April 16, 2024 • 34 mins
California consumers have filed a class action lawsuit against luxury fashion brand Hermès over purchasing practices for the brand’s exclusive Birkin bag, Apple is currently grappling with a historic lawsuit issued by the Department of Justice, alleging that the tech giant has consciously tried to maintain a monopoly over the iPhone market, and Florida Governor, Ron DeSantis, signs bill that bans children under 14 from having social media accounts.
- (00:00) - Intro
- (02:01) - Hermes Antitrust Lawsuit
- (16:37) - Apple Antitrust Lawsuit
- (28:18) - Florida Social Media Age Restriction
- (33:42) - Outro
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Danessa Watkins (00:05):
Welcome litigation nation. I'm your
host, Danessa Watkins, here withmy
my co host, Jack Sanker.
As a reminder, this is the show where we do a
roundup of the litigation andlegal news that are as making
headlines across the country. Sowhat do we have today, Jack?
Jack Sanker (00:21):
There's a recent class action against luxury good
maker, Hermes, for the allegedanti competitive business
practices regarding the sale oftheir much sought after Birkin
bags.
Danessa Watkins (00:31):
And I'm gonna cover the recent bill that was
signed into law in Florida thatis the US's most restrictive
social media ban to date andalso the US Department of
Justice's recent antitrustlawsuit filed against Apple
along with 16 states and theDistrict of Columbia. Since
we're doing a few antitrustcases, I thought it might be
(00:53):
helpful for our viewers to justgive a quick overview of what
antitrust law is. So this arealaw applies to nearly all of the
industries in the country. Thepurpose is to ensure that fair
competition exists in the marketand also to protect consumers.
So we have laws like the ShermanAct that prohibit a variety of
(01:15):
practices that would trade,including price fixing,
anticompetitive corporatemergers, and various predatory
acts that are really designed toachieve or maintain monopoly
power.
So, essentially, antitrust lawsprevent companies from profiting
by playing dirty. And the ideais that without these laws in
(01:36):
place, consumers wouldn't havethe choices that they do and
they would be forced topotentially pay higher in order
to get the goods and servicesthat they require. So
oftentimes, we have businessesthat can sue another business
for anti competitive behavior,but the government may also step
in at times to stop businessesfrom establishing monopolies.
(01:58):
Here's what you need to know.
Jack Sanker (02:01):
So with that primer on antitrust law generally,
there's an interesting classaction that was filed in the
Northern District of Californiafor violation of the Sherman Act
and, the some state laws inCalifornia for unfair
competition, things like thatagainst Hermes International,
which is a maker of all sorts ofluxury good goods, but in this
(02:21):
particular case, the HermesBirkin bag. So some background
if you don't know, some luxurybrands do this. It's happening
more and more, really.Basically, retailers will
straight up refuse to sell you aluxury good unless you
demonstrate to the retailer whatthey call, quote, sales history.
So basically, you wanna buy thisrare luxury good.
(02:43):
In this case, it's the famousBirkin bag from Hermes. Rolex
also does this, and a lot ofwatch companies do as well.
You'll get put on, like, awaiting list, which is basically
forever unless you have a saleshistory. And what that means
practically is if you wanna beable to buy this thing, this
Birkin bag or this Rolex orwhatever it is, you'll have to
purchase from the retailer abunch of other stuff first,
(03:05):
which can then put you higher onthis list and will give you the
privilege of paying many 1,000of dollars for the one thing
that you do want. So put anotherway, you have to buy a bunch of
other crap you may not actuallywant just to move up on the
list.
And this is, I know, kind of afirst world problem. Don't get
me wrong here. But that is whatHermes does for its Birkin bags,
(03:26):
and it's an interesting case outof California that's worth
talking about. According to mywife, Birkin bags can cost tens
of 1,000 of dollars but aretotally worth it. They're
allegedly really high quality,whatever.
And, here's what the plaintiffsdescribe, happened to them in
this when they attempted to buythe Hermes bags, the Birkin
(03:48):
bags, and their complaint. Soquoting from the complaint,
Birkin handbags cannot bepurchased from defendants
through the website. Instead,consumers can only purchase
Birkin handbags from defendantsby physically going to an a
Hermes retail store. However,unlike most consumer products
and most other products sold bydefendants, and they're talking
(04:08):
about Hermes there, consumerscannot simply walk into an
Hermes retail store, pick out aBirkin handbag they want and
purchase it. Birkin handbags arenever publicly displayed for
sale at Hermes retail stores.
Indeed, it is often the casethat there are no Birkin
handbags at all in Hermes retailstores, or if there are, there
are only 1, 2, or, at most, 3Birkin handbags. But even if
(04:29):
there are Birkin handbags at theparticular Hermes retail store,
the handbags will not bedisplayed on the sales floor for
the general public. In fact,most consumers will never be
shown a Birkin handbag at theHermes retail store. Typically,
only those consumers who aredeemed worthy of purchasing a
Birkin handbag will be shown aBirkin handbag in a private
room. The chosen consumer willbe given the opportunity to
(04:52):
purchase the specific Birkinhandbag handbag, which they are
shown.
Consumers cannot order a Birkinhandbag at the retail location.
For all practical purposes,there is no way to order a bag
in the style, size, color,leather, and hardware that the
consumer wants. Now Hermes salesassociates are tasked by
defendants with selecting theseconsumers who are qualified to
(05:13):
purchase Birkin handbags. Thesales associates are directed by
defendants to only offer Birkinhandbags to consumers who have
established a sufficientcomplaint quotes here purchase
history or purchase profile withdefendant's or defendant's
ancillary products such asshoes, belts, scarves, jewelry,
and home goods. Only once aconsumer has sufficient purchase
history or purchase profile withwill the consumer be offered the
(05:37):
opportunity to purchase a Birkinhandbag, unquote.
So here's a pretty interestingpart, that I really didn't know,
and this is the part that mostlyimplicates Hermes the
corporation. This is regardingthe structure of the
compensation for Hermessalespeople in the actual
(05:57):
stores. Quoting it from thecomplaint, quote, the commission
rates paid by defendants tosales associates differ based on
the type of products sold. Salesassociates are paid 3% on
ancillary products such asshoes, scarves, belts, jewelry,
and home goods. They're paid 1.5commission on non Birkin
handbags, and they receive nocommission whatsoever on the
sale of Birkin handbags.
Although Hermes sales associatesreceive no commission on the
(06:20):
most valuable and sought afterproducts sold by their employer,
they are instructed bydefendants to use Birkin
handbags as a way to coerceconsumers to purchase ancillary
products sold by defendants forwhich the sales associates
receive a 3% commission in orderto build up the purchase history
required to be offered a Birkinhandbag. In this way, defendants
are able to use their salesassociates to implement
(06:41):
defendant's illegal tyingarrangement. So let's pause here
for a minute. What what is atying arrangement? What what
even, you know, really is thebasis of this lawsuit?
And a moment ago, you heard fromVanessa about the Sherman Act
and broad strokes anti, monopolyand antitrust laws in the United
States. This idea of a tyingarrangement. It's t y I n g.
(07:05):
Going from the FTC website and,my general knowledge about this,
I'm not an antitrust lawyer. Wedo have some good ones at the
firm, and I, didn't get a chanceto talk to them before recording
today, but maybe we can have onethem on to explain this a little
better than I can.
I'll quote from a recent writeup on the definition of tying,
quote, for competitive purposes,a monopolist may use forced
(07:27):
buying or tie in sales to gainsales in other markets where it
is not dominant and to make itmore difficult for rivals in
those markets to obtain sales.This may limit consumer choice
for buyers wanting to purchase1, quote, tying product by
forcing might so, or may preferto get from a different seller.
