Today Canada’s Competition Bureau announced that they were investigating allegations of anti-competitive clauses used by Apple Canada in contracts with wireless carriers. Unfortunately, they didn’t say, or even hint, at what the allegations were, but I suspect it’s related to the quotas that Apple imposes on iDevice resellers and the amount of money those resellers have to pay Apple if they don’t meet those quotas.
While the specifics are different for each agreement, Apple generally sets a minimum threshold for sales and requires that carriers pay the difference if they can’t move enough of its smartphones.
So how much could a carrier have to pay Apple if they don’t meet the quota ? It’s hard to say. In 2013, Verizon’s deal with Apple was estimated to be (US) $40B-$45B over 3 years. In 2011, Sprint made a $20B with Apple to sell 30million iPhones in 4 years. In either case, it’s a lot of money. In March 2012, Sanford C. Bernstein downgraded Sprint because they were concerned Sprint wouldn’t sell enough iPhones to pay for its “punishing” commitment to Apple.
If Apple is found to be guilty of such anti-competitive behaviour, then it would be a big boost for BlackBerry, whose devices are often put on the back burner by the carriers — especially the US carriers — no doubt in order to ensure that the carriers meets their iPhone quotas. Yeah, I’m looking at you AT&T !
It reminds me of Microsoft’s anti-competitive practices. In that case, the governments didn’t do anything about until it was too late, and Windows was well entrenched as the de facto standard. I hope that this time, the governments won’t wait so long.
All this adds more support to the argument that the sale of devices should be completely separated from the sale of services, and that carriers should not be allowed to sell devices. But that’s the topic for another blog post…..