I-phone Monopoly?

I recently needed to purchase a new cell phone as my three year old Blackberry was about to die. I really wanted a new I-phone because of all of the very cool features that were available. I also liked the fact that I would no longer have to carry both my phone and I-pod around with me as they would be combined into one handy device. There was just one problem, I have Verizon and so do 99.9% of my friends and family. Apple has an exclusive deal with AT&T that makes you have to switch to AT&T in order to use an I-phone.

This exclusive deal between AT&T and Apple made me wonder if this was a monopolistic move or just smart negotiation between two large and powerful corporations to better both companies and innovation for the consumers. I found an article that I thought was interesting as it relates this specific case and how the Obama administration is looking at if it is in violation of the Sherman Anti-Trust Act: http://online.wsj.com/article/SB124689740762401297.html. So, is this deal between Apple and AT&T a violation of the Sherman Anti-Trust Act. The Act was originally enacted to prevent the collusion between firms or “trusts” to lower supply and artificially raise the prices. Such collusion is a violation of the Sherman Anti-Trust Act, and prevents market competition and negatively affects the consumer in which the law was brought about to protect.

So the question remains, is this agreement illegal according to Sherman Anti-Trust or Clayton Acts. I would have to say no. There is no proof that there is lowering of supply or price-fixing taking place. They would have to prove that the the agreement was anti-competitive and negatively impacting consumers and society. I don’t believe this is the case. One reason is because there are substitutes to the I-phone. There is Palm and numerous other Smartphone’s on the market that could be substituted for the I-phone through the other major mobile phone carriers. As much as I wish someone were to step in and say that the agreement wasn’t allow and Verizon could carry the I-phone (because I still really want one), I don’t think that should be the case. This agreement is in no way illegal and I think is promoting competition and bettering society. It is making the other companies work harder on future technologies and innovations that can compete with the I-phone.

Another point that was brought up is that the reason behind the agreement with AT&T and Apple was that AT&T had the network capable of supporting the I-phone and the other companies were lagging behind in this regard. I don’t know too much about how this technology works and what is required to run the I-phone so I can’t comment in this regard, however if AT&T is the only one capable of running the I-phone, then it was the other carriers such as Verizon and T-mobiles fault for lagging behind.

In conclusion, I do not believe this agreement is in violation of the Sherman Anti-trust Act. There is no proof of artificial price-fixing or that this agreement is a detriment to society. There is also no proof that this collusion is anti-competitive and preventing other firms from competing or joining the market. If the companies are just creating great products that have a high demand because they are innovative, that in no way entitles the government to step in and prohibit it. According to the Sherman Act legal monopolies or those brought about by merit are perfectly legal and allowable. I believe this is the case with the exclusive agreement between AT&T and Apple.