Would Apple Actually Exit the EU Or UK?

2023.04.04   prev     next

IN the face of impending orders to alter its products to satisfy antitrust regulators, some wonder if Apple might just decide to leave the EU, or the UK, or wherever some undesirable change to its products is mandated.

Others say, no way Apple’s going to leave that market. Look at all the money its making there. It can’t give that up. Of course, it’ll just have to grit its teeth and make the changes, whether it likes it or not.

I don’t have any prediction as to whether Apple would exit any of these markets, but I think it’s a definite possibility. The “too much money to leave” argument is based on static analysis of how well Ap­ple has been doing before these new rules go into effect.

UK and the Browser Engine

Now, you might say, wait a min­ute, how much would it hurt, say, Apple’s UK profits to implement a regulator’s demand to allow, for example, other browser rendering engines besides WebKit? That seems a rather small request. How could Apple possibly be willing to give up its highly successful presence in the UK just to avoid that?

I think the answer to that question entirely depends on how Apple in­ter­prets the context of the demand. Suppose that Apple looks at it, and thinks the following:

• Allowing other browser engines will not cause any serious problems with our iPhone and iPad products. Or if it could cause problems, we think we can effectively mitigate those problems in a way that would be acceptable to the regulator, and would not involve too terribly much development work.
• Although, on the whole, we think it’s better not to do it, we do see some benefits to our users that would come from permitting alternate web engines. So it won’t be an entirely negative change.
• We think this regulator is going to be very reasonable about giving us the needed time/chances to get this right, before resorting to fines, and even then the fines would start small and would get really large only if/when the regulator became convinced that we were purposely stalling.
• We think we can reliably contain this change to the UK, while leaving things as they are in all other markets where we sell iPhone and iPad.
• We think this UK mandate for alternate browser engines is based on narrow, specific, legal logic, and therefore would not likely be the beginning of more/other/bigger demands.

If this is what Apple sees when it looks at this change, then I think Apple will certainly stay in the UK, and implement the change (if ultimately required to do so).

But — what if Apple looks at the situation, and instead sees this:

• Allowing other browser engines will cause serious problems with our iPhone and iPad products, and those problems will not be easy (or perhaps even possible) to effectively mitigate, even with a lot of effort. And it might be even harder to mitigate those problems in a way that will be acceptable to the regulator.
• We see no significant benefits to our users that will come from allowing alternate web engines. The only beneficiaries will be people who want to jack with our system and our users in ways that are not helpful for either.
• We think it likely that this regulator will be unreasonable about giving us the needed time/chances to get this right, and avoid fines. Probably this regulator expects us to guess how extreme the changes need to be — if we guess too strong, then we hurt our products unnecessarily, but if we guess too weak, then we get hit with immediate, ultra-massive fines that will cripple our UK profitability.
• We do not believe that we can reliably contain this to the UK — this change will, in-effect, be allowing a UK regulator to dictate how our products function all over the planet.
• We think this mandate for alternate browser engines is not based on narrow, specific, legal logic, but rather stems from the vague notion that it is some kind of antitrust violation for Apple to have any control over what a third-party developer can do with Apple’s hardware. Caving to this regulator will almost certainly be just the beginning of many more, and much greater, such demands.

In that case, I think it would only make sense for Apple to exit the UK, and perhaps issue an open letter explaining that decision in terms of the above outlook.

Success Is Not Illegal

Lest anyone thinking I am beating up on the UK (or EU): Be aware that one of the strongest proponents of stripping Apple of control of its products is America’s own E­liz­a­beth Warren, U.S. Senator from Massachusetts. In multiple statements over the past few years, Warren has made it crystal clear that she wants to break up Apple into multiple companies — apparently to keep the different parts of Apple from colluding with each other against Apple’s competitors!

Now, think about that for a second. Aren’t a company’s different parts (not divisions; Apple isn’t divisional) supposed to work with each other against the company’s competitors?

Consider Apple’s processor team. For well over a decade, this team has been working to provide Ap­ple’s products with custom, Apple-proprietary processor chips: first the A-series chips used in iPad and then iPhone, and when they got powerful enough, culminating with the M-series chips that now power Apple’s Mac line of desktop/laptop computers. The intention of this processor effort, all along, was to eventually make processors that are much better than anything else in the industry, giving Apple’s products a distinct edge over all competing products. And now, at least a dozen years after Apple started working on it, that strong advantage is real and present, and giving Apple a big leg up against its competition.

Apple does not sell any of its custom chips. It makes them purely for use in its own products. Is that fair? If some smaller tech company (i.e. any other tech company at all) wants to use Apple’s chips in its products, it simply cannot. It could offer to pay Apple’s cost, plus a 10% profit margin, and Apple would say no. It could ask Apple to develop a new custom chip for it, and Apple would say no. Apple is not in the chip market. Apple makes chips for iPhone, iPad, AirPods, HomePod, Apple Watch, and Mac, and future Apple products we haven’t even seen yet. That’s it. Apple’s chip team massively colludes with the rest of Apple, a­gainst all Apple competitors.

If Apple were forcibly broken up into multiple companies, and one of those companies was a chip design company, say, “Cupertino Chips Inc.” (CCI), then CCI would be prohibited by antitrust law from giving any special favors to the other former pieces of Apple. CCI would be required to sell its A-series and M-series chips to whomever wants to buy, such as Samsung, or Google, or Microsoft. More than a dozen years of painstaking, expensive, and risky effort to build a processor advantage, just as it’s reaching its big fruition, would be abruptly taken away and given to the entire industry.

Now, I haven’t heard that Warren advocates for that specific action. She might have some other plan for what pieces Apple should be broken up into. But the logic is the same: It’s just unfair that different parts of Apple actually work together against Apple’s competitors. It’s not right that the “little guys” can’t inject themselves between the different parts of Apple without Ap­ple’s voluntary consent.

In this view (and contrary to U.S. District Judge Yvonne Gonzalez Rogers’s verdict in Epic Games v. Apple), success is illegal, and a fundamental purpose of antitrust law is to bust up a company when it just becomes “too powerful” — re­gard­less of how it got there, whether by dirty tricks, or by good, honest, competitive work and ingenuity.

Leaving

Apple can’t exactly leave the USA — but it could easily leave the UK or EU. Would it lose a lot of money by doing so? Well, maybe. May­be not.

The funny thing is, Apple could leave the UK without really leaving. The beautiful UK Apple stores would sadly shut down, and Apple would stop shipping its products to the UK. Apple would ignore demands for fine payment and any other legal sanctions, saying, “we’re not in your country any more, and we’re not subject to your laws.” But just like iPhone was available in many countries before Apple officially sold it anywhere outside the USA, all of Ap­ple’s products would probably find their way into the UK anyway, sold underground at a steep premium.

Then it would be up the UK government to decide what to do about that. Is it illegal to own an i­Phone? Do we hunt down violators, prohibition style? Do we command UK telecoms to stop service to iPhones, and fine them if they don’t comply? What do we do about WiFi-only iPads?

Apple could sit back and munch popcorn, while the government, corporations, and citizens of the UK have a nasty, multi-year brawl over who has to do what. And Ap­ple might make just about the same amount of money the whole time.

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