Top Hat & Thimble - June 2025
Welcome to NextGen Competition’s newsletter, delivering insider insights on antitrust battles, industry shakeups, AI trends, and more.
This Apple has fallen far from the tree.
It has betrayed its key promises to its customers and partners. It is no longer innovating, falling behind on AI, and eking out incremental iPhone improvements year after year. Its privacy promises are broken. It sells iPhone user data to Google for close to 20 billion dollars annually.
It also imposes onerous terms on app developers that make a phone ‘smart,’ including taking a 30% cut of many app developers’ revenues. In some cases, users pay the entire 30% tax as developers simply charge more for purchases made through Apple’s app store. So let that sink in – you pay over a thousand dollars for an iPhone and then pay Apple more money when you download and use apps not even developed by Apple!
This 30% cut also hurts privacy-first subscription-based service providers and encourages ‘free’ services that hoover up user data as Proton explains in its recent class-action lawsuit.
One estimate suggests the company extracted over $10 billion in 2024 from US users and app developers and users this way. No wonder it refuses to comply in good faith with laws and legal rulings requiring it to make changes to the way it operates its app store. Instead, it delays and disassembles as Judge Yvonne Gonzalez Rogers found in May.
You may be wondering: how then can Apple still control over 65% of the smart phone market in the US?
The DOJ’s antitrust lawsuit against Apple provides an answer. Apple maintains its market power by shutting out competitors from its ecosystem (see illustration below) and degrading interoperability for competing products and services.
Apple’s closed ecosystem of products and services locks in users – just when I thought I was out they pull me back in.
Apple’s closed ecosystem makes it harder for users to switch to Android or other platforms and makes it harder for consumers to mix and match services to access cheaper and innovative options. For example, Apple forces iPhone users to back data on Apple’s iCloud service for which it is facing a separate consumer antitrust lawsuit.
On June 30, District Judge Neal denied Apple’s motion to dismiss the DOJ’s antitrust case against it and found that:
…the Court finds that Plaintiffs adequately allege Apple maintains "a dominant share" in both the smartphone and performance smartphone markets…
The Court finds that Plaintiffs have set forth adequate allegations of entry barriers and "[o]ther germane factors" that support Apple’s monopoly power.
… Apple acts in a manner to protect its monopoly power in the smartphone and performance smartphone market, are sufficient to establish a prima facie case…
…Complaint includes numerous statements allegedly made by Apple executives regarding the barriers set in place to maintain its monopoly.
Apple now faces a reckoning, and we look forward to the DOJ fully prosecuting this case to enable a more open and interoperable smartphone ecosystem. This will provide more opportunities for companies big and small to innovate and offer more choices for consumers. It will give us, the users, more say on how we use our smartphones and not be denied access to services on phones we have already paid for by Apple.
As always, thank you for reading and your support.
With regards,
Sumit Sharma
Executive Director
NextGen Competition
Will Europe Hold the Line Against Apple’s Malicious Compliance?
In a brazenly unapologetic attempt to dodge its €500 million fine for violating the Digital Markets Act (DMA), Apple has submitted revised terms of service that still fall short. The fine stems from Apple’s anti-steering restrictions—rules that blocked app developers from telling users they could subscribe elsewhere for less.
According to CNBC, Apple’s new terms are “not a complete departure from the company’s previous policy that drew the European Commission’s attention in the first place.” The tech giant’s convoluted new rules are clearly designed to evade the fine. They might impress lawyers, but they fail app developers in every meaningful way.
Apple’s new Digital Markets Act malicious compliance scheme is blatantly unlawful in both Europe and the United States and makes a mockery of fair competition in digital markets. Apps with competing payments are not only taxed but commercially crippled in the App Store. – Tim Sweeney, EPIC Games CEO
The good news for Sweeney—and for the dozens of American startups who joined Y Combinator that have voiced support for real competition over gatekeeping—is that the EU isn’t backing down. European Commissioner for Competition Teresa Ribera said it plainly in a recent interview with MLex, “[w]e are not going to open our sovereignty so as to allow someone else to decide how we need to adopt a regulation. Of course, not.”
Trouble in Paradise? OpenAI Turns on Microsoft
OpenAI’s relationship with Microsoft has soured so badly that Sam Altman and his team are now considering asking the FTC to investigate Microsoft’s investment on antitrust grounds. It’s a stunning reversal from just a few years ago, when Altman was lobbying Satya Nadella to help oust the old board and reinstall him as CEO.
According to The Wall Street Journal:
“Accusing Microsoft of anticompetitive behavior during their partnership, people familiar with the matter said. That effort could involve seeking federal regulatory review of the terms of the contract for potential violations of antitrust law, as well as a public campaign, the people said.”
Yes, even Sam Altman has finally come to terms with the reality that OpenAI’s deal with Microsoft is anticompetitive and gives Microsoft too much control over how OpenAI operates its business. It’s a stunning admission from the company that Microsoft has propped up to the tune of $13.75 billion.
We’ve long warned about how these “partnerships” are really acquisitions in disguise, including in our recent blog: Sam Altman Just Confirmed What We’ve Been Saying All Along.
Reading the Tea Leaves: Closing Arguments in Google’s Search Remedies Trial
In closing arguments for Google’s search remedies trial, Judge Mehta signaled openness to limiting Google’s default search payments and requiring syndication and transparency remedies.
The DOJ argued that Google’s dominance in general search and text ads has harmed competition and that meaningful remedies must open up distribution and provide access to critical search data. But what’s top of mind for the court? According to NextGen Competition’s Sumit Sharma: network effects, proportionality, spillover effects on adjacent markets, and whether remedies are actually workable.
