DOJ sues Apple over iPhone monopoly in landmark antitrust case

The
Department
of
Justice
sued


Apple
on
Thursday,
saying
its
iPhone
ecosystem
is
a
monopoly
that
drove
its
“astronomical
valuation”
at
the
expense
of
consumers,
developers
and
rival
phone
makers.

The
government
has
not
ruled
out
breaking
up
one
of
the
largest
companies
in
the
world,
with
a
Justice
Department
official
saying
on
a
briefing
call
that
structural
relief
was
on
the
table
if
the
U.S.
were
to
win.

The
lawsuit
claims
Apple’s
anti-competitive
practices
extend
beyond
the
iPhone
and
Apple
Watch
businesses,
citing
Apple’s
advertising,
browser,
FaceTime
and
news
offerings.

“Each
step
in
Apple’s
course
of
conduct
built
and
reinforced
the
moat
around
its
smartphone
monopoly,”
according
to
the
suit,
filed
by
the
DOJ
and
16
attorneys
general
in
New
Jersey
federal
court.

Apple
shares
fell
more
than
4%
during
trading
Thursday.
A
breakup
of
Apple
if
successful
would
be
one
of
only
a
handful
of
breakups
under
the
Sherman
Act.
The
DOJ
has
considered
using
it
in
other
antitrust
cases,
but
has
not
done
so
since
the
breakup
of
the
Bell
System
in
1982.

The
Justice
Department
said
in
a
release
that
to
keep
consumers
buying
iPhones,
Apple
moved
to
block
cross-platform
messaging
apps,
limited
third-party
wallet
and
smartwatch
compatibility,
and
disrupted
non-App
Store
programs
and
cloud
streaming
services.

The
challenge
represents
a
significant
risk
to
Apple’s
walled-garden
business
model.
The
company
says
that
complying
with
regulations
costs
it
money,
could
prevent
it
from
introducing
new
products
or
services,
and
could
hurt
customer
demand.

The
lawsuit
could
force
Apple
to
make
changes
in
some
of
its
most
valuable
businesses:
The
iPhone,
in
which
Apple
reported
more
than
$200
billion
in
sales
in
2023,
the
Apple
Watch,
part
of
the
company’s
$40
billion
wearables
business,
and
its
profitable
services
line,
which
reported
$85
billion
in
revenue.

U.S.
Attorney
General
Merrick
Garland
said
at
a
news
conference
that
the
Supreme
Court
defines
monopoly
power
as
“the
power
to
control
prices
or
exclude
competition.”

“As
set
out
in
our
complaint,
Apple
has
that
power
in
the
smartphone
market,”
Garland
said.
“If
left
unchallenged.
Apple
will
only
continue
to
strengthen
its
smartphone
monopoly.”

Apple
said
in
a
statement
that
it
disagreed
with
the
premise
of
the
lawsuit
and
that
it
would
defend
against
it.

“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,”
an
Apple
spokesperson
told
CNBC.
“It
would
also
set
a
dangerous
precedent,
empowering
government
to
take
a
heavy
hand
in
designing
people’s
technology.”

The
lawsuit
follows
years
of
investigations
into
Apple’s
business
practices
and
two
prior
DOJ
cases
against
Apple:

One
over
e-book
prices
and
another
over
allegations
that
it

colluded
with
other
technology
companies
to
depress
salaries.

“This
anticompetitive
behavior
is
designed
to
maintain
Apple’s
monopoly
power
while
extracting
as
much
revenue
as
possible,”
the
complaint
said.

The
complaint
highlights
comments
from
CEO

Tim
Cook
and
other
executives.
Some
users
have
asked
Apple
to
improve
Android-to-iPhone
messaging.
Developers
have
gone
as
far
as
creating
apps
that
can
circumvent
the
platform
limitations,
only
to
be
shut
down
by
Apple.

Prosecutors
highlighted
one
exchange
between
Cook
and
a
consumer.

“Not
to
make
it
personal
but
I
can’t
send
my
mom
certain
videos,”
the
complaint
says
one
user
told
Cook,
referring
to
a
2022
interview
at
a
Vox
Media
event.

“Buy
your
mom
an
iPhone,”
Cook
responded.

The
DOJ
is
also
focusing
on
Apple’s
smartwatch,
Apple
Watch,
saying
the
company
designed
it
to
only
work
with
iPhones,
and
not
Android
devices.
The
company’s
decision
means
that
“users
who
purchase
the
Apple
Watch
face
substantial
out-of-pocket
costs
if
they
do
not
keep
buying
iPhones,”
according
to
the
complaint.

The
Justice
Department
said
Apple
has
fought
cloud
streaming
services
on
its
App
Store
platform,
blocking
consumer
access
to
high-quality
video
games
on
iPhones,
echoing
complaints

from
Microsoft
and
Facebook
parent
Meta.

Garland
said
the
DOJ
is
also
looking
at
changing
policies
around
Apple
Wallet,
the
company’s
app
for
phone-based
credit
cards
and
payments.

“When
an
iPhone
user
puts
a
credit
or
debit
card
in
Apple
Wallet,
Apple
inserts
itself
into
the
process
that
would
otherwise
occur
directly
between
the
user
and
the
card
issuer,”
Garland
said.

Apple
has
faced
several
significant
antitrust
challenges
more
recently,
largely
focused
on
its
control
over
the
iPhone
App
Store.
It
mostly
won
in
a
civil
suit
against
Epic
Games
in
2021,
although
it
made
concessions
during
the
trial
and
had
to
make
some
changes
to
its
policies
under
California
law.

“Today’s
lawsuit
seeks
to
hold
Apple
accountable
and
ensure
it
cannot
deploy
the
same,
unlawful
playbook
in
other
vital
markets,”
the
U.S.
government
said
in
the
release.

Jonathan
Kanter,
assistant
attorney
general
for
antitrust,
argued
during
the
Thursday
news
conference
that
Apple
benefited
from
previous
DOJ
antitrust
actions
against
Microsoft.

“Apple
itself
was
a
significant
beneficiary
of
that
case,”
Kanter
said.
“And
the
remedy
paved
the
way
for
Apple
to
launch
iTunes,
iPod,
eventually
the
iPhone,
free
from
anti-competitive
restrictions,
excessive
fees
and
retaliation.”

The
company
is
currently
jockeying
with
the
European
Commission
over
whether
it’s
complying
with
the
new
EU
Digital
Markets
Act,
which
forces
Apple
to
open
up
the
iPhone
app
store
to
rivals
such
as
Microsoft
or
Epic
Games.
Apple
plans
to
charge
big
companies
that
eschew
its
app
store
50
cents
per
download.

Apple
was

fined
$2
billion
by
the
EU
over
a
dispute
with


Spotify
about
whether
the
music
streaming
service
can
link
to
its
website
and
account
system
inside
of
its
app.

Apple
had
64%
of
the
market
share
for
U.S.
smartphones
in
the
last
quarter
of
2023,
versus
18%
for
Samsung,

according
to
Counterpoint
Research.

Apple
isn’t
the
only
big
tech
company
facing
government
scrutiny.
The
DOJ
filed
an
antitrust
case
against
Google
in
2020
over
its

dominant
search
position
and
in
another
year

over
its
advertising
business.
The
DOJ
also
famously
sued
Microsoft
in
the
1990s,
eventually
forcing
it
to
allow
users
to
unbundle
the
Internet
Explorer
browser
from
the
Windows
operating
system.

Correction:
This
story
has
been
updated
to
correct
that
Apple
had
64%
of
the
market
share
for
U.S.
smartphones
in
the
last
quarter
of
2023,
according
to
Counterpoint
Research.