Among the Jobs of Competition

by Don Boudreaux on February 18, 2011

in Antitrust, Competition

Here’s a letter to the Wall Street Journal:

You report that U.S. antitrust regulators are scrutinizing Apple (“Regulators Eye Apple Anew,” Feb. 18).  One concern is that, “Under Apple’s terms for the new service, companies that sell digital subscriptions to content on Apple devices would be required to make it available for sale through apps at the company’s iTunes App Store at the best available price.”

If a chief function of competition is to ensure that consumers get the lowest possible prices, how can Apple’s policy of requiring that content suppliers give Apple customers the “best available” – i.e., the lowest – prices be anticompetitive, especially given Apple’s obvious interest in keeping the prices its customers pay for contents as low as possible?  Because no content supplier is required to sell its content on Apple devices, suppliers who choose to do so clearly expect to remain profitable despite their agreeing to charge Apple customers prices no higher than they charge non-Apple customers.

Moreover, Apple has capable competitors (such as HP, with its TouchPad).  So if consumers are harmed by Apple’s contractual terms, Apple’s rivals will offer to content suppliers terms more to these suppliers’ liking, causing these suppliers to abandon Apple.  And Apple’s market share will fall while that of its rivals rises.

Sincerely,
Donald J. Boudreaux

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