ROTTEN TO THE CORE
Landmark DOJ suit vs. Apple phone ‘monopoly’
Apple is violating antitrust laws by blocking fair competition to ensure the dominance of its iPhone, the Justice Department alleged Thursday in a long-awaited federal lawsuit that could upend the business model of the world’s secondmost valuable company.
Filed in a New Jersey federal court by the DOJ and 16 state attorneys general, the lawsuit alleges Apple has maintained an illegal monopoly over the smartphone market through unfair tactics, such as onerous App Store fees and restricted developer access to key features of its products, resulting in higher prices and fewer choices for American shoppers.
“Consumers should not have to pay higher prices because companies violate the antitrust laws,” Attorney General Merrick Garland said in a statement. “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.”
Third federal lawsuit
The landmark lawsuit is arguably the most significant enforcement action taken against Apple to date by the DOJ, which has now sued the company three times over the past 14 years. The DOJ is also locked in an ongoing legal battle with Google over alleged antitrust violations, while the Federal Trade Commission has targeted Meta and Amazon.
Led by CEO Tim Cook, Apple was already in the midst of a heated public war of words with “Fortnite” maker Epic Games over its App Store practices — including its policy of taking a 30% cut of purchases made within the App Store — and intense regulatory scrutiny in Europe.
Apple shares closed down 4% Thursday. The Cupertino, Calif.based tech behemoth has a market cap of $2.65 trillion, trailing Microsoft’s $3.19 trillion.
Apple said in a statement that the “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,” the company said.
Apple held a whopping 64% share of US smartphone sales in the fourth quarter of 2023, according to data from Counterpoint Research. Its next closest competitor, Samsung, had 18%.
During a press conference, Garland noted Apple texts with Android phones have limited functionality, such as a lack of encryption or typing indicators, to encourage customers to stick with iPhones.
The DOJ’s lawsuit cites a Vox Media’s Code Conference in 2022 that Cook attended in which he was asked to improve text messaging between iPhones and Androids because the questioner couldn’t “send my mom certain videos.”
Cook responded, “Buy your mom an iPhone,” according to the complaint.
Wedbush analyst Daniel Ives noted the DOJ’s lawsuit will likely be a years-long headache for Apple.
Separately, Apple, Meta and Alphabet’s Google are set to be investigated for potential violations of the EU’s Digital Markets Act that could lead to hefty fines by the end of the year, according to people with direct knowledge of the matter said Thursday.