The US Department of Justice has accused Apple of operating an illegal monopoly in the smartphone market in a sweeping new antitrust lawsuit that seeks to change many of the ways Apple locks its phones.
The Justice Department, along with 16 state and district attorneys general, accuses Apple of raising prices for consumers and developers at the expense of making users more reliant on their phones. The parties allege that Apple “selectively” imposes contractual restrictions on developers and withholds critical ways to access the phone as a way to prevent competition from arising, according to a statement.
“Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses and merchants, among others,” the Justice Department wrote.
The government points out several different ways in which Apple has allegedly illegally maintained its monopoly:
- Discontinue “super apps” that encompass many different programs and could degrade “iOS reliability” by making it easier for iPhone users to switch to competing devices.
- Block cloud streaming apps for things like video games, which would reduce the need for more expensive hardware.
- Suppress the quality of messaging between the iPhone and competing platforms like Android
- Limit the functionality of third-party smartwatches with their iPhones and make it difficult for Apple Watch users to switch from iPhone due to compatibility issues.
- Prevent third-party developers from creating competing digital wallets with tap-to-pay functionality for iPhone
“Apple responded to competitive threats by imposing a series of 'Whac-A-Mole' rules and contractual restrictions”
“For years, Apple responded to competitive threats by imposing a series of 'Whac-A-Mole' contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and strangle competitive alternatives to rival technologies,” the head of the Justice Department's antitrust division, Jonathan Kanter, said in a statement.
The case is being filed in the United States District Court for the District of New Jersey.
In a statement, Apple spokesman Fred Sainz said the lawsuit “threatens who we are and the principles that distinguish Apple products 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 the design of people's technology. “We believe this lawsuit is factually and legally flawed, and we will vigorously defend against it.”
Apple is the second tech giant the Justice Department has taken on in recent years after filing two separate antitrust lawsuits against Google during the last two administrations. It has reversed a long drought of technology monopolization cases since the landmark lawsuit against Microsoft at the turn of the century. The case has been years in the making, and in June 2019 reports emerged that the Justice Department get to handle antitrust investigations in the company.
Apple's iOS app developers have complained for years about the platform's closed and often opaque market. Among the most vocal are companies like Spotify that offer paid subscription services that Apple requires a 15 to 30 percent reduction to be offered on its platform. On top of that, Apple has its own apps that compete with those in its App Store (the only place where Apple allows users to download apps for what it says are security reasons), which has led to even more distrust among developers. about whether they are getting a fair deal. filmed in the market.
House panel found that Apple had a monopoly on iOS app distribution
Some developers managed to get the attention of Congress when a House subcommittee conducted its own investigation into the tech giants a few years ago. A 2020 report from that panel found that Apple had monopoly power in the app distribution market on iOS. Lawmakers introduced laws like the Open App Markets Act and the American Online Choice and Innovation Act that sought to prevent large platforms like Apple from giving their own products an advantage in their markets over their competitors. But more than two years after their introduction, neither has received a vote in either chamber.
Europe has moved ahead of the United States in its efforts to control technology. New rules have been instituted through the Digital Markets Act to check the power of the gatekeepers of large platforms, several of which are operated by Apple. Earlier this month, the European Commission fined Apple 1.84 billion euros (about $2 billion) in connection with a complaint from Spotify about its restrictive practices in the App Store. The EU said its investigation found that “Apple prohibits developers of music streaming apps from fully informing iOS users about alternative, cheaper music subscription services available outside the app.”
The Justice Department will have its hands full with technology monopoly lawsuits in the coming years. It concludes closing arguments in its search distribution case against Google in May and will then begin trial in a case over Google's advertising technology in the fall.
