U.S. Attorney General Merrick Garland (left) announces antitrust lawsuit against Apple on March 21, 2024, iPhones (AP Photo/Jeff Chiu, File)
The Department of Justice made good on whispers of a major, imminent antitrust enforcement action against Apple by announcing the lawsuit Thursday, accusing the iPhone giant of violating the law by exerting its “monopoly power” to stay ahead of smartphone competition.
U.S. Attorney General Merrick Garland said that the DOJ, 15 states, and Washington, D.C., have joined in a New Jersey-based federal lawsuit that alleges Apple has violated § 2 of the Sherman Antitrust Act, which “prohibits monopolization or attempts at monopolizing any aspect of interstate trade or commerce.”
That offense, the law says, can subject Apple to a fine “not exceeding $100,000,000.”
“Apple has maintained monopoly power in the smartphone market not simply by staying ahead of the competition on the merits, but by violating antirust law,” Garland said, adding that the alleged anticompetitive conduct “hurts consumers” with higher prices and stifled innovation and hurts developers forced to compete on an uneven playing field.
Garland said Apple engaged in “exclusionary, anticompetitive conduct” by imposing “contractual restrictions and fees that limit the features and functionality that developers can offer iPhone users” and by “selectively restrict[ing] access to the points of connection between third-party apps and the iPhone’s operating system, degrading the functionality of non-Apple apps and accessories.”
According to the lawsuit, over the past decade-plus, Apple reaped the benefits of “a tax in the form of a 30 percent commission on the price of any app downloaded from the App Store, a 30 percent tax on in-app purchases, and fees to access the tools needed to develop iPhone native apps in the first place” — all while making it harder for users to ever abandon the iPhone.
“As Apple exercised its control of app distribution and app creation, Apple slowed its own iPhone innovation and extracted more revenue and profit from its existing customers through subscriptions, advertising, and cloud services. These services increase the cost of switching from the iPhone to another smartphone because many of these services—including its proprietary gaming, cloud storage, and news service—are exclusive to the Apple ecosystem, causing significant frictions for iPhone users who try to use alternative services on another smartphone,” the complaint said. “Moreover, Apple’s conduct demonstrates that Apple recognized the importance of digital products and services for the success of the iPhone while at the same time it restricted the development and growth of non-iPhone products and services—especially those that might make it easier for users to switch from the iPhone to another smartphone.”
In essence, Apple “consolidated” its monopoly power “not by making its own products better but by making other products worse,” Garland said. He mentioned “green text” messages — as opposed to the blue ones that iPhone to iPhone users will see — as an example of Apple “deliberately” lessening its own products’ “functionality” to hurt competition.
“As any iPhone user who has ever seen a green text message or received a tiny, grainy video can attest, Apple’s anticompetitive conduct also includes making it more difficult for iPhone users to message with users of non-Apple products,” the attorney general said. “It does this by diminishing the functionality of its own messaging app and by diminishing the functionality of third-party messaging apps.”
Though most users wouldn’t know it, the attorney general continued, the difference between a green text actually affects user privacy.
“For example, if an iPhone user messages a non-iPhone user in Apple Messages, the text appears not only as a green bubble, but incorporates limited functionality: The conversation is not encrypted; Videos are pixelated and grainy; and Users cannot edit messages or see typing indicators,” Garland said.
Deputy Attorney General Lisa O. Monaco in remarks that followed emphasized that “no company is above the law” and asserted that Apple should be held accountable for “locking its customers into the iPhone while locking its competitors out of the market.”
“Apple has gone from revolutionizing the smartphone market to stalling its advancement. This shift has smothered an entire industry. From users to app developers to the next generation of innovators,” Monaco said. “Apple’s anticompetitive conduct must stop. 16 other attorneys general agree, and have joined us in bringing this lawsuit against Apple.”
The state plaintiffs include New Jersey, Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, and Wisconsin. The states, D.C., and the DOJ are now asking a judge to declare that Apple “acted unlawfully to monopolize, or, in the alternative, attempt to monopolize, the smartphone market” in America and to block the tech company from “continuing to engage in the anticompetitive practices.”
Apple, vowing to combat the lawsuit “vigorously,” has called the DOJ’s case “wrong on the facts and the law.”
Have a tip we should know? [email protected]