Following the day long marathon of closing arguments, Sumit wrote a piece in Tech Policy Press reading the tea leaves:
The discussion at closing arguments suggested that the court is comfortable enough with its findings in its liability decision to impose injunctive remedies and forward-looking remedies, stopping short of structural separation with an important caveat.
The important caveat for forward-looking remedies is that these should target inputs for general search services and general text advertising that Google has acquired because of its monopoly, and the fact that potential competitors cannot replicate them without the benefits of network effects that Google enjoys.
A final decision is expected in August. Sumit’s full thoughts are available here.
Other Competition News
Headlines from the past month you might have missed:
A Profile on Lina: In a June sit-down with The New York Times’ “Interesting Times” podcast, the former FTC Chair reflects on her career, the state of the economy, and what’s ahead for the agency under President Trump. It’s definitely worth the read (or listen). One of the most striking moments comes during her comments on Big Tech’s outsized power:
The third thing I would note is that a through line across these big tech companies is that they came to dominate key arteries of commerce and communications. They ended up becoming gatekeepers. That meant that you had all sorts of users that were dependent on them, but you also had businesses — major Fortune 500 businesses — that all of a sudden were also suddenly dependent on the whims of a Google or an Amazon and could see how a single tweak of the algorithm could end up being devastating.
As always, Khan offers a clear-eyed view of the structural problems she spent years trying to solve.
Keeping Out the Crawlers: This week, it was reported that Cloudflare will begin rolling out protections for publishers and other domain owners to prevent AI crawlers from stealing their work without proper compensation. Known crawlers will be blocked, and publishers will have the option to allow “AI scrapers” to “Pay Per Crawl.” Matthew Prince, CEO of Cloudflare, remarked:
“If the Internet is going to survive the age of AI, we need to give publishers the control they deserve and build a new economic model that works for everyone – creators, consumers, tomorrow’s AI founders, and the future of the web itself. Original content is what makes the Internet one of the greatest inventions in the last century, and it's essential that creators continue making it. AI crawlers have been scraping content without limits. Our goal is to put the power back in the hands of creators, while still helping AI companies innovate. This is about safeguarding the future of a free and vibrant Internet with a new model that works for everyone.”
To read the full Cloudflare statement, click here.
Google Braces for Impact: The European Union isn’t backing down from regulating Big Tech, with Google recently losing an appeal to reverse a $4.7 billion fine levied against the tech giant back in 2018 over Android dominance and the company’s attempt to “throttle competition and reduce consumer choice.”But fears persist that President Trump could use Big Tech’s allegiance as a weapon in Europe. Heck, he’s already successfully held Canada hostage.
The New York Times’ Adam Satariano and Jeanna Smialek report that “Concerns about how else Mr. Trump might leverage technology for political advantage has jump-started efforts across the region to develop alternatives.”
This comes on the heels of an executive order issued by President Trump in February, which Microsoft immediately complied with in removing the International Criminal Court’s chief prosecutor’s access to his email account over his decision to pursue Israel’s leader for war crimes.
When Big Tech acts at the President’s behest and U.S. tech dominance goes unchecked, how should other countries respond? 🤔
Big Tech and…the military? This month, we’ve seen several pieces on how Big Tech’s influence is seeping into the U.S. Army, with The Bulwark reporting that the Department of Defense (DoD) recently promoted four tech executives as lieutenant colonels. This comes on the heels of OpenAI announcing a partnership for a $200 million pilot program to “develop prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains,” according to DoD.
While informed AI and tech expertise is crucial in keeping our military at the forefront of new technology, Jackie Snow of Quartz illustrated our concerns best:
“The arrangement creates an unprecedented level of integration between private companies and military planning. The executives won't work on projects involving their own employers, but they'll have direct input into military strategy while their companies compete for massive defense contracts.”
Should Google Do The Unthinkable? David Streitfeld thinks so. And by the unthinkable, he means breaking itself up before the DOJ has the chance to:
“That would be a very Silicon Valley power move: Break yourself up before courts can break you up. In an era when Big Tech is under suspicion, a maneuver like this would probably be applauded across the political spectrum. For a company that used to have the motto ‘Don’t be evil,’ such redemption might be irresistible.”
A self-imposed breakup, Streitfeld argues, could bring redemption, financial upside, boost competition, and a wave of new innovation from engineers who “might create things as amazing as the original Google search engine, which awed people who first used it a quarter-century ago.”
Big Tech’s Downward Spiral: Julia Angwin doesn’t hold back in her latest column, arguing that the era of unchecked Big Tech dominance may finally be coming to an end, and that consumers could be the biggest winners:
“Reining in Big Tech appears to be one of the few bipartisan policies that has spanned the Biden and Trump administrations, despite the tech titans’ attempts to curry favor with the new president. Taken together, these developments could end years of stagnation and usher in more competition, smaller companies and better services. I personally can’t wait for competition in the search market…”
Angwin walks through each of the major platforms, the mounting legal and regulatory pressures they face, and why real competition, not just antitrust enforcement, is the path to better services, smaller companies, and a healthier tech ecosystem.
Stay Vigilant: We’ve long warned about the ways Big Tech quietly exploits consumer data, and Shira Ovide of The Washington Post published this helpful piece on how to safeguard your privacy, breaking down the “scuzzy tactics” tech giants like Meta use to track users, and what you can do about it.
Her practical advice: avoid Chrome, delete Meta apps from your phone, and use company websites instead of their apps for tasks like booking travel. It's a timely reminder that privacy protections often start with individual choices, especially when companies refuse to play fair. 🕵️
Until next month! In the meantime, follow us on X and BlueSky for the latest on Big Tech, AI, and antitrust. ⚖️