Apple has been sued by the Justice Department for allegedly violating antitrust laws by constructing an illegal monopoly over the smartphone market in the United States. It is joined by 16 other state and district attorneys general.
The New Jersey lawsuit asserts that Apple maintains an illegal monopoly by imposing contractual restrictions and withholding access points from developers. Without this activity, users would have access to other products, apps, and services which would make them less reliant on the iPhone and lower costs for consumers and developers. Examples of anti-competitive behavior alleged in the complaint include blocking the growth of apps so that consumers experience less ease switching between competing smartphone platforms, stifling the development of cloud-streaming apps and services so that consumers must pay for expensive hardware to experience high-quality video games and other applications, degrading the quality and security of cross-platform messaging apps so that consumers must continue to buy iPhones, frustrating the functionality of third-party smartwatches so that consumers must continue to buy iPhones, and blocking cross-platform third-party digital wallets.
Apple famously produces products like the iPhone, iPad, Apple Watch, and Mac computers that work seamlessly together but less flawlessly with devices manufactured and sold by other companies. This “walled garden” is a feature that consumers have come to expect from Apple products, the company says. However, the complaint frames the walled garden as Apple’s attempt to keep competitors away and prices high.
It references an antitrust enforcement case the United States brought against Microsoft around the time Apple launched the iPod, pointing out that while Apple “branded itself a nimble, innovative upstart” and criticized Microsoft for its “dirty tactics,” it was not facing nearly the same restrictions it is now forcing on others. iPods were compatible with Windows computers, the complaint states, and Microsoft was not charging Apple a 30 percent fee per song downloaded from Apple’s iTunes store, like the fee Apple now imposes.
The complaint alleges that Apple’s anticompetitive actions have made it so that it is not economically viable to innovate and build some apps, like digital wallets, because they could not be used by iPhone users. At the same time, Apple itself is disincentivized from innovating. The complaint quotes Apple executives as saying, “I think going forward we need to set a stake in the ground for what features we think are ‘good enough’ for the consumer. I would argue that we’re already doing *more* than what would have been good enough. …anything new and especially expensive needs to be rigorously challenged before it’s allowed into the consumer phone.”
Apple’s stock price has dropped, possibly due to antitrust concerns and artificial intelligence products recently introduced by competitors Google and Microsoft. The company is also facing an ongoing battle stemming from an antitrust lawsuit brought by video game maker Epic Games over the 15 to 30 percent commissions Apple charges for digital transactions completed through apps in its iPhone App Store.
Additional Reading
Apple has kept an illegal monopoly over smartphones in US, Justice Department says in antitrust suit, AP News (March 21, 2024)
Justice Department Sues Apple for Monopolizing Smartphone Markets, U.S. Department of Justice (March 21, 2024)
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