(07:53):
If the seller offering the tiedproduct has sufficient market
power in the tying product,these arrangements can violate
antitrust laws, unquote. So thekind of crux of this Hermes case
is that Hermes is engaged in atying arrangement by forcing
customers who want a Birkin bagto buy a bunch of less
desirable, but probably stillexpensive Hermes stuff first.
(08:17):
Here, one of the plaintiffsalleges that she spent tens of
1,000 at Hermes and finallyasked to be permitted to buy a
saying you need to spend moremoney on other Hermes stuff
before we sell you the Bergen.
Danessa Watkins (08:35):
So it's pretty vague then.
Jack Sanker (08:38):
Seems like it's, vague but also understood. You
don't get to buy the Birkinunless you've dropped some
amount.
Danessa Watkins (08:46):
Sir, a certain amount, but they don't specify
what that amount is.
Jack Sanker (08:49):
They won't tell you what it is Okay. Which probably
keeps you buying.
Danessa Watkins (08:52):
Right. Exactly.
Jack Sanker (08:53):
And you there's a whole sunk cost aspect of it. If
you spend $5,000 and and theytell you you only need to spend
another 5,000, that's all you'llspend. But if they, you know,
they keep it vague, maybe youcome in and spend $20,000 or
whatever. Mhmm. I don't know.
Danessa Watkins (09:07):
And who are the plaintiffs in this suit?
Jack Sanker (09:09):
People that wanted to buy Birkin bags and weren't
allowed to. Okay. Yeah.Interesting.
Danessa Watkins (09:14):
Because I could see the the competitors bringing
this suit also.
Jack Sanker (09:19):
Yeah. You would think. Although, I don't know if
there is a competitor of WellFor the the scarcity level, I
had to look alright. I don'tknow anything about Hermes bags.
Okay?
But I looked into it, and,apparently, they're like like,
sasquatch level rare. Like, theydon't exist. You know? It's like
a it's like an urban myth. Like,you can't get them.
Danessa Watkins (09:40):
Right.
Jack Sanker (09:40):
And so to have one is an immense, status symbol,
and, basically, people will doanything to get them. But I
think from Hermes' perspective,if they just, you know, price
them in such a way that would bemaybe the word would be gauche,
you know, If it was, like thisthis leather bag is $400,000 or
whatever. Like, that you know?And maybe that would be kinda
(10:03):
tacky. Mhmm.
But maybe don't know. I'm I'mspeculating. But so the
plaintiffs in this case arealleging that Hermes is
illegally tying the sale oftheir Birkin bags to other
(10:24):
products through this paymentstructure of their salespeople,
which I think is interestingbecause the salespeople are
incentivized to push the otherproducts. And, really, they're
not incentivized to sell Birkinbags at all because they get no
commission on it. But the onlypurpose of the Birkin bag then
is to sell the less desirablestuff, scarves and shoes and
whatnot.
So there's certain claims forviolation of California state
(10:46):
laws. Then, of course, there'sthe Sherman Act claims. I think
it's interesting because it'salso very common for imported,
you know, what you would callluxury cars and also, luxury
watches too. So, like, ifthere's a a dealership that
happens to sell Lamborghinis,you know, they don't they're not
often just selling Lamborghinis.Lamborghinis.
(11:07):
Maybe they're also sellingAudis. Maybe they're also
selling, you know, somethingelse along those lines. And, you
walk in there and you're like, II want the, you know, a brand
new Lamborghini, and they'relike, well, no. You know? You
have to buy 2 other cars from usfirst.
You have to buy, like, you know,this Audi that's been on the lot
for 18 months that we're tryingto get rid of and something else
before they'll even entertainthe idea of selling you what it
(11:29):
is. I think a lot of it has todo with the fact that when it's
coming from the manufacturer,the manufacturer controls the
price. So, like, you see thiswith you'll see this with Birkin
bags, and of course you'll seethis with Rolexes big time and
with, you know, if you were toresell a new Lamborghini or
whatever, where the resalevalue, after you actually get it
in your hand is way higher thanthe MSRP. So, like, you know, a
(11:52):
$10,000 watch from Rolex. Rolextells their dealers you cannot
sell this watch for more than$10,000.
Right?
Danessa Watkins (11:58):
Mhmm.
Jack Sanker (11:59):
And, and they're like, okay. So we can only make
x amount of dollars on it. Butif you buy that watch from Rolex
and then and then go put it uponline, you could sell it for
$20,000, like, because they'reso hard to get. So the I think
the dealers are feeling likethey're not they're getting
screwed on that margin becausethey can't just sell it at the
market price. And I guess toclaw back some of that, they're,
(12:20):
like, making you buy a bunch ofother stuff you didn't want.
So the so Rolex dealership willmake you buy, you know, 2 to 3
other items or some jewelry orwhatever, just before they even
sell you what you want.
Danessa Watkins (12:31):
That's interesting. I didn't even know
that those practices existed.Clearly, I'm not buying the high
end Lamborghini. The high
end Lamborghini. I mean, I'm
Jack Sanker (12:37):
not buying either, but, Rolex is notorious for
this. But also, shoemakers, cardealers, anyone who's selling
anything that's, like,collectible, this seems to be
something that you're seeingmore and more of. But what's
unique in the Hermes case isthat the tying is not being done
by a third party. It's Hermesthat's doing it. So for example,
(12:59):
if someone were to bring thiscase against, you know, say,
Rolex or, certain luxury cardealers or whatever, Rolex and
car manufacturers are using,affiliated third party sellers,
like, so an authorized dealer orcar dealership or whatever you
wanna call it.
They're not being run by, like,Rolex company stores or, you
(13:21):
know, or Lamborghini companystores or whatever. They're
being run by, you know, thislocal dealer. So you can't or I
mean, maybe you could, but itwould be hard to, directly go
after Rolex for theanticompetitive practice when
it's really happening at thelower level distribution. Here,
Hermes Hermes owns and runs allof these stores themselves. So
(13:43):
if there is liability, it'sgoing to be imputed directly
onto, you know, Hermes, propercorporation, you know,
theoretically, you know, be onthe hook here.
And, I mean, I'm not saying thatyou and I should head over to
the Oak Street, Hermes here inChicago and ask for a Birkin bag
(14:06):
just so that we can get turneddown and join this class. I'm
not saying anyone listeningshould do that either. It's an
interesting case nonetheless.And applying this the Sherman
Act and some of the other anti,competitive statues, both at the
federal level and state level,to, the way in which a lot of
these luxury brands areoperating today, you know, a 130
(14:28):
years after these laws werepassed, kinda does show you
that, you know, there's nothingnew under the sun. People were
still doing the same things theywere in the 18 nineties.
Danessa Watkins (14:38):
And I wonder for the plaintiffs in this case
if they need to show a certainlevel of, you know, money
already spent or yeah. Oncertain products?
So, you
Jack Sanker (14:49):
know, they don't spell it out super well in the
complaint because that's what Iwas looking for too, but I I do
think that's what I would that'swhat I would claim. I'd be like,
look. I didn't want this scarffor these shoes or whatever. I
was being induced to buy them sothat I could buy the Birkin bag,
and now they won't sell me thebag. I I I've been damaged in
the amount of money that I'vespent, you know, or something
(15:09):
along those lines, which I stillthink is kinda tenuous because,
like, you did pay for the shoes,and you received the shoes.
Right? And to your pointearlier, it is all it's all
implicit. It's not spelled out.And so that may be, difficult.
