The Department of Justice (DOJ) and 16 states on March 21 filed a civil lawsuit against Apple Inc. accusing the company of illegally monopolizing the smartphone market.
The DOJ and 16 state attorneys general claimed that Apple attempted to limit competition, which harms consumers, small businesses, and app developers via the firm’s App Store and other Apple features. Apple has long placed significant restrictions on what can be downloaded through its App Store, saying that those rules are designed to bolster Apple device users’ privacy and security.
But the broad suit accuses Apple of a range of illegal behavior, saying that it controls automotive services, news services, and digital wallets and puts restrictions on third-party apps. It also claims that the tech giant based in Cupertino, California, places controls on messages sent from iPhones to other phones in its default messaging service.
Apple, the DOJ alleged, engaged in monopolistic behavior by making its Apple Watch compatible only with iPhones.
“Consumers should not have to pay higher prices because companies violate the antitrust laws,” Attorney General Merrick Garland said in a statement announcing the lawsuit. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”
Further, the lawsuit accuses Apple of an illegal monopoly on smartphones maintained by imposing contractual restrictions on, and withholding critical access from developers. Apple has already been subject to antitrust probes and orders in Europe, Japan, and Korea, as well as lawsuits from corporate rivals such as Epic Games.
“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” the DOJ complaint against Apple also read. “The cumulative effect of this course of conduct has been to maintain and entrench Apple’s smartphone monopoly at the expense of the users, developers, and other third parties who helped make the iPhone what it is today.”
Apple has long defended what it calls a walled garden approach as a feature prized by consumers who want only Apple products and what the company says is the top-tier protection available for their personal information. It has described the barrier as a way for the iPhone to distinguish itself from devices running on Google’s Android software, which isn’t as restrictive and is licensed to a wide range of manufacturers.
Concerns about an antitrust crackdown on Apple’s business model have contributed to the drop in the company’s stock price, along with concerns that it is lagging Microsoft and Google in the push to develop products powered by artificial intelligence technology.
The DOJ made it clear in its complaint that they see Apple’s walled garden mostly as a weapon to ward off competition, creating market conditions that enable it to charge higher prices that have propelled its lofty profit margins while stifling innovation.
“For years, Apple responded to competitive threats by imposing a series of ‘Whac-A-Mole’ contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies,” Jonathan Kanter, DOJ assistant attorney general of the antitrust division, said in a statement on March 21.
Earlier this year, Apple announced it would comply with a European Union law that will force the company and other smartphone makers to make adjustments to what apps users can download. For the first time ever, Apple said in a release that users in the EU would be able to download apps from third-party stores—not just its App Store.
On March 15, the tech giant agreed to pay out $490 million to settle a class-action lawsuit that alleged that CEO Tim Cook defrauded shareholders by concealing falling demand for iPhones in China. Previously, the firm denied liability, but it settled to avoid the cost and distraction of litigation, court papers show.
Apple posted $97 billion of net income in the 2023 fiscal year, and the recent payout equates to a little less than two days of profit.
Apple Responds
In response to the lawsuit, Apple released a statement saying it would threaten the company’s very existence while setting a “dangerous precedent” that will affect other businesses.“At Apple, we innovate every day to make technology people love—designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users,” the company said in a statement on March 21. “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 statement went on: “[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.”
