The US Justice Department sues Apple for monopolizing smartphone markets. „If successful, it would set a dangerous precedent” – Apple said.

The Justice Department, joined by 16 other state and district attorneys general, filed a civil antitrust lawsuit against Apple „for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act” – according to the press release.

Shares of the company slid 4.1% Thursday, erasing about $113 billion in market value and taking their year-to-date loss back to 11%. Once the world’s most valuable firm at more than $3 trillion, Apple has underperformed both the Nasdaq 100 and the S&P 500 in 2024, according to Yahoo Finance.

The complaint, filed in the U.S. District Court for the District of New Jersey, alleges that „Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers”.

Also, „Apple undermines apps, products, and services that would otherwise make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers. Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.”

“Consumers should not have to pay higher prices because companies violate the antitrust laws,” said Attorney General Merrick B. Garland. “We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law.„

“For years, Apple responded to competitive threats by imposing a series of “Whac-A-Mole” contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets.”

“No matter how powerful, no matter how prominent, no matter how popular — no company is above the law,” said Deputy Attorney General Lisa Monaco. “Through today’s action, we reaffirm our unwavering commitment to that principle.”

The complaint alleges that Apple’s anticompetitive course of conduct has taken several forms, many of which continue to evolve today, including:

Blocking Innovative Super Apps. Apple has disrupted the growth of apps with broad functionality that would make it easier for consumers to switch between competing smartphone platforms.

Suppressing Mobile Cloud Streaming Services. Apple has blocked the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware.

Excluding Cross-Platform Messaging Apps. Apple has made the quality of cross-platform messaging worse, less innovative, and less secure for users so that its customers have to keep buying iPhones.

Diminishing the Functionality of Non-Apple Smartwatches. Apple has limited the functionality of third-party smartwatches so that users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones.

Limiting Third Party Digital Wallets. Apple has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.

The complaint also alleges that Apple’s conduct extends beyond these examples, affecting web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more. Apple has every incentive to extend and expand its course of conduct to acquire and maintain power over next-frontier devices and technologies.

Apple’s response to the DOJ’s iPhone antitrust lawsuit

The statement from Apple spokesperson Fred Sainz:

„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.”

____________

Apple Inc. is a publicly traded company incorporated in California and headquartered in Cupertino, California. In fiscal year 2023, Apple generated annual net revenues of $383 billion and net income of $97 billion. Apple’s net income exceeds any other company in the Fortune 500 and the gross domestic products of more than 100 countries.