On November 17, 2023, Apple CEO Cook listened during the Asia-Pacific Economic Cooperation Leaders Week program at Apple Park in San Francisco.
Andrew Caballero-Reynolds | AFP | Getty Images
Justice Department files suit apple Apple on Thursday called its iPhone ecosystem a monopoly that has led to its “astronomical valuations” to the detriment of consumers, developers and rival phone makers.
Federal antitrust enforcement agencies and 16 attorneys general have also said Apple’s anticompetitive conduct extends beyond its iPhone and Apple Watch businesses, citing Apple’s advertising, browser, FaceTime and news products.
“Every step of Apple’s conduct established and strengthened the moat of its smartphone monopoly,” the complaint filed in the District of New Jersey states. Apple shares fell more than 2% in Thursday trading.
The Justice Department stated in a press release that in order to allow consumers to continue to buy iPhones, Apple has taken measures to block cross-platform messaging applications, limit the compatibility of third-party wallets and smart watches, and interrupt non-App Store programs and cloud streaming services.
This challenge poses a significant risk to Apple’s walled garden business model. The company said compliance with the regulations would cost it money, could prevent it from launching new products or services and could hurt customer demand.
The lawsuit could force Apple to make changes to some of its most valuable businesses: iPhones (Apple reports sales of more than $200 billion in 2023), Apple Watch (part of the company’s $40 billion wearables business) and its earnings line of services, the company reported revenue of $85 billion.
“If unchallenged, Apple will only continue to strengthen its smartphone monopoly,” Attorney General Merrick Garland said in a press release.
Apple said in a statement that it disagreed with the premise of the lawsuit and would defend it.
“This lawsuit threatens our identity and the principles that make Apple products stand out in a fiercely competitive market. If successful, it will hinder our ability to create the technology people expect from Apple – technology at the intersection of hardware, software and services ,” an Apple spokesperson told CNBC. “It would also set a dangerous precedent that would allow governments to take drastic measures when designing human technology.”
The lawsuit follows a years-long investigation by the U.S. Department of Justice into Apple’s business practices and two other cases it filed against Apple: one over e-book prices and another over Apple’s relationship with other technologies. Allegations that companies colluded to keep wages low.
“The purpose of this anti-competitive behavior is to maintain Apple’s monopoly position while generating as much revenue as possible,” the lawsuit states.
iMessage, Apple Watch, and cloud gaming
The complaint highlights comments made by Chief Executive Tim Cook and other executives. Some users have asked Apple to improve Android to iPhone messaging. Developers have even created apps that circumvent platform restrictions, only to have them shut down by Apple.
Apple CEO Tim Cook took the stage to speak on the second day of the Vox Media Code Conference 2022 in Beverly Hills, California.
Jerrod Harris | Getty Images Entertainment | Getty Images
Prosecutors highlighted an exchange between Cook and a consumer.
“Not to make it personal, but I can’t send certain videos to my mom,” one user told Cook, referring to an interview at a 2022 Vox Media event.
“Buy your mom an iPhone,” Cook replied.
The U.S. Department of Justice is also focusing on Apple’s smart watch, Apple Watch, saying the company designed the watch to only work with iPhones and not Android devices. The company’s decision means “users who purchase Apple Watch will face significant out-of-pocket costs if they do not continue to purchase an iPhone,” the complaint said.
The U.S. Department of Justice said Apple cracked down on cloud streaming services on its App Store platform, preventing consumers from playing high-quality video games on iPhones, responding to complaints From Microsoft and Facebook parent company Meta.
Apple has faced several major antitrust challenges recently, mostly centered on its control of the iPhone App Store. It mostly won its 2021 civil lawsuit against Epic Games, although it backed down during the trial and had to make some changes to its policies under California law.
“Today’s lawsuit seeks to hold Apple accountable and ensure that it cannot use the same illegal tactics in other important markets,” Assistant Attorney General for Antitrust Affairs Jonathan Kanter said in a press release.
The company is currently arguing with the European Commission over whether to comply with the new Digital Markets Act, which forces Apple to open its iPhone App Store to competitors such as Microsoft or Epic Games. Apple plans to charge 50 cents per download to large companies that avoid its App Store.
Apple fined $2 billion by EU over dispute with EU Spotify Regarding whether music streaming services can be linked to their website and in-app account systems.
In the last quarter of 2023, Apple held 64% of the U.S. iPhone market share, while Samsung held 18%. According to Counterpoint research.
Apple isn’t the only big tech company facing government scrutiny. The U.S. Department of Justice filed an antitrust lawsuit against Google in 2020 over its search dominance and another year over its advertising business. The U.S. Department of Justice also sued Microsoft in the 1990s, eventually forcing it to allow users to separate the Internet Explorer browser from the Windows operating system.
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