iPhone competition investigation closed
January 19th, 2017
Apple’s iPhone smartphone enjoys market power, but terms imposed by Apple on wireless carriers did not harm competition, the Competition Bureau concluded recently.
The Bureau analyzed Apple’s terms under the Competition Act’s abuse of dominance provisions.
The iPhone’s market position, profitability, and status as a must-carry device for wireless carriers led the Bureau to conclude that it enjoys market power, thus meeting the first requirement of the abuse of dominance provisions.
The Bureau thus looked at three types of clauses in Apple’s agreements with wireless carriers:
- minimum order quantities or other volume commitments
- most‑favoured nation or any other term that required preferential or parity treatment
- up‑front retail subsidy requirements
These types of clauses are vertical restraints that can harm competition by making it harder for wireless carriers to carry rival devices. Equally, however, such clauses can have pro-competitive effects.
In this case, there was not enough evidence to conclude that Apple’s terms were harming competition, the Bureau concluded:
the evidence suggested impact on carrier decision‑making at the margins, it was not sufficient for the Bureau to conclude that there would be meaningful impact on competing OEMs or, by consequence, consumers
The Bureau also noted that the market for smartphones is both dynamic and innovative. There were advances in technology and features even during the course of the Bureau’s two year investigation, as well as both entry and exit. The Bureau also noted that the market for smartphones has seen explosive growth: in 2015, 73% of adult Canadians had a smartphone, up from only 24% in 2010.
The Bureau thus closed its inquiry.