Although I think everyone knowsthe game here, and I think, it's
(15:31):
it's common enough in luxurydealers that everyone
understands you don't even getto look at this stuff.
Like, go to a Rolex dealer andand, you know, ask if they'll
sell you, you, you know, a aSubmariner or whatever. They'll
just if they don't know you,they'll slap at you. They're
like, absolutely not, which iscrazy because even if you're
like, I'll pay for the item.I'll pay they're just like,
that's not where we make ourmoney. We make our money
Danessa Watkins (15:52):
on all the
Jack Sanker (15:53):
crap we make you purchase before we sell you the
item. Yeah. So, it's, it'll beinteresting to see if this one
sticks around. I don't know howbig the class can can be. I
mean, how many people have havegone through the trouble of
building a sales history withwith Hermes to then be denied
the holy grail Birkin bag.
(16:13):
I mean, dozens maybe if that
Danessa Watkins (16:17):
And clearly, there's an employee
whistleblower that's giving allthe inside information about
Jack Sanker (16:22):
The commission aspect of it is what's very
interesting. Yeah. For sure. Itwhich I think does, imply that
Hermes knows what's going on.It's not just, you know
Danessa Watkins (16:29):
Yeah.
Jack Sanker (16:30):
Employees on the floor doing it. Right. So
Danessa Watkins (16:32):
Interesting. Alright. So moving on to this
antitrust suit against Apple. Soon March 21, 2024, the US
Department of Justice filed alawsuit against Apple along with
16 states and the District ofColumbia, alleging that Apple is
(16:54):
using anticompetitive practicesin order to maintain its
monopoly in the smartphonemarket. Now the basic theory of
this lawsuit is that Apple issquelching the development of
apps, these so called super appsthat are essentially a gateway
to a variety of other servicesand apps.
So think cloud streaming, gamingapps, messaging apps, but but
(17:18):
particularly financial servicessuch as digital wallets. That's
a big one that came up in thislawsuit. And then accessories
such as smartwatches and, thingsof that nature. So the idea is
that Apple is insulating theiPhone from the rise of
potential competitors. Now thethe DOJ is claiming that Apple's
(17:41):
practices are intended to keepcustomers reliant on iPhones and
less likely to switch to otherdevices.
So I don't think it's any secretthat the iPhone is certainly the
most profitable product thatApple has put out. And just to
give you a sense of that, in2022, the App Store generated a
(18:01):
104,000,000,000 in digitalsales. Alright. Now some of the
anticompetitive behaviors thatthe DOJ is alleging includes
making it easier for users toconnect iPhones to Apple
products, such as smartphones orexcuse me, such as smartwatches
and laptops, preventing thecreation of digital wallet
(18:22):
alternatives by limiting financefinance companies access to the
iPhone's payment chip and alsoBluetooth trackers from tapping
into its location servicefeature. There's also
allegations of blocking cloudstreaming apps and then
undermining messaging acrosssmartphone prices and less
(18:51):
innovation.
Now I found some quotes from aprofessor from the University of
Virginia School of Law. This isThomas b Nachbar, and he weighed
in on this lawsuit and theimpact that it's going to have.
So first, he started by findingsome similarities between this
case and the lawsuit that thegovernment brought against
(19:12):
Microsoft in the late 19nineties. So in that case, the
Department of Justice and 20different states filed an
antitrust claim againstMicrosoft to determine ruling in
that Microsoft case was thatthere were violations of the
(19:34):
Sherman Act and a district courtordered Microsoft to divide the
company in half. Certainly, weknow that didn't happen.
Microsoft appealed and theyended up settling with the DOJ.
So they didn't have to break uptheir company, but they did
agree to share computinginterfaces with other companies.
So professor Nackbar says,quote, the Microsoft case itself
(19:57):
offers a lot of guidance here.In that case, the court ruled
that the plaintiff has to showthat there is anti competitive
effect and then the defendanthas to provide a pro competitive
justification. Then if theplaintiff can rebut that
justification, the court shouldbalance the pro competitive and
the anti competitive effects.
Much of the conduct thegovernment is complaining of in
(20:18):
this case, he's referring to theApple case, are things that
Apple says it does in order toeither protect its users or to
provide them a distinctivecustomer experience. And those
types of justifications werelargely accepted by the court in
the Microsoft case. So it willlikely come down to the facts.
How credible Apple's claims arethat its conduct provides a
(20:39):
distinct product or improvesecurity. Credibility was a
major problem for Microsoft inits case with some very damning
email traffic featuringprominently in the case, end
quote.
Now what's interesting aboutwhat that professor notes from
the Microsoft case is that inthe Apple complaint, it's an 88
page complaint, but they startby giving quotes from what may
(21:05):
turn out to be very damningemails between, Apple
executives. So this is quotingthe first paragraph of the
complaint. In 2010, a top Appleexecutive emailed Apple's then
CEO about an ad for the newKindle e reader. The ad began
with a woman who was using heriPhone to buy and read books on
the Kindle app. She thenswitches to an Android
(21:27):
smartphone and continues to readher books using the same Kindle
app.
The executive wrote to Jobs,Steve Jobs. 1 quote message that
can't be missed is that it iseasy to switch from iPhone to
Android. Not fun to watch, endquote. Jobs was clear in his
response. Apple would forcedevelopers to use its payment
(21:47):
system to lock in bothdevelopers and users on its
platform.
Over many years, Apple hasrepeatedly responded to
competitive threats like thisone by making it harder or more
expensive for its users anddevelopers to leave than by
making it more attractive forthem to stay. And that's end
quote from that first paragraph.So certainly the DOJ is starting
(22:08):
out this complaint by showing orattempting to show a a clear
intent to create a monopoly byApple's then CEO and the higher
ups.
I think to interject here just on the
Jack Sanker (22:22):
the amount of money that app Apple rakes in on this,
from almost everyone, I there's,like, there's, like, rumors of
certain apps getting a specialdeal with Apple. But for almost
everyone, it's a sliding scaleof 15 to to 30. But for small
guys, you know, you a small appor whatever, is, you know, if
(22:49):
you have an app that is doing,you know, $10,000,000 in sales
or whatever and you want it tobe on the App Store, you have to
be paying Apple between 1.53$1,000,000 just to be on for the
privilege of being in allowed onthe App Store. Yeah. So it's a
it's a it's a serious amount ofmoney from their perspective.
Danessa Watkins (23:06):
Yeah. That's interesting. And I'm I'm sure
that there are going to be a lotmore stories like that, of
situations where Apple has, youknow, or is raking in money
because people know that iPhoneis the most successful
smartphone out there.
Yeah. I think Apple's justification, which
we'll see you in whatever theyfiled in response to the
Jack Sanker (23:28):
DOJ complaint, it is typically been, we are
interested in the privacy, ofour consumers' data and in
protecting them from, you know,bad products or whatever. So so,
you know, I hate to say it, butthe App Store experience and can
(23:48):
in the apps that are on the AppStore, there is a certain amount
of, trust that you can sort ofhave in those apps versus the
more open, like, Android store,at least in my experience. But
with that comes, you know, theamount of control that Apple has
over, you know, how those appsare presented and everything
else. But that's Apple'stypically their responses. You
(24:10):
know?
We're Right. We're protectingour consumers against, you know,
harmful downloads or whateverthey wanna call it. And whereas
the competitors are saying, no.You're just, to your point,
building a moat.
