in modern antitrust enforcement: the targeting of successful companies based on complaints rather than solid economic evidence. When antitrust enforcement ignores sound economic analysis in favor of political objectives, both competition and consumers ultimately suffer.