Apple Market Cap Crashes by $113 Billion Following DOJ Lawsuit

An Apple logo hangs at an Apple store in Palo Alto, Calif., on Feb. 2, 2024. AP Photo/Noah Berger

Apple’s market capitalization tumbled by roughly $113 billion on Thursday after the U.S. Department of Justice (DOJ) filed an antitrust lawsuit.

The lawsuit was filed by the DOJ and 16 states on March 21, alleging that Apple was illegally monopolizing the smartphone market. On Wednesday, Apple shares closed at $178.66. By the end of Thursday, shares fell to $171.29, a decline of 4.12 percent. The company’s market capitalization declined by roughly $113 billion, to $2.65 trillion. Year to date, Apple is trading down by nearly 8 percent while its market cap is below the $3 trillion mark from late January. Apple has underperformed both the S&P 500 Index and NASDAQ 100 so far this year.

The complaint against Apple alleges that the firm “illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers,” the DOJ said in a March 21 press release.

“Apple undermines apps, products, and services that would otherwise make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers. Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.”

The “anticompetitive behavior” is aimed at ensuring Apple retains its monopoly power while the company extracts as much revenue as possible, the department said.

Some of these behaviors include blocking innovative apps that would allow users to easily switch among competing smartphone platforms, suppressive streaming apps that would have allowed consumers to enjoy high-quality video games without having to pay for expensive smartphone hardware, and inhibiting the creation of cross-platform third-party digital wallets.

While Apple deals with the DOJ lawsuit in the United States, the company is facing probes in Europe looking into whether the firm is in compliance with the Digital Markets Act. The act allows the European Commission to charge up to 10 percent of a company’s global annual revenue as a penalty if they are found violating the rules.

During an interview with Bloomberg, Bill Kovacic, an antitrust professor at George Washington University Law School, said that “there comes a point in which the downpour of cases and scrutiny that comes with them become a real drag on how these companies operate.”

“Even if they win, in an important way they’ve lost,” he said.

In January, Apple was hit with three downgrades. Barclays moved the stock down from Equal Weight to Underweight, setting a price target of $160, according to Yahoo Finance. Piper Sandler downgraded Apple to Neutral.

Equity research firm Redburn Atlantic lowered the stock rating to Neutral as well, citing regulatory headwinds as one of the reasons for the downgrade. It kept the price target at $200.

Apple’s Monopoly

Apple hit back at the lawsuit, saying the DOJ complaint not only threatens the company’s existence but it also sets a “dangerous precedent” that could negatively affect other businesses as well.

“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect,” the company said in a statement.

“[The suit] would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”

Former hedge fund manager and CNBC host Jim Cramer criticized the lawsuit, pointing out that the department has not found any “smoking guns” that could pinpoint Apple as guilty.

He cited an antitrust case filed by the government against Microsoft 20 years back. In that case, Microsoft did control the majority of the global market, he said, while noting that such a situation does not exist for Apple.

“The decision by the Justice Department to go against Apple will end up like any of the myriad analysts who’ve gone from buy to hold on Apple’s stock during my time … It’s creating still one more buying opportunity, because the regulators, they ain’t got nothing for you,” he said.

“I just got a whole brand spanking new reason to buy Apple, don’t trade it … I know a loser case when I see one, and the United States of America versus Apple is a loser.”

Attorney General Merrick B. Garland justified the DOJ action against Apple, stating that consumers “should not have to pay higher prices because companies violate the antitrust laws.” If Apple’s actions are left unchallenged, the company “will only continue to strengthen its smartphone monopoly.”

During an interview with AP, Mr. Kovacic, a former chairman of the Federal Trade Commission (FTC), said that Apple’s defense in the case is likely to claim that it is not a monopoly in the smartphone market.

Sean O’Brien, founder of Yale’s Privacy Lab, pointed out that “Apple has a history of clandestine deals with surveillance giants like Google, and [CEO] Tim Cook gave Uber a slap on the wrist instead of an app store ban when [the ride-sharing company] built a backdoor to spy on iPhone users who had already deleted Uber’s app.”