The irritating monopoly power of Apple

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.

apple-iphone-cable

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.

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