From Discount to Discrimination: The Strange Economics of Anti-Competitive Antitrust
Antitrust has always been a strange regulatory enterprise. Businesses are largely free to engage in various commercial practices involving price, output, product design, distribution, research, and innovation—until they’re not. Outside the paradigmatic examples of explicit agreements among competitors to fix price and output, many business practices live in a gray zone. Whether a particular pricing practice, rebate structure, or distribution strategy is lawful cannot be known with certainty ex ante.
Instead, legality often turns on an ex post judicial inquiry under the “rule of reason,” where a court weighs competitive harms against procompetitive justifications and decides whether the conduct undermines the competitive process and harms consumers. Recurring pressures also push antitrust toward broader social goals, including worker employment levels and environmental impact.
Consider Epic Games’ lawsuit against Apple over various iOS policies, including the requirement that iPhone apps be distributed exclusively via the App Store. Apple adopted this distribution model when the App Store was launched in 2008, just one year after the iPhone entered the market in 2007. Over the next decade, the iPhone grew in popularity to become the leading smartphone in the United States.
In 2020, 12 years after the policy’s adoption, Epic Games sued and alleged the policy violated the Sherman Act due to “Apple’s substantial market power.” Although Apple ultimately prevailed in 2023 after a full trial and appellate review, it took three years of litigation to settle the question. The episode underscores an antitrust oddity: business practices implemented at entry can be retroactively recharacterized as unlawful once market success changes a firm’s market position.