Justice officials said Thursday they are suing Apple, saying its devices and software constitute a monopoly and generate huge profits at the expense of customers.
“Every step in Apple’s course of action built and strengthened the moat around its smartphone monopoly,” the lawsuit said.
The U.S. Department of Justice and 15 states allege it used robust demand for its iPhone and other products to drive up prices for its services and hurt smaller rivals in the first major antitrust effort
For example, officials say it has blocked makers of third-party apps and products from using key features such as the contactless technology that enables mobile payments.
Another major complaint concerns messaging. US Attorney General Merrick Garland said this morning that users who try to message owners of other brands of smartphones end up experiencing problems such as videos not being sent.
Apple shares are having their worst day since August 2023 – down 4 percent at one point – on a day when the stock market hit highs.
Apple joins a list of major tech companies indicted by U.S. regulators, including Alphabet’s Google, Meta Platforms and Amazon.com under the administrations of both former President Donald Trump and President Joe Biden.
The case could drag on for years. If the DoJ wins or Apple makes concessions, Apple’s rivals will initially benefit.
But it would also mean better and cheaper apps and products made by third-party companies like Spotify or tracking gadget Tile.
Apple CEO Tim Cook
FILE – The Apple logo is shown on a screen during an announcement at the Apple campus on September 12, 2023 in Cupertino, California. The Justice Department announced a sweeping antitrust lawsuit against Apple on Thursday, March 21, 2024, accusing the tech giant of having an illegal monopoly on smartphones in the US (AP Photo/Jeff Chiu, File)
“Consumers should not have to pay higher prices because companies violate antitrust laws,” Attorney General Merrick Garland said in a statement.
“If no criticism is made, Apple will only continue to strengthen its smartphone monopoly.”
The Justice Department alleges that Apple uses its market power to get more money not just from consumers, but also from developers, content creators, artists, publishers, small businesses and merchants.
The 88-page lawsuit, filed in U.S. federal court in Newark, New Jersey, said it aimed to “free the smartphone markets from Apple’s anticompetitive and exclusionary conduct and restore competition to lower smartphone prices for consumers , reduce costs for developers and preserve innovation for the future.”
The case takes direct aim at the digital fortress Apple has built around the iPhone and other popular products like the iPad, Mac and Apple Watch.
They have created what is often called a ‘walled garden’ – where the carefully designed hardware and software can flourish together seamlessly, while the consumer has to do little more than turn on the devices.
But the complaint is that this prevents other companies from working together so seamlessly.
The strategy has helped make Apple one of the largest companies in the world, with annual revenues of nearly $400 billion and, until recently a market value of more than $3 trillion.
Shares of Apple are down 7 percent this year, while most of the stock market has soared to new highs.
It has led to longtime rival Microsoft – the target of a major Justice Department antitrust lawsuit a quarter-century ago – taking the title of the world’s most valuable company.
According to the lawsuit, rules and decisions are designed to force Apple users to remain in the Apple ecosystem and purchase the company’s iconic but expensive hardware, the iPhone.
Apple is already subject to antitrust investigations and injunctions in Europe, Japan and Korea, as well as lawsuits from corporate rivals such as Epic Games.
One of Apple’s most lucrative businesses – the App Store, which charges developers commissions of up to 30 percent – has already survived a lengthy legal challenge under US law by Epic.
Although the lawsuit found that Apple had not violated antitrust laws, a federal judge ordered Apple to allow links and buttons to pay for apps without using Apple’s in-app payment commission.
“We believe this lawsuit is flawed on the facts and the law, and we will vigorously defend against it,” Apple said in a statement.