Why the EU is unlikely to crack down on Apple over its carrier contracts

Carriers have passed information to the European Commission’s antitrust chief about the contracts Apple makes them sign, according to a report in The New York Times. The Commission says it is looking into the information, although it stops short of calling them formal complaints, meaning it is not obliged to consider a formal investigation into the matter.

The details of this information remain sketchy, although the report suggests that French carriers are concerned that Apple’s contracts hold back competition by setting excessively high quotas for iPhone sales, thereby making it difficult to assign marketing resources to rival smartphones. While no one is forcing the operators to sell the iPhone, they really want to do so because customers want it, and that means agreeing to Apple’s demands. The terms of such contracts are always secret.

Here’s a statement sent out on Friday by Antoine Colombani, spokesman for Competition Commissioner Joaquín Almunia:

“The markets for smartphones and tablets are very dynamic, innovative and fast-growing. Samsung’s growing market position and the success of Google’s Android platform are good reasons to believe that competition is strong in the markets for smartphones and tablets.

“The Commission has been made aware of Apple’s distribution practices for iPhones and iPads. There have been no formal complaints, though. The Commission is currently looking at the situation and, more generally, is actively monitoring market developments. We will intervene if there are indications of anticompetitive behaviour to the detriment of consumers.”

I find it hard to believe this will come to anything. As the statement suggests, iOS devices are not the only game in town — in fact, the iPhone only has around 25 percent share of the smartphone market across the five biggest European economies. Apple certainly has a lot of weight to throw around in the mobile market, but nowhere near enough as to constitute a monopoly.

A good (though not perfect) point of comparison here would be Intel, which found itself the subject of a $ 1.45 billion EU fine back in 2009 for abuse of its dominant position. Intel, which utterly dominated the x86 processor market as it does now, gave secret kickbacks to computer manufacturers and retailers for not stocking AMD-based products. It even paid manufacturers to delay or cancel the launch of non-Intel products.

That was a clear-cut case of illegal practices, hurting consumers by limiting their choices. It’s hard, if not impossible, to argue that consumers in the EU do not have easy access to non-Apple mobile devices. In the Intel case, those manufacturers and retailers did not seriously have the option of telling the chipmaker to show itself the door. In this Apple business, the anonymous carriers in question could likely have done what U.S. Cellular did, and just not stock the iPhone. There are plenty of alternatives.

I suspect that the carriers in this situation are simply trying to weaken Apple’s hand in contract negotiations, and that the Commission is highly unlikely to step in and help.