Fast facts
- The US Department of Justice filed an antitrust lawsuit against Apple on Thursday.
- In its complaint, the Justice Department alleges that Apple has created a “smartphone monopoly” that will continue to grow if left unchallenged.
- Apple told TheStreet in a statement that the lawsuit would set a “dangerous precedent.”
The US Department of Justice filed an antitrust lawsuit against Apple on Thursday (AAPL) alleging that the tech giant has built a “smartphone monopoly” at the expense of consumers, developers and competitors.
Beyond the mere existence of the iPhone, the complaint, joined by 16 attorneys general, claims that Apple has engaged in illegal and anti-competitive behavior in everything from the App Store to its smartwatches, messaging apps, Apple Wallet and FaceTime.
The Justice Department said that Apple's behavior violates the Sherman Actan antitrust law passed in 1890. The lawsuit was filed in the United States District Court for the District of New Jersey.
“Apple has maintained monopoly power…by violating federal antitrust law,” Attorney General Merrick Garland said at a news conference Thursday. “We allege that Apple has employed a strategy that relies on exclusionary and anti-competitive conduct that harms consumers and developers.”
For consumers, he said, Apple's conduct has resulted in fewer choices and less innovation. For developers, “it means being forced to follow rules that insulate Apple from the competition.”
“We allege that Apple has consolidated its monopoly power not by improving its own products but by making other products worse,” Garland said.
He added that Apple achieves this in two main ways: one, by imposing high fees on third-party developers who use Apple's ecosystem, and two, by “restricting the connections” between these third-party apps and Apple's user interface.
Garland cited difficulties in cross-platform messaging from an iPhone user to a non-iPhone user, saying that Apple “deliberately degrades the quality and security of its users, causing iPhone users to perceive other phones as lower quality to even though Apple is responsible for breaking cross-platform messaging.”
Apple does not agree and will fight the lawsuit
Apple said in a statement that it disagrees with the lawsuit, adding that it “will vigorously defend against it.”
“This lawsuit threatens who we are and the principles that distinguish Apple products in fiercely competitive markets,” Apple said. “If successful… it would set a dangerous precedent, empowering the government to take a heavy hand in the design of people's technology. We believe this lawsuit is wrong on both the facts and the law.”
International Data Corporation. found in January that Apple was the top smartphone maker by market share in 2023, the first time it took that top spot from Samsung since 2010.
The tech giant recently engaged in a fight with Epic Games over the revocation of Epic's European developer account, recently acquired under the newly applicable European Digital Markets Act.
Apple shares fell more than 3% on Thursday.
“If left unchecked, Apple will only continue to strengthen its smartphone monopoly,” Garland said. “But there is a law for that.”
Related: Epic Games CEO explains how he fought Apple and won
Wedbush: Case is a 'serious matter'
Wedbush's Dan Ives said in a note Thursday morning that the lawsuit would likely take years in court and could ultimately lead to a trial between the United States and Apple.
Ives said he didn't expect Apple to make any changes to its business model now. But he said Apple was going to have to “find a way to resolve this case, pay a substantial fine and ultimately find some compromise with the App Store developers.”
Ives said the case added to the “headline risk” of the Apple story, saying it would drag on, keeping the company under the microscope both in the United States and abroad.
“The Justice Department's antitrust case is a serious matter that has taken years to build and they are clearly moving aggressively down this collision path with (CEO Tim Cook) and Cupertino,” Ives said. “This clearly escalates the Biden administration's antitrust efforts against Big tech giants and adds to the current ongoing antitrust case against Google and other cases against Meta and Amazon.”
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