Danessa Watkins (24:21):
Right. And, like professor Nachbar said, it
it's ultimately gonna come downto a judge having to weigh what
are these these competitivebehaviors versus the the
consumer protections that, thatApple says it's trying to put
into
Jack Sanker (24:37):
place. And I I don't have the date offhand, but
I I do know I think I rememberthis from law school. But the,
the, Microsoft
Danessa Watkins (24:55):
government on this one. I mean, they have a
sizable business that they needto protect and that they're
gonna fight for. So, I don'tthink we'll have any decisions
in this case for a while for anumber of years. And even then,
there could be appeals, but thisis one that's probably gonna set
some real precedent goingforward for antitrust law, and,
(25:16):
I've read a few articles inparticular that was saying that,
the government currently is isputting a lot of money into
research into potentialmonopolies and, spending a lot
of litigation against them too.So
Jack Sanker (25:30):
Yeah. The problem is that Apple can I mean, this
is not this is a a blip on theirradar in terms of expenses? You
know, they can they can have 100of lawyers billing effectively
24 hours a day for the next 10years and really not even feel
it. You know? Yeah.
And, like, eventually, the DOJwill.
Danessa Watkins (25:46):
Yeah. Certainly. And so it's funny.
And looking into this story, Ifound an interesting article on
wired.com, which actuallytouched on the very reason that
I personally switched to aniPhone, and that is the stigma
of the green bubble.
Jack Sanker (26:02):
Oh, yeah.
Danessa Watkins (26:04):
And this is actually addressed in the
complaint. It says Appleaffirmatively undermines the
quality of rival smartphones. Sobecause messages sent between
iPhones via Apple's proprietarynetwork appear appear in blue
bubbles, but those from Androidphones appear in green and are
excluded from any of theImessage features. Apple has
(26:26):
signaled to consumers that rivalphones are of less quality, the
suit alleges. And I had thattoo.
You know, you're in a groupchat, and you're you're turning
the chat from blue to green. And
Jack Sanker (26:39):
It's it's a scarlet letter of texting. Yeah.
Danessa Watkins (26:41):
Absolutely.
Jack Sanker (26:42):
Green bubble. You're just like, man, come on.
Danessa Watkins (26:44):
And, of course, you know, you've got younger and
younger consumers that aregetting, smartphones now. And
we've talked on previous showshow peer pressure affects this
generation differently, youknow, the cohort of juveniles.
So those types of things whereyou're gonna have kids that, you
(27:04):
know, don't have the iPhone.They're gonna feel more
pressured and bug their parentsmore for the iPhone to get the
the blue bubbles. So it's just,you know, one of many issues
that are raised in the complaintabout why they think, iPhone is
engaging in this anticompetitive behavior.
And then we found actually, itwas wired.com that also touched
(27:25):
on some of the damning evidencethat could potentially come out
in this case. I'm quoting nowfrom that article. So back in
2022 at the annual CodeConference where tech luminaries
submit to on stage interviews,an audience member asked Apple
CEO Tim Cook for some techsupport. Quote, I can't send my
(27:45):
mom certain videos, end quote,he said. She used an app an
Android device, which means shecan't access Apple's Imessage.
Cook's now infamous response, quote, buy
your mom an iPhone, end quote.
There you go. Yep. Unquote.
Jack Sanker (27:57):
There you go. Yep.
Danessa Watkins (27:58):
So it will be interesting to see how this case
develops. I'm sure we're gonnaget a motion to dismiss filed by
Apple in the next couple weeksor so. So we'll continue to
follow-up, and, this could beyours in the making.
Jack Sanker (28:12):
Lot of content.
Danessa Watkins (28:13):
Absolutely.
Alright. Now moving on to this new Florida
law that, Ron DeSantis justsigned in. In a nutshell, this
bill is set to take effect,January 1, 2025, and it will ban
(28:34):
social media accounts forchildren under 14 in Florida. It
also will require parentalpermission for 14 15 year olds
to use social media. Now what'skind of interesting about this
this bill that just got passedis it's actually well, probably
not probably not the second.
I'm sure there's been a longline of them. But just a month
(28:56):
ago, governor DeSantis actuallyvetoed a bill that was similar,
but it set the ban at 16. So,there must have been some
negotiations that were donebehind the scenes, because at
the time he vetoed it, he didsay that a improved bill was
coming out, and DeSantis hasalso said he would never sign
(29:17):
into law a bill that he feltwould not pass constitutional
muster. So, I guess the thenegotiations were that were had
were giving some parentalcontrol back when it, pertained
to 14 15 year olds who areaccessing social media. So
looking a little bit into whatthe law would prohibit and
(29:39):
require.
First, social media platformshave to prohibit minors under 14
from creating new accounts. Itrequires social media platforms
to terminate certain accounts.It authorizes the state to issue
and enforce civil investigationunder certain circumstances and
(30:00):
also providing for civilpenalties, and it will allow 14
15 year olds to keep theiraccounts if a parent or guardian
says it's okay. Now this issomewhat similar to to the laws
that other states have tried toput through. We mentioned on a
(30:21):
prior episode, the CADCA thatCalifornia tried to put in which
a district court recently heldas unconstitutional primarily
based on first amendment issues.
That is up on appeal, so we willfollow-up on that. But
certainly, this new law probablyis gonna face the same scrutiny,
(30:43):
that we have the same FirstAmendment concerns really that
we're setting a hard line at, 16and limiting access to
information for anyone underthat. There's also questions
about how can a social mediacompany actually verify
someone's age? Are we doingcensorship and restricting
(31:07):
access in a sweeping fashionthat really isn't called for.
Again, prior restraints on freespeech.
Jack Sanker (31:13):
The termination of accounts also, I think, raises a
big red flag. Right? Like,you're compelling the so you're
compelling the social mediacompany to take down speech,
which is, I think I mean, I'mnot an expert. You are. But the
the whole section 2 30 aspect ofwhat a publisher is and is
obligated to do and isn'tobligated to do or whatever
(31:33):
seems like it's gonna run afoulof that.
Danessa Watkins (31:36):
Oh, absolutely. And especially in today's day
and age where you haveinfluencers, you know, you have
youngsters under the age of 18that are actually bringing
income from things like this.No. I expect that there's gonna
be pushback probably from,social media companies and
families alike who will beaffected by this. And it's hard
(31:57):
because, certainly, there are aplethora of studies out there
about the negative effects ofsocial media on on young minds.
But, you know, it's it's gonnabe hard for lawmakers to to come
up with something that balancesboth First Amendment rights and
and the protections that we needfor for the youth.
Jack Sanker (32:17):
Yeah. Especially in light of the past couple of
years when I would say that, youknow, not to be overtly
political, but the the kind ofcohort that is, or coalition
rather that is, coalition ratherthat is, like, behind this, if
you will, has in many othercontexts been all about the
expansion of first amendmentrights for online speech. You
(32:39):
know? The idea of, doingsomething about, you know,
quote, unquote cancel culture orwhatever.
Danessa Watkins (32:47):
Mhmm.
Jack Sanker (32:48):
So, like and those are different things. You could
definitely make, bigdistinctions between the two
things that I'm alluding tohere, and, you know, what's
going on with, you know, speechof minors. And I and minors also
have speech rights compared toadults. Sure. But, nevertheless,
this would amount to governmentdown speech restrictions on, on
(33:12):
individuals, minors, sure, fromthe same pea group of people
that are, like, in othercontexts, you know, we should be
able to say anything online.
Right. And, that's justsomething to keep an eye on.
Danessa Watkins (33:23):
Yeah. No. It's it's definitely interesting. A
lot of avenues that you can lookat this one. So, I'm I'm sure
that as as soon as this startsto go into effect, there will be
a slew of lawsuits.
