In a blockbuster antitrust case, the U.S. Department of Justice and a coalition of 15 states and the District of Columbia have filed a lawsuit accusing Apple of violating federal antitrust laws by abusing its market dominance in the smartphone industry. The suit alleges that Apple has illegally maintained a monopoly over key technology for mobile devices through a series of exclusionary and anticompetitive practices.
At the center of the government's case is the contention that Apple has deliberately restricted options and inflated costs for consumers by exercising tight control over core smartphone technology and limiting the functionality of third-party apps and accessories. Apple is estimated to control over 70% of the U.S. high-end smartphone market.
Apple protects its monopoly power in smartphones and performance smartphones by using its control over app distribution and app creation to suppress or delay apps, innovations, and technologies that would reduce user switching costs or simply allow users to discover, purchase, and use their own apps and content without having to rely on Apple.
As a result, Apple faces less competition from rival smartphones and less competitive pressure from innovative, cross-platform technologies not because Apple makes its own products better but because it makes other products worse.Specific accusations include Apple's requirement that developers use its proprietary in-app payment systems and pay a 30% commission on digital sales, restrictions preventing cloud gaming services from operating on iPhones and limiting interoperability with non-Apple hardware like smartwatches and payment systems.
The lawsuit draws particular attention to Apple's treatment of iMessage, alleging the company "deliberately imposes restrictions" that make cross-platform messaging difficult to discourage iPhone users from switching to Android.
In its response, Apple has denied the government's claims, framing the lawsuit as an assault on its innovative business model that seamlessly integrates hardware, software and services. The company argues that many of its practices, like app review policies, exist to protect user privacy and security.
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. The DOJ counters that Apple's dominance stifles competition and innovation and leads to higher prices for consumers.
By pursuing alleged exclusionary tactics instead of fair competition on the merits, the DOJ argues, Apple has violated Section 2 of the Sherman Antitrust Act's prohibitions against monopolization.
You can read the 88-page lawsuit here.
The DOJ's lawsuit essentially aims to make the iPhone look and operate like an Android device, which would actually hurt competition.Bringing more Android-like qualities to the iPhone would actually eliminate consumer choice, and part of the iPhone's strengths are its privacy and security, and if the U.S. Department of Justice wins, then Apple will have to make significant compromises in these areas.