I’m a good Apple consumer. Over the past few years, I’ve bought three Apple mac laptops and two iPhones. I appreciate the quality of the product and have been willing to pay more than the average price for a laptop and mobile phone. Yet, although their products are generally very good, they do irritate me for the way they exploit their monopoly power.
A while back I lost my original 9pin cable used to charge my iPhone. I bought a replacement from a local shop in Oxford. I think it cost about £10, but it worked and I was happy.
Yesterday, I updated my iphone to IOS7 (new software for Apple). It was all looking very nice, but when I tried to charge the phone it didn’t work! A quick look on the internet and many people are in the same situation. (My iPhone 5 won’t change)
Basically, Apple have deliberately blocked third party chargers. The logic behind this is that, by blocking third party chargers, Apple can make more money selling their own chargers and licensing other firms to produce them. They don’t want third party companies offering cheaper chargers which Apple don’t get commission from. These cables are very expensive if you buy from an Apple store – £25. This price sounds to be suspiciously like monopoly pricing.
To me this is a clear exploitation of Monopoly power. Apple are using their market power to introduce vertical restraints and prevent a competitive market in the area of charging cables.
It reminds me of printers who prevent other firms selling compatible ink cartridges. This enables firms making printers to sell printers cheaply and then make high profits selling ink to a captive market.
From an economic perspective this decision by Apple, is highly inefficient.
- Allocative inefficiency. At £25 for an official Apple cable, the price is much higher than the marginal cost of producing it.
- Wasted resources. The cable I bought is now useless, I’ll probably have to throw it away.. There is no good reason for Apple to prevent this cable being used. It is just ensuring that there is a wastage of resources. It is also bad news for the firms who have been producing these cables without an Apple chip.
Regulation of monopolies
I hope the OFT and / or European competition commission one day investigate Apple and prevent them from implementing these kind of vertical restraints. It is against the public interest and just means consumers end up paying more to Apple.
See also: Regulation of monopoly
Monopoly profit vs Brand Loyalty
The funny thing is that I don’t raise an eyebrow paying £1,000 for an Apple laptop – even though there profit margin is huge. I reluctantly paid £400 to replace a screen on a Macbook Air. (which I thought was a rip off).
But, this £15 cable which is now useless, annoys me the most. Apple might make more monopoly profits, but it is really good business sense to irritate consumers? It feels like the Ryanair approach to business – charge for whatever you can, and if you annoy your customers that’s a bonus.
- There are supposed to be ways to work around the failure to charge, though they didn’t work for me.
- I’ve found this i Phone charger on Amazon.co.uk for £5.99 which claims it works with IOS7 – a lot cheaper than going to my local Apple store!
- Apple have cash reserves of $147 billion, roughly 10% of American companies cash piles. They really need those extra $25.