So we'll just have to keep aneye on it and and see if Florida
fares any better thanCalifornia. Alright. Well,
that's the show for today.Remember to check us out, Apple,
(33:48):
Spotify, YouTube, wherever youget your podcasts. Leave us
comments.
Let us know your thoughts ifthere's any other topics that
you want us to cover or expandupon. And yeah, we'll see you
next time.
Welcome litigation nation. I'm your
host, Danessa Watkins, here withmy
my co host, Jack Sanker.
As a reminder, this is the show where we do a
roundup of the litigation andlegal news that are as making
headlines across the country. Sowhat do we have today, Jack?
Jack Sanker (00:21):
There's a recent class action against luxury good
maker, Hermes, for the allegedanti competitive business
practices regarding the sale oftheir much sought after Birkin
bags.
Danessa Watkins (00:31):
And I'm gonna cover the recent bill that was
signed into law in Florida thatis the US's most restrictive
social media ban to date andalso the US Department of
Justice's recent antitrustlawsuit filed against Apple
along with 16 states and theDistrict of Columbia. Since
we're doing a few antitrustcases, I thought it might be
(00:53):
helpful for our viewers to justgive a quick overview of what
antitrust law is. So this arealaw applies to nearly all of the
industries in the country. Thepurpose is to ensure that fair
competition exists in the marketand also to protect consumers.
So we have laws like the ShermanAct that prohibit a variety of
(01:15):
practices that would trade,including price fixing,
anticompetitive corporatemergers, and various predatory
acts that are really designed toachieve or maintain monopoly
power.
So, essentially, antitrust lawsprevent companies from profiting
by playing dirty. And the ideais that without these laws in
(01:36):
place, consumers wouldn't havethe choices that they do and
they would be forced topotentially pay higher in order
to get the goods and servicesthat they require. So
oftentimes, we have businessesthat can sue another business
for anti competitive behavior,but the government may also step
in at times to stop businessesfrom establishing monopolies.
(01:58):
Here's what you need to know.
Jack Sanker (02:01):
So with that primer on antitrust law generally,
there's an interesting classaction that was filed in the
Northern District of Californiafor violation of the Sherman Act
and, the some state laws inCalifornia for unfair
competition, things like thatagainst Hermes International,
which is a maker of all sorts ofluxury good goods, but in this
(02:21):
particular case, the HermesBirkin bag. So some background
if you don't know, some luxurybrands do this. It's happening
more and more, really.Basically, retailers will
straight up refuse to sell you aluxury good unless you
demonstrate to the retailer whatthey call, quote, sales history.
So basically, you wanna buy thisrare luxury good.
(02:43):
In this case, it's the famousBirkin bag from Hermes. Rolex
also does this, and a lot ofwatch companies do as well.
You'll get put on, like, awaiting list, which is basically
forever unless you have a saleshistory. And what that means
practically is if you wanna beable to buy this thing, this
Birkin bag or this Rolex orwhatever it is, you'll have to
purchase from the retailer abunch of other stuff first,
(03:05):
which can then put you higher onthis list and will give you the
privilege of paying many 1,000of dollars for the one thing
that you do want. So put anotherway, you have to buy a bunch of
other crap you may not actuallywant just to move up on the
list.
And this is, I know, kind of afirst world problem. Don't get
me wrong here. But that is whatHermes does for its Birkin bags,
(03:26):
and it's an interesting case outof California that's worth
talking about. According to mywife, Birkin bags can cost tens
of 1,000 of dollars but aretotally worth it. They're
allegedly really high quality,whatever.
And, here's what the plaintiffsdescribe, happened to them in
this when they attempted to buythe Hermes bags, the Birkin
(03:48):
bags, and their complaint. Soquoting from the complaint,
Birkin handbags cannot bepurchased from defendants
through the website. Instead,consumers can only purchase
Birkin handbags from defendantsby physically going to an a
Hermes retail store. However,unlike most consumer products
and most other products sold bydefendants, and they're talking
(04:08):
about Hermes there, consumerscannot simply walk into an
Hermes retail store, pick out aBirkin handbag they want and
purchase it. Birkin handbags arenever publicly displayed for
sale at Hermes retail stores.
Indeed, it is often the casethat there are no Birkin
handbags at all in Hermes retailstores, or if there are, there
are only 1, 2, or, at most, 3Birkin handbags. But even if
(04:29):
there are Birkin handbags at theparticular Hermes retail store,
the handbags will not bedisplayed on the sales floor for
the general public. In fact,most consumers will never be
shown a Birkin handbag at theHermes retail store. Typically,
only those consumers who aredeemed worthy of purchasing a
Birkin handbag will be shown aBirkin handbag in a private
room. The chosen consumer willbe given the opportunity to
(04:52):
purchase the specific Birkinhandbag handbag, which they are
shown.
Consumers cannot order a Birkinhandbag at the retail location.
For all practical purposes,there is no way to order a bag
in the style, size, color,leather, and hardware that the
consumer wants. Now Hermes salesassociates are tasked by
defendants with selecting theseconsumers who are qualified to
(05:13):
purchase Birkin handbags. Thesales associates are directed by
defendants to only offer Birkinhandbags to consumers who have
established a sufficientcomplaint quotes here purchase
history or purchase profile withdefendant's or defendant's
ancillary products such asshoes, belts, scarves, jewelry,
and home goods. Only once aconsumer has sufficient purchase
history or purchase profile withwill the consumer be offered the
(05:37):
opportunity to purchase a Birkinhandbag, unquote.
So here's a pretty interestingpart, that I really didn't know,
and this is the part that mostlyimplicates Hermes the
corporation. This is regardingthe structure of the
compensation for Hermessalespeople in the actual
(05:57):
stores. Quoting it from thecomplaint, quote, the commission
rates paid by defendants tosales associates differ based on
the type of products sold. Salesassociates are paid 3% on
ancillary products such asshoes, scarves, belts, jewelry,
and home goods. They're paid 1.5commission on non Birkin
handbags, and they receive nocommission whatsoever on the
sale of Birkin handbags.
Although Hermes sales associatesreceive no commission on the
(06:20):
most valuable and sought afterproducts sold by their employer,
they are instructed bydefendants to use Birkin
handbags as a way to coerceconsumers to purchase ancillary
products sold by defendants forwhich the sales associates
receive a 3% commission in orderto build up the purchase history
required to be offered a Birkinhandbag. In this way, defendants
are able to use their salesassociates to implement
(06:41):
defendant's illegal tyingarrangement. So let's pause here
for a minute. What what is atying arrangement? What what
even, you know, really is thebasis of this lawsuit?
And a moment ago, you heard fromVanessa about the Sherman Act
and broad strokes anti, monopolyand antitrust laws in the United
States. This idea of a tyingarrangement. It's t y I n g.
(07:05):
Going from the FTC website and,my general knowledge about this,
I'm not an antitrust lawyer. Wedo have some good ones at the
firm, and I, didn't get a chanceto talk to them before recording
today, but maybe we can have onethem on to explain this a little
better than I can.
I'll quote from a recent writeup on the definition of tying,
quote, for competitive purposes,a monopolist may use forced
(07:27):
buying or tie in sales to gainsales in other markets where it
is not dominant and to make itmore difficult for rivals in
those markets to obtain sales.This may limit consumer choice
for buyers wanting to purchase1, quote, tying product by
forcing might so, or may preferto get from a different seller.
(07:53):
If the seller offering the tiedproduct has sufficient market
power in the tying product,these arrangements can violate
antitrust laws, unquote. So thekind of crux of this Hermes case
is that Hermes is engaged in atying arrangement by forcing
customers who want a Birkin bagto buy a bunch of less
desirable, but probably stillexpensive Hermes stuff first.
