Apple's Contracts With European iPhone Carriers Examined for Potential Antitrust Issues

The New York Times reports that regulators with the European Union are taking a close look at contracts between Apple and its iPhone carrier partners, seeking to determine whether Apple's strict terms amount to anti-competitive behavior. In particular, Apple's practice of requiring carriers to commit to selling a certain number of iPhones has placed pressure on the carriers to promote the iPhone above other alternatives.

[S]ome of Apple’s competitors complain that the big purchases Apple requires from carriers strongly pressure them to devote most of their marketing budgets to the iPhone, leaving little money to promote competing devices, said an executive at one of Apple’s rivals, who declined to be named to avoid jeopardizing carrier relationships.

Apple’s practice of telling carriers how many phones they must sell and threatening to penalize them shows just how powerful the iPhone has become as a bargaining chip. Other manufacturers typically allocate fewer handsets to each carrier than they estimate it can sell to ensure that there is little, if any, leftover inventory, an executive at one rival handset maker said.

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Carriers are of course not required to carry the iPhone, but customer demand for the device means that most carriers believe they have little choice and must agree to Apple's terms in order to remain competitive in the marketplace.

The European Commission has not yet launched a formal investigation of Apple over its contract terms, and it is unclear what its next steps will be, with spokesman Antoine Colombani simply noting that the competition regulators are "monitoring the situation". For its part, Apple says only that its contracts are compliant with all local laws.

Related Forum: iPhone

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Top Rated Comments

nepalisherpa Avatar
147 months ago
If Apple is confident about iPhones then why is it threatening to penalize carriers if they don't meet the sales quota? Rather than threatening them, make your OS and devices even better. Sales will happen automatically. I guess all those higher sales number of iPhones is partly explained by this.

Honestly, I want Apple to be hit hard so that they learn their lesson and start working on making their OS/products even better rather than spending time on all these nonsense stuffs like monopolizing or suing or stupid ads.
Score: 17 Votes (Like | Disagree)
needfx Avatar
147 months ago
Apple has become far worse than what the 1984 ad implied for IBM
Score: 11 Votes (Like | Disagree)
iGrip Avatar
147 months ago
For its part, Apple says only that its contracts are compliant with all local laws.


Well, there we have it. Apple always tells us the truth, especially when it says it is compliant with law.



/s
Score: 9 Votes (Like | Disagree)
venusboy Avatar
147 months ago
I thought, as a business, it is my right to do what I want with my products and to write whatever contracts I want - nobody is twisting the other guy's arm to sign my contracts. So how can a mutually agreed contract be "anti-competitive"?

The EU is not like the US. Anti-competitive behavior is not authorized and often penalized because monopolies impede innovation and create higher prices for consumers in the long run (e.g. Apple/Microsoft's enormous margins). In most EU countries it is illegal to sell at a loss (except during government defined "sales" periods).

In the EU a contract must be signed by consenting parties which are not under duress. They also have to be mutually beneficial. If you use the dominance of your product or market position to create a contract which advantages one party significantly more than the other, your contract can be considered null and void, or worse you can be forced to pay a penalty.

If you want to sell your product in the EU, you've got to play by their rules.
Score: 7 Votes (Like | Disagree)
Born Again Avatar
147 months ago
Apple has been a bully long enough.

Now that the fever over an iphone has subsided carriers can now push back.

No doubt they leaked the information out against apple.
Score: 7 Votes (Like | Disagree)
Stella Avatar
147 months ago
They will probably investigate and they will probably fine them. The EU is all about fining corporations to help fund the governments.

What a load of utter crap.
Score: 6 Votes (Like | Disagree)