The United States Department of Justice, along with 16 state and district attorneys general, on Thursday filed a civil antitrust lawsuit against iPhone maker – Apple Inc – in the U.S. District Court for the District of New Jersey. The lawsuit accuses the tech giant of monopolizing smartphone markets, and thereby harming competition and driving up prices for consumers.
“We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. If left unchallenged, Apple will only continue to strengthen its smartphone monopoly,” Attorney General Merrick B. Garland said in a press release. “Consumers should not have to pay higher prices because companies violate the antitrust laws,” the Attorney General added.
Why is the U.S. government suing Apple?
The Tim Cook-led company is accused to engaging in various anti-competitive practices that benefit it at the expense of consumers, developers, and other businesses. These practices allegedly include:
· Blocking innovative “super apps” with broad functionalities that could reduce reliance on iPhones.
· Suppressing mobile cloud gaming services that offer high-quality games without expensive hardware upgrades.
· Limiting the functionality of non-Apple smartwatches when paired with iPhones, making them less attractive options.
· Restricting third-party digital wallets from accessing the iPhone’s tap-to-pay feature, hindering competition in mobile payments.
· Making cross-platform messaging apps less user-friendly compared to the company’s iMessage, potentially discouraging users from switching to Android.
The DOJ believes these tactics create a “moat” around Apple’s ecosystem, locking users in and preventing them from exploring alternative options. This, in turn, allows the tech company to maintain high prices for iPhones and charge hefty commissions to app developers.
What is Apple’s response?
Apple denies the allegations and argues that its practices foster innovation and create a seamless user experience for its customers. “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. It would also set a dangerous precedent, empowering the government to take a heavy hand in designing the people’s technology,” Apple spokesperson said.
What are the potential consequences?
This bold legal challenge could have significant ramifications for the tech industry. Apple reported staggering annual net revenues of $383 billion and a net income of $97 billion in fiscal year 2023, the DOJ mentioned in the release. With this, the Cupertino, California-headquartered company surpasses any other company in the Fortune 500 and the GDPs of over 100 countries, it claimed. This financial dominance underscores the significant impact of Apple’s business practices on the market and consumers.
The lawsuit seeks to hold Apple accountable and prevent the deployment of similar unlawful strategies in other vital markets. If the government wins, Apple might be forced to open up its ecosystem. This could potentially lead to lowering of iPhone prices, along with more choices for consumers and a more level playing field for app developers.
It is noteworthy that this antitrust lawsuit by the U.S. authorities comes at a time when Apple has already been adapting to regulatory pressures in the European Union, prompted by the EU’s Digital Markets Act. While the legal process is a lengthy battle and could take years, the U.S. lawsuit presents a formidable challenge to Apple, potentially requiring the company to make substantial changes to its business practices. It remains to be seen how this plays out.