(08:17):
Here, one of the plaintiffsalleges that she spent tens of
1,000 at Hermes and finallyasked to be permitted to buy a
saying you need to spend moremoney on other Hermes stuff
before we sell you the Bergen.
Danessa Watkins (08:35):
So it's pretty vague then.
Jack Sanker (08:38):
Seems like it's, vague but also understood. You
don't get to buy the Birkinunless you've dropped some
amount.
Danessa Watkins (08:46):
Sir, a certain amount, but they don't specify
what that amount is.
Jack Sanker (08:49):
They won't tell you what it is Okay. Which probably
keeps you buying.
Danessa Watkins (08:52):
Right. Exactly.
Jack Sanker (08:53):
And you there's a whole sunk cost aspect of it. If
you spend $5,000 and and theytell you you only need to spend
another 5,000, that's all you'llspend. But if they, you know,
they keep it vague, maybe youcome in and spend $20,000 or
whatever. Mhmm. I don't know.
Danessa Watkins (09:07):
And who are the plaintiffs in this suit?
Jack Sanker (09:09):
People that wanted to buy Birkin bags and weren't
allowed to. Okay. Yeah.Interesting.
Danessa Watkins (09:14):
Because I could see the the competitors bringing
this suit also.
Jack Sanker (09:19):
Yeah. You would think. Although, I don't know if
there is a competitor of WellFor the the scarcity level, I
had to look alright. I don'tknow anything about Hermes bags.
Okay?
But I looked into it, and,apparently, they're like like,
sasquatch level rare. Like, theydon't exist. You know? It's like
a it's like an urban myth. Like,you can't get them.
Danessa Watkins (09:40):
Right.
Jack Sanker (09:40):
And so to have one is an immense, status symbol,
and, basically, people will doanything to get them. But I
think from Hermes' perspective,if they just, you know, price
them in such a way that would bemaybe the word would be gauche,
you know, If it was, like thisthis leather bag is $400,000 or
whatever. Like, that you know?And maybe that would be kinda
(10:03):
tacky. Mhmm.
But maybe don't know. I'm I'mspeculating. But so the
plaintiffs in this case arealleging that Hermes is
illegally tying the sale oftheir Birkin bags to other
(10:24):
products through this paymentstructure of their salespeople,
which I think is interestingbecause the salespeople are
incentivized to push the otherproducts. And, really, they're
not incentivized to sell Birkinbags at all because they get no
commission on it. But the onlypurpose of the Birkin bag then
is to sell the less desirablestuff, scarves and shoes and
whatnot.
So there's certain claims forviolation of California state
(10:46):
laws. Then, of course, there'sthe Sherman Act claims. I think
it's interesting because it'salso very common for imported,
you know, what you would callluxury cars and also, luxury
watches too. So, like, ifthere's a a dealership that
happens to sell Lamborghinis,you know, they don't they're not
often just selling Lamborghinis.Lamborghinis.
(11:07):
Maybe they're also sellingAudis. Maybe they're also
selling, you know, somethingelse along those lines. And, you
walk in there and you're like, II want the, you know, a brand
new Lamborghini, and they'relike, well, no. You know? You
have to buy 2 other cars from usfirst.
You have to buy, like, you know,this Audi that's been on the lot
for 18 months that we're tryingto get rid of and something else
before they'll even entertainthe idea of selling you what it
(11:29):
is. I think a lot of it has todo with the fact that when it's
coming from the manufacturer,the manufacturer controls the
price. So, like, you see thiswith you'll see this with Birkin
bags, and of course you'll seethis with Rolexes big time and
with, you know, if you were toresell a new Lamborghini or
whatever, where the resalevalue, after you actually get it
in your hand is way higher thanthe MSRP. So, like, you know, a
(11:52):
$10,000 watch from Rolex. Rolextells their dealers you cannot
sell this watch for more than$10,000.
Right?
Danessa Watkins (11:58):
Mhmm.
Jack Sanker (11:59):
And, and they're like, okay. So we can only make
x amount of dollars on it. Butif you buy that watch from Rolex
and then and then go put it uponline, you could sell it for
$20,000, like, because they'reso hard to get. So the I think
the dealers are feeling likethey're not they're getting
screwed on that margin becausethey can't just sell it at the
market price. And I guess toclaw back some of that, they're,
(12:20):
like, making you buy a bunch ofother stuff you didn't want.
So the so Rolex dealership willmake you buy, you know, 2 to 3
other items or some jewelry orwhatever, just before they even
sell you what you want.
Danessa Watkins (12:31):
That's interesting. I didn't even know
that those practices existed.Clearly, I'm not buying the high
end Lamborghini. The high
end Lamborghini. I mean, I'm
Jack Sanker (12:37):
not buying either, but, Rolex is notorious for
this. But also, shoemakers, cardealers, anyone who's selling
anything that's, like,collectible, this seems to be
something that you're seeingmore and more of. But what's
unique in the Hermes case isthat the tying is not being done
by a third party. It's Hermesthat's doing it. So for example,
(12:59):
if someone were to bring thiscase against, you know, say,
Rolex or, certain luxury cardealers or whatever, Rolex and
car manufacturers are using,affiliated third party sellers,
like, so an authorized dealer orcar dealership or whatever you
wanna call it.
They're not being run by, like,Rolex company stores or, you
(13:21):
know, or Lamborghini companystores or whatever. They're
being run by, you know, thislocal dealer. So you can't or I
mean, maybe you could, but itwould be hard to, directly go
after Rolex for theanticompetitive practice when
it's really happening at thelower level distribution. Here,
Hermes Hermes owns and runs allof these stores themselves. So
(13:43):
if there is liability, it'sgoing to be imputed directly
onto, you know, Hermes, propercorporation, you know,
theoretically, you know, be onthe hook here.
And, I mean, I'm not saying thatyou and I should head over to
the Oak Street, Hermes here inChicago and ask for a Birkin bag
(14:06):
just so that we can get turneddown and join this class. I'm
not saying anyone listeningshould do that either. It's an
interesting case nonetheless.And applying this the Sherman
Act and some of the other anti,competitive statues, both at the
federal level and state level,to, the way in which a lot of
these luxury brands areoperating today, you know, a 130
(14:28):
years after these laws werepassed, kinda does show you
that, you know, there's nothingnew under the sun. People were
still doing the same things theywere in the 18 nineties.
Danessa Watkins (14:38):
And I wonder for the plaintiffs in this case
if they need to show a certainlevel of, you know, money
already spent or yeah. Oncertain products?
So, you
Jack Sanker (14:49):
know, they don't spell it out super well in the
complaint because that's what Iwas looking for too, but I I do
think that's what I would that'swhat I would claim. I'd be like,
look. I didn't want this scarffor these shoes or whatever. I
was being induced to buy them sothat I could buy the Birkin bag,
and now they won't sell me thebag. I I I've been damaged in
the amount of money that I'vespent, you know, or something
(15:09):
along those lines, which I stillthink is kinda tenuous because,
like, you did pay for the shoes,and you received the shoes.
Right? And to your pointearlier, it is all it's all
implicit. It's not spelled out.And so that may be, difficult.
Although I think everyone knowsthe game here, and I think, it's
(15:31):
it's common enough in luxurydealers that everyone
understands you don't even getto look at this stuff.
