The App Store as "Essential Facility"

The App Store approval and rejection process is now a running joke in the wider tech community. At the iPhone development coal-face, it massively increases business risk and, in some cases, is actively ruining businesses and livelihoods. That is no joke.

Rogue Amoeba, in their latest post on the tortured path to shipping Airfoil Speakers Touch 1.0.1 encourage support for the EFF. I agree. It's definitely time that someone turned up the legal heat on Apple.

There is one particular aspect of law that I think that some greater mind than mine should look closely at: the "Essential Facilities" doctrine of anti-trust law.

Essential Facilites basically describes a situation where a firm with substantial market power uses some kind of 'choke point' or 'bottleneck' to deny competitors entry to the market.

My feeling is that the App Store constitutes an "essential facility". Access to the App Store is required by any company wishing to compete in the market for iPhone OS software.

Most of the quotations in this article, except where indicated, were sourced from an article written by the former FCC Chairman, Robert Pitofksy.

It's not about platforms

The most common defences of the current App Store policies (usually from those with no skin in the game) are:

  • It's Apple's platform and they can do what they want with it.
  • If you don't like it, go make Android apps.

It is true that the iPhone is a device invented by Apple. It is also true that Apple developed the App Store. It is far from clear, however, that it automatically follows that "Apple can do what they want with it". Is that what the law really says?

Secondly, the exhortation to "go somewhere else" and build applications denies the somewhat obvious fact that there is no other market for iPhone OS software. No Android user will pay me for my Objective-C/UIKit-based application. It's useless to an Android user.

Nobody says "if you don't like our rules for using Heathrow airport, why don't you get a bus and drive people to Tokyo?". It doesn't make sense.

A Monopoly in iPhone App Stores

The Essential Facilities doctrine rests on the control of a particular resource by a monopolist. Apple is not a monopolist in mobile phones, mobile phone operating systems. That's not the issue.

Apple is, however, a perfect monopolist in "technologies necessary to sell an application to an iPhone owner". How many iPhone App Stores are there? Exactly one. Who controls it absolutely? Apple.

Basics of an Essential Facilities Claim

There are four central requirements to be satisfied before one can claim unfair dealing under essential facilites:

Control of the essential facility by a monopolist

As I have already argued, Apple has a perfect monopoly over the enabling technology required for selling iPhone applications - namely, the App Store and the encryption tools required to cryptographically sign an iPhone application for use by a customer.

An important point here is that it must be shown that the facility is essential to competition:

"[A] facility 'controlled by a single firm will be considered "essential" only if control of the facility carries with it the power to eliminate competition . . . .'" City of Anaheim v. S. Cal. Edison Co., 955 F.2d 1373, 1380 n.5 (9th Cir. 1992) (quoting Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 544 (9th Cir. 1991)).

I give you: the Google Voice rejection, the Podcaster rejection. That's competition that has been 100% eliminated simply by denying access to the App Store.

A competitor's inability to practically or reasonably duplicate the essential facility

It is, absent the firmware exploits we call 'jailbreaking', cryptographically impossible to recreate the App Store. Under DMCA, it's probably illegal to even try.

"[A] facility will not be deemed essential if equivalent facilities exist or where the benefits to be derived from access to the alleged essential facility can be obtained from other sources." Apartment Source of Philadelphia v. Philadelphia Newspapers, Civ. A. No. 98-5472, 1999 WL 191649, at *7 (E.D. Pa. Apr. 1, 1999).

There are no other App Stores one can use to gain access to the iPhone OS software market. The Android Store or the Palm Store are not equivalent facilities to the iPhone App Store.

The denial of the use of the facility to a competitor

If you're denied entry to or rejected from the App Store, what other recourse do you have to sell your software? Absolutely none. If you are permanently denied access to the App Store facility, make no mistake: the size of the market for your iPhone software is precisely zero users total. You're out of the iPhone business and there's no way around that.

The feasibility of providing the facility to competitors

There are 100,000 applications already in the store. It's clearly feasible for Apple to provide the App Store facility to competitors.

Anticompetitive Animus

Pitofksy writes:

"Opinions of the United States courts also suggest that antitrust liability under the essential facilities doctrine is particularly appropriate when denial of access is motivated by an anticompetitive animus – usually demonstrated by a change in existing business practices with the apparent intent of harming rivals."

I give you: Podcaster, MailWrangler, Google Voice. The fact that the rules for acceptance and rejection are not clearly published and seemingly arbitrary is worrying. In particular, the rejection of certain applications for things that accepted applications are already doing gives the impression of capriciousness. I cannot say for certain whether there are anticompetitive pressures at work here, but note that Pitofksy says:

"a change in existing business practices with the apparent intent of harming rivals" (emphasis mine)

120,000 Developers

At the recent iPhone Tech Talks, which I didn't attend, Apple was making a big play of the figure of 120,000 developers now signed up to the iPhone Developer Program. As I said on Twitter this morning:

"120,000 iPhone developers should be enough to start a class-action 'essential facilities' antitrust lawsuit against Apple, right?"

In summary, the App Store is unarguably essential to any business wishing to compete with Apple and other companies in the market for iPhone OS software.

The App Store approval process dramatically increases risk and uncertainty for companies who wish to compete with Apple.

The App Store as a mechanism for delivering iPhone OS software to iPhone OS devices cannot possibly be duplicated by any competitor to Apple. The existence of other App Stores for other mobile platforms is irrelevant. I can't deliver an iPhone application to an iPhone through the Android Store or my website.

Despite the weasel words over the Google Voice non-rejection, Apple has unquestionably denied access to the App Store to several applications. Some developers have been able to negotiate access to the App Store by consenting to Apple's demands. Others have been seemingly permanently denied access to the App Store facility with no indication of action that could be taken to have access granted (Podcaster, etc.).

I am not a lawyer. I am even less of an American Lawyer, but 'essential facilities' doctrines exist in EU law too. I could well be entirely wrong in this article, but I thought it was a useful question to pose.

Many commentators miss the point about the App Store: it's simply not the case that "if you hate it so much, move to Android" is a watertight defence of the current App Store policy. I'm not talking about "the market for software for mobile phones". This is about "the market for iPhone OS software" which, let's not forget, was transacting $1m/day last August and growth has been spectacular since then.