U.S. Justice Department sues Apple over its ‘iPhone monopoly’

The United States Department of Justice, joined by 16 state and district attorneys general, has filed a civil antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act. You can read the full text of the filling here (PDF).

The government alleges that Apple used contractual restrictions and technological restrictions to limit developers in such a way that it is more difficult for them to compete with Apple’s own products and services, and more difficult for iPhone users to switch to Android.

“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.”

U.S. Dept. of Justice

The suit also claims that “Unless Apple’s anticompetitive and exclusionary conduct is stopped, it will likely extend and entrench its iPhone monopoly to other markets and parts of the economy.”

It should be noted that the suit does not allege that Apple maintains a majority of the smartphone market and it is not about whether or not consumers can choose to buy smartphones other than the iPhone. Rather, the suit charges that Apple using its market strength to give an advantage to its own apps, services, and products over others. For example, forcing third-party smartwatch makers to use APIs that limit their access and capabilities compared to what Apple can do with its own Apple Watch, or making it impossible for third-party location trackers like Tile to work as well across devices as Apple’s own AirTags.

The DOJ breaks down its major complaints into five main categories:

• Blocking innovative super apps: Apple has disrupted the growth of apps with broad functionality that would make it easier for consumers to switch between competing smartphone platforms.
• Suppressing mobile cloud streaming services: Apple has blocked the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware.
• Excluding coss-platform messaging apps: Apple has made the quality of cross-platform messaging worse, less innovative, and less secure for users so its customers have to keep buying iPhones for the iMessage platform.
• Diminishing the functionality of non-Apple smartwatches: Apple has limited the functionality of third-party smartwatches so that users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones.
• Limiting third-party digital wallets: Apple has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.

While these are the big-ticket items, the complaint says that Apple’s anticompetitive conduct extends further, including “web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more.”

Apple has issued the following response to the suit:

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. 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 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.

Apple

The Department of Justice began its inquiry into Apple in 2019 and has built a case that is much broader than most other regulatory agencies. The European Union, for example, focused on the App Store and tap-to-pay functionality.

Apple has successfully defended itself against other antitrust suits, most recently against Epic Games, but the scope here is much broader.

Whatever the outcome, it is unlikely to have a material effect on users for quite some time. These cases can take years to resolve, and then any forced remedies are often given deadlines even further out to give the company time to comply. For at least the next couple of years, the most likely way this will impact Apple users is if Apple preemptively makes minor changes to its policies and contracts in an effort to argue that any past issues are already resolved and prevent the government from imposing a bigger remedy.