Like, go to a Rolex dealer andand, you know, ask if they'll
sell you, you, you know, a aSubmariner or whatever. They'll
just if they don't know you,they'll slap at you. They're
like, absolutely not, which iscrazy because even if you're
like, I'll pay for the item.I'll pay they're just like,
that's not where we make ourmoney. We make our money
Danessa Watkins (15:52):
on all the
Jack Sanker (15:53):
crap we make you purchase before we sell you the
item. Yeah. So, it's, it'll beinteresting to see if this one
sticks around. I don't know howbig the class can can be. I
mean, how many people have havegone through the trouble of
building a sales history withwith Hermes to then be denied
the holy grail Birkin bag.
(16:13):
I mean, dozens maybe if that
Danessa Watkins (16:17):
And clearly, there's an employee
whistleblower that's giving allthe inside information about
Jack Sanker (16:22):
The commission aspect of it is what's very
interesting. Yeah. For sure. Itwhich I think does, imply that
Hermes knows what's going on.It's not just, you know
Danessa Watkins (16:29):
Yeah.
Jack Sanker (16:30):
Employees on the floor doing it. Right. So
Danessa Watkins (16:32):
Interesting. Alright. So moving on to this
antitrust suit against Apple. Soon March 21, 2024, the US
Department of Justice filed alawsuit against Apple along with
16 states and the District ofColumbia, alleging that Apple is
(16:54):
using anticompetitive practicesin order to maintain its
monopoly in the smartphonemarket. Now the basic theory of
this lawsuit is that Apple issquelching the development of
apps, these so called super appsthat are essentially a gateway
to a variety of other servicesand apps.
So think cloud streaming, gamingapps, messaging apps, but but
(17:18):
particularly financial servicessuch as digital wallets. That's
a big one that came up in thislawsuit. And then accessories
such as smartwatches and, thingsof that nature. So the idea is
that Apple is insulating theiPhone from the rise of
potential competitors. Now thethe DOJ is claiming that Apple's
(17:41):
practices are intended to keepcustomers reliant on iPhones and
less likely to switch to otherdevices.
So I don't think it's any secretthat the iPhone is certainly the
most profitable product thatApple has put out. And just to
give you a sense of that, in2022, the App Store generated a
(18:01):
104,000,000,000 in digitalsales. Alright. Now some of the
anticompetitive behaviors thatthe DOJ is alleging includes
making it easier for users toconnect iPhones to Apple
products, such as smartphones orexcuse me, such as smartwatches
and laptops, preventing thecreation of digital wallet
(18:22):
alternatives by limiting financefinance companies access to the
iPhone's payment chip and alsoBluetooth trackers from tapping
into its location servicefeature. There's also
allegations of blocking cloudstreaming apps and then
undermining messaging acrosssmartphone prices and less
(18:51):
innovation.
Now I found some quotes from aprofessor from the University of
Virginia School of Law. This isThomas b Nachbar, and he weighed
in on this lawsuit and theimpact that it's going to have.
So first, he started by findingsome similarities between this
case and the lawsuit that thegovernment brought against
(19:12):
Microsoft in the late 19nineties. So in that case, the
Department of Justice and 20different states filed an
antitrust claim againstMicrosoft to determine ruling in
that Microsoft case was thatthere were violations of the
(19:34):
Sherman Act and a district courtordered Microsoft to divide the
company in half. Certainly, weknow that didn't happen.
Microsoft appealed and theyended up settling with the DOJ.
So they didn't have to break uptheir company, but they did
agree to share computinginterfaces with other companies.
So professor Nackbar says,quote, the Microsoft case itself
(19:57):
offers a lot of guidance here.In that case, the court ruled
that the plaintiff has to showthat there is anti competitive
effect and then the defendanthas to provide a pro competitive
justification. Then if theplaintiff can rebut that
justification, the court shouldbalance the pro competitive and
the anti competitive effects.
Much of the conduct thegovernment is complaining of in
(20:18):
this case, he's referring to theApple case, are things that
Apple says it does in order toeither protect its users or to
provide them a distinctivecustomer experience. And those
types of justifications werelargely accepted by the court in
the Microsoft case. So it willlikely come down to the facts.
How credible Apple's claims arethat its conduct provides a
(20:39):
distinct product or improvesecurity. Credibility was a
major problem for Microsoft inits case with some very damning
email traffic featuringprominently in the case, end
quote.
Now what's interesting aboutwhat that professor notes from
the Microsoft case is that inthe Apple complaint, it's an 88
page complaint, but they startby giving quotes from what may
(21:05):
turn out to be very damningemails between, Apple
executives. So this is quotingthe first paragraph of the
complaint. In 2010, a top Appleexecutive emailed Apple's then
CEO about an ad for the newKindle e reader. The ad began
with a woman who was using heriPhone to buy and read books on
the Kindle app. She thenswitches to an Android
(21:27):
smartphone and continues to readher books using the same Kindle
app.
The executive wrote to Jobs,Steve Jobs. 1 quote message that
can't be missed is that it iseasy to switch from iPhone to
Android. Not fun to watch, endquote. Jobs was clear in his
response. Apple would forcedevelopers to use its payment
(21:47):
system to lock in bothdevelopers and users on its
platform.
Over many years, Apple hasrepeatedly responded to
competitive threats like thisone by making it harder or more
expensive for its users anddevelopers to leave than by
making it more attractive forthem to stay. And that's end
quote from that first paragraph.So certainly the DOJ is starting
(22:08):
out this complaint by showing orattempting to show a a clear
intent to create a monopoly byApple's then CEO and the higher
ups.
I think to interject here just on the
Jack Sanker (22:22):
the amount of money that app Apple rakes in on this,
from almost everyone, I there's,like, there's, like, rumors of
certain apps getting a specialdeal with Apple. But for almost
everyone, it's a sliding scaleof 15 to to 30. But for small
guys, you know, you a small appor whatever, is, you know, if
(22:49):
you have an app that is doing,you know, $10,000,000 in sales
or whatever and you want it tobe on the App Store, you have to
be paying Apple between 1.53$1,000,000 just to be on for the
privilege of being in allowed onthe App Store. Yeah. So it's a
it's a it's a serious amount ofmoney from their perspective.
Danessa Watkins (23:06):
Yeah. That's interesting. And I'm I'm sure
that there are going to be a lotmore stories like that, of
situations where Apple has, youknow, or is raking in money
because people know that iPhoneis the most successful
smartphone out there.
Yeah. I think Apple's justification, which
we'll see you in whatever theyfiled in response to the
Jack Sanker (23:28):
DOJ complaint, it is typically been, we are
interested in the privacy, ofour consumers' data and in
protecting them from, you know,bad products or whatever. So so,
you know, I hate to say it, butthe App Store experience and can
(23:48):
in the apps that are on the AppStore, there is a certain amount
of, trust that you can sort ofhave in those apps versus the
more open, like, Android store,at least in my experience. But
with that comes, you know, theamount of control that Apple has
over, you know, how those appsare presented and everything
else. But that's Apple'stypically their responses. You
(24:10):
know?
We're Right. We're protectingour consumers against, you know,
harmful downloads or whateverthey wanna call it. And whereas
the competitors are saying, no.You're just, to your point,
building a moat.
