Apple CEO Tim Cook testifies before Senate Homeland Security and Governmental Affairs Committee inquiry
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The U.S. Department of Justice sued Apple on Thursday, accusing it of using the iPhone’s market power to cut off rivals, launching a multi-year process involving hundreds of lawyers and threatening Apple’s “walled garden” business model.
If the Justice Department prevails, it may seek to make a series of changes to Apple’s operations, and U.S. officials have not ruled out the possibility: apple May face “structural remedies” or be disbanded.
If Apple’s arguments prevail, the court may rule estimated 64% of the U.S. smartphone market is not a monopoly, or its actions are not illegal, giving Apple new tools to fight future regulation.
But before that happens, we’re likely to see years of legal wrangling, during which Apple will be forced to defend its business publicly, distract senior executives with legal meetings, provide the government with internal documents, and Possibly facing the potential for bad headlines. damage its brand or image.
The DOJ lawsuit still needs to be assigned to a judge. In the short term, Apple may request that the venue be moved from New Jersey and possibly that the case be dismissed entirely.
William Kovacic, director of the Competition Law Center, said the timing of all these steps varies, with trials actually set to be scheduled for 2025 and appeals not until 2027, depending on the allocation. The judge of the case. at George Washington University.
John Newman, a University of Miami law professor and former Justice Department lawyer, said companies like Apple accused of violating antitrust laws often like to delay trials.
“Typically, defendants like to put things off forever,” Newman said. “Would the judge agree to the defendants’ proposal, which would inevitably require years, massive discovery, dragging it out forever? Or could they actually step up and try to control it?” he continued.
For example, Google was sued by the U.S. Department of Justice in a similar case in October 2020, and it took nearly three years to enter the trial stage. Remedies have not yet been determined and have not been appealed. The U.S. Department of Justice’s case against Apple was inspired by the historic case filed against Microsoft in 1998. The case went to trial later that year and the appeal was decided in 2001.
potential interference
Like the Microsoft trial, the Justice Department’s lawsuit against Apple attempts to deliver a new landmark ruling in U.S. antitrust, focusing on Apple’s entire ecosystem, not just one product, and whether the way it operates represents Anti-competitive conduct.
In a statement provided to CNBC on Thursday, Apple said the lawsuit “threatens our identity” and could harm its ability to make competitive technology products.
In a filing with the Securities and Exchange Commission, Apple provided more details about why it dislikes such lawsuits. The company said that when laws and regulations change, including antitrust lawsuits, it must spend money to comply. The document said “imposed” changes could harm customer demand and create uncertainty for Apple when laws or regulations change.
Another challenge for Apple could be that large public trials like this one compete for senior executives’ time and attention, while more decisions within Apple may have to undergo legal scrutiny before they can proceed.
Kovacic, a former Federal Trade Commission commissioner, said companies facing antitrust cases often need to have employees not involved in the trial participate in meetings, organize company documents, or help guide companies on how to present evidence or technical arguments.
“The real danger that companies faced in big antitrust cases in the past was that the focus became winning the antitrust lawsuit, rather than winning customers and doing their jobs,” Kovacic said. “It would Slow you down. It’s such a liability.”
For Apple, it’s not just a lawsuit from the U.S. Department of Justice, but also new regulations in Europe and investigations from other countries around the world.
The U.S. government has not yet said what steps it wants Apple to take to address its allegations, but its preliminary filing Thursday leaves the matter unresolved and broadly calls for comprehensive redress.
One possibility includes forcing Apple to open iPhones to third-party stores as it does in Europe. Many of the DOJ’s other charges, such as Apple’s alleged restrictions on third-party smartwatches and “super apps,” do not resemble recent developments in other countries or markets. The Justice Department could also find remedies aimed at repositioning the entire tech industry or future products.
“If this thing goes to trial, I would expect it to be about more than just smartphones, although that is the core of the story. This is really a case about the future of smart devices,” Newman said.
Apple may choose to preemptively make changes or tweaks to targeted products to avoid additional scrutiny, as it has in the past. For example, in januaryApple partially opened its App Store to cloud gaming services, one of the main competitors the Justice Department claims Apple cut off.
discovery and accumulation
Government lawyers will ask Apple to provide confidential internal documents to support their case, a process called discovery. Apple’s business partners may also face requests to produce their own confidential documents to the government. Generally speaking, companies fear discovery because they don’t know what to expect, and Apple is particularly secretive about its internal documents and policies.
Documents discovered through discovery are often released publicly during trials, exposing private deliberations.
The government may take action to remove top Apple executives, including the CEO Tim Cook, even called them to the witness stand during the trial. For example, Cook testified in the recent antitrust trial against Epic Games.
But for tech companies, executive depositions or depositions remain risky, especially if the executive can’t rein in his or her ego – Former Microsoft CEO Bill Gates Notoriously short-tempered and displaying extreme disdain In 1998, a videotaped deposition of David Boies was played during the trial to shed light on the proceedings.
