The Justice Department is in the late stages of an investigation into Apple and could file a sweeping antitrust case targeting the company's strategies to protect the iPhone's dominance as soon as the first half of this year, three people with knowledge of the matter said. knowledge of the matter. affair.
The agency is focusing on how Apple has used its control over its hardware and software to make it harder for consumers to get rid of the company's devices, as well as for rivals to compete, said the people, who spoke anonymously because the investigation was active.
Specifically, researchers have examined how the Apple Watch works better with the iPhone than other brands, as well as how Apple excludes competitors from its iMessage service. They have also examined Apple's payments system for the iPhone, which prevents other financial companies from offering similar services, these people said.
Senior leaders in the Justice Department's antitrust division are reviewing the results of the investigation so far, two of the people said. Agency officials have met with Apple several times, including in December, to discuss the investigation. No final decision has been made on whether a lawsuit should be filed or what it should include, and Apple has not had a final meeting with the Justice Department in which it can present its case to the government before a lawsuit is filed.
The Justice Department is closing in on what would be the most consequential federal antitrust lawsuit challenging Apple, which is the world's most valuable technology company. If the lawsuit is filed, US regulators will have sued four of the largest technology companies for monopolistic business practices in less than five years. The Justice Department is currently facing Google in two antitrust cases, focused on its search and advertising technology businesses, while the Federal Trade Commission has sued Amazon and Meta for stifling competition.
Apple's lawsuit would likely be even broader than previous challenges to the company, attacking its powerful business model that pairs the iPhone with devices like the Apple Watch and services like Apple Pay to attract and keep consumers loyal to its products. Rivals have said they have been denied access to key Apple features such as the Siri virtual assistant, leading them to argue the practices are anti-competitive.
A Justice Department spokesperson declined to comment for this article. Apple also declined to comment.
The company has previously said its practices do not violate antitrust law. By defending its business practices against past criticism, apple said that their “focus has always been to grow the pie” and “create more opportunities not only for our business, but also for artists, creators, entrepreneurs and all the 'crazy' ones with a great idea.”
The company takes pride in the way the iPhone integrates hardware and software to create a seamless customer experience. In 2020, Tim Cook, CEO of Apple, said during testimony before a congressional antitrust committee that the company redefined mobile phones with “its effortless user experience, simplicity of design, and high-quality ecosystem.” He added that Apple competed with Samsung, LG, Google and other smartphone makers, which offer a different approach.
“Apple does not have a dominant market share in any market in which we do business,” Cook said at the time. “That's not just true for the iPhone; It is valid for any product category. “
The case would add to the growing regulatory pressure, both domestically and internationally, affecting Apple's business, currently valued at $2.83 trillion.
This year, European regulators are expected to force Apple to accommodate app stores beyond its own under the Digital Markets Act, a law passed in 2022 to rein in tech giants. Similar actions have been taken or are being considered against the App Store in South Korea and Japan.
Additionally, the European Commission said in 2021 that Apple had violated its antitrust laws by imposing app store fees on competitors of its Apple Music product. The commission's investigation into the matter continues.
The resolution of the Justice Department's investigation could be affected by the details of how Apple complies with European regulations, said two people with knowledge of the matter, who spoke anonymously because the investigation was ongoing.
Apple faces increased regulatory pressure as its business slows. Last year, the company reported that its annual revenue fell 2.8 percent to $383 billion, its first fiscal year decline since 2019, as sales of iPhones, iPads and Macs slowed. Still, the company sold more than 200 million iPhones and accounted for almost three quarters of smartphones sold worldwide that were priced above $600, analysts estimate.
When the Justice Department began its technology investigations in 2019, it prioritized its antitrust review of Google over Apple because it lacked the financial resources and personnel to fully evaluate both companies, according to two people with knowledge of the matter. That changed in 2022 after the department's budget increased.
The investigation has spanned a broader range of Apple's business interests than previously reported, six people with knowledge of the meetings said. That includes how Apple has blocked cloud gaming apps, which allow users to stream a multitude of titles to their phones, from being offered in its App Store.
The researchers spoke with executives at Tile, the Bluetooth tracking service, about Apple's competing AirTag product and the company's restrictions on third parties accessing the iPhone's location services. Executives at Beeper, a startup that made iMessage available on Android phones, spoke to researchers about how Apple blocked it from allowing messaging to be offered on competing smartphone operating systems. Researchers have also had conversations with banks and payment apps about how Apple prevents them from accessing the tap-to-pay feature on iPhones.
Tile and Beeper declined to comment for this article.
They have also analyzed how the Apple Watch works better together with the iPhone than other competing smartwatches. Users of Garmin devices have complained on Apple's support forums about not being able to use their watches to respond to certain text messages from their iPhone or modify the notifications they receive from the iPhone connected to their watch.
Apple's new privacy tool, App Tracking Transparency, which allows iPhone users to explicitly choose whether an app can track them, has drawn scrutiny because it restricts advertisers' collection of user data. Advertising companies have said the tool is anti-competitive.
Meta, which owns Facebook and Instagram, encouraged the Justice Department to look into the issue in its conversations with the agency, two of the people said. The company, which makes most of its money from advertising, said in 2022 that it could lose about $10 billion in revenue that year because of the changes. Meta declined to comment. Investigators have also examined Apple's policy of applying fees to in-app purchases on iPhones, which companies such as Spotify and dating app powerhouse Match Group say is anti-competitive.
In 2020, Epic Games, the creator of the popular game Fortnite, sued Apple over the App Store's requirement that developers use the tech giant's payment system. A federal judge determined that Apple did not have a monopoly on mobile games, dealing a blow to Epic's claim.
When Epic Games sued Google over similar claims, it got a different result. A jury ruled in December that Google's App Store policies had violated antitrust laws. Google plans to appeal the verdict.
The Justice Department last sued Apple in 2012, accusing it of conspiring with book publishers to raise the price of digital books. Apple lost the case and paid a $450 million settlement.