Danessa Watkins (24:21):
Right. And, like professor Nachbar said, it
it's ultimately gonna come downto a judge having to weigh what
are these these competitivebehaviors versus the the
consumer protections that, thatApple says it's trying to put
into
Jack Sanker (24:37):
place. And I I don't have the date offhand, but
I I do know I think I rememberthis from law school. But the,
the, Microsoft
Danessa Watkins (24:55):
government on this one. I mean, they have a
sizable business that they needto protect and that they're
gonna fight for. So, I don'tthink we'll have any decisions
in this case for a while for anumber of years. And even then,
there could be appeals, but thisis one that's probably gonna set
some real precedent goingforward for antitrust law, and,
(25:16):
I've read a few articles inparticular that was saying that,
the government currently is isputting a lot of money into
research into potentialmonopolies and, spending a lot
of litigation against them too.So
Jack Sanker (25:30):
Yeah. The problem is that Apple can I mean, this
is not this is a a blip on theirradar in terms of expenses? You
know, they can they can have 100of lawyers billing effectively
24 hours a day for the next 10years and really not even feel
it. You know? Yeah.
And, like, eventually, the DOJwill.
Danessa Watkins (25:46):
Yeah. Certainly. And so it's funny.
And looking into this story, Ifound an interesting article on
wired.com, which actuallytouched on the very reason that
I personally switched to aniPhone, and that is the stigma
of the green bubble.
Jack Sanker (26:02):
Oh, yeah.
Danessa Watkins (26:04):
And this is actually addressed in the
complaint. It says Appleaffirmatively undermines the
quality of rival smartphones. Sobecause messages sent between
iPhones via Apple's proprietarynetwork appear appear in blue
bubbles, but those from Androidphones appear in green and are
excluded from any of theImessage features. Apple has
(26:26):
signaled to consumers that rivalphones are of less quality, the
suit alleges. And I had thattoo.
You know, you're in a groupchat, and you're you're turning
the chat from blue to green. And
Jack Sanker (26:39):
It's it's a scarlet letter of texting. Yeah.
Danessa Watkins (26:41):
Absolutely.
Jack Sanker (26:42):
Green bubble. You're just like, man, come on.
Danessa Watkins (26:44):
And, of course, you know, you've got younger and
younger consumers that aregetting, smartphones now. And
we've talked on previous showshow peer pressure affects this
generation differently, youknow, the cohort of juveniles.
So those types of things whereyou're gonna have kids that, you
(27:04):
know, don't have the iPhone.They're gonna feel more
pressured and bug their parentsmore for the iPhone to get the
the blue bubbles. So it's just,you know, one of many issues
that are raised in the complaintabout why they think, iPhone is
engaging in this anticompetitive behavior.
And then we found actually, itwas wired.com that also touched
(27:25):
on some of the damning evidencethat could potentially come out
in this case. I'm quoting nowfrom that article. So back in
2022 at the annual CodeConference where tech luminaries
submit to on stage interviews,an audience member asked Apple
CEO Tim Cook for some techsupport. Quote, I can't send my
(27:45):
mom certain videos, end quote,he said. She used an app an
Android device, which means shecan't access Apple's Imessage.
Cook's now infamous response, quote, buy
your mom an iPhone, end quote.
There you go. Yep. Unquote.
Jack Sanker (27:57):
There you go. Yep.
Danessa Watkins (27:58):
So it will be interesting to see how this case
develops. I'm sure we're gonnaget a motion to dismiss filed by
Apple in the next couple weeksor so. So we'll continue to
follow-up, and, this could beyours in the making.
Jack Sanker (28:12):
Lot of content.
Danessa Watkins (28:13):
Absolutely.
Alright. Now moving on to this new Florida
law that, Ron DeSantis justsigned in. In a nutshell, this
bill is set to take effect,January 1, 2025, and it will ban
(28:34):
social media accounts forchildren under 14 in Florida. It
also will require parentalpermission for 14 15 year olds
to use social media. Now what'skind of interesting about this
this bill that just got passedis it's actually well, probably
not probably not the second.
I'm sure there's been a longline of them. But just a month
(28:56):
ago, governor DeSantis actuallyvetoed a bill that was similar,
but it set the ban at 16. So,there must have been some
negotiations that were donebehind the scenes, because at
the time he vetoed it, he didsay that a improved bill was
coming out, and DeSantis hasalso said he would never sign
(29:17):
into law a bill that he feltwould not pass constitutional
muster. So, I guess the thenegotiations were that were had
were giving some parentalcontrol back when it, pertained
to 14 15 year olds who areaccessing social media. So
looking a little bit into whatthe law would prohibit and
(29:39):
require.
First, social media platformshave to prohibit minors under 14
from creating new accounts. Itrequires social media platforms
to terminate certain accounts.It authorizes the state to issue
and enforce civil investigationunder certain circumstances and
(30:00):
also providing for civilpenalties, and it will allow 14
15 year olds to keep theiraccounts if a parent or guardian
says it's okay. Now this issomewhat similar to to the laws
that other states have tried toput through. We mentioned on a
(30:21):
prior episode, the CADCA thatCalifornia tried to put in which
a district court recently heldas unconstitutional primarily
based on first amendment issues.
That is up on appeal, so we willfollow-up on that. But
certainly, this new law probablyis gonna face the same scrutiny,
(30:43):
that we have the same FirstAmendment concerns really that
we're setting a hard line at, 16and limiting access to
information for anyone underthat. There's also questions
about how can a social mediacompany actually verify
someone's age? Are we doingcensorship and restricting
(31:07):
access in a sweeping fashionthat really isn't called for.
Again, prior restraints on freespeech.
Jack Sanker (31:13):
The termination of accounts also, I think, raises a
big red flag. Right? Like,you're compelling the so you're
compelling the social mediacompany to take down speech,
which is, I think I mean, I'mnot an expert. You are. But the
the whole section 2 30 aspect ofwhat a publisher is and is
obligated to do and isn'tobligated to do or whatever
(31:33):
seems like it's gonna run afoulof that.
Danessa Watkins (31:36):
Oh, absolutely. And especially in today's day
and age where you haveinfluencers, you know, you have
youngsters under the age of 18that are actually bringing
income from things like this.No. I expect that there's gonna
be pushback probably from,social media companies and
families alike who will beaffected by this. And it's hard
(31:57):
because, certainly, there are aplethora of studies out there
about the negative effects ofsocial media on on young minds.
But, you know, it's it's gonnabe hard for lawmakers to to come
up with something that balancesboth First Amendment rights and
and the protections that we needfor for the youth.
Jack Sanker (32:17):
Yeah. Especially in light of the past couple of
years when I would say that, youknow, not to be overtly
political, but the the kind ofcohort that is, or coalition
rather that is, coalition ratherthat is, like, behind this, if
you will, has in many othercontexts been all about the
expansion of first amendmentrights for online speech. You
(32:39):
know? The idea of, doingsomething about, you know,
quote, unquote cancel culture orwhatever.
Danessa Watkins (32:47):
Mhmm.
Jack Sanker (32:48):
So, like and those are different things. You could
definitely make, bigdistinctions between the two
things that I'm alluding tohere, and, you know, what's
going on with, you know, speechof minors. And I and minors also
have speech rights compared toadults. Sure. But, nevertheless,
this would amount to governmentdown speech restrictions on, on
(33:12):
individuals, minors, sure, fromthe same pea group of people
that are, like, in othercontexts, you know, we should be
able to say anything online.
Right. And, that's justsomething to keep an eye on.
Danessa Watkins (33:23):
Yeah. No. It's it's definitely interesting. A
lot of avenues that you can lookat this one. So, I'm I'm sure
that as as soon as this startsto go into effect, there will be
a slew of lawsuits.
So we'll just have to keep aneye on it and and see if Florida
fares any better thanCalifornia. Alright. Well,
that's the show for today.Remember to check us out, Apple,
(33:48):
Spotify, YouTube, wherever youget your podcasts. Leave us
comments.
Let us know your thoughts ifthere's any other topics that
you want us to cover or expandupon. And yeah, we'll see you
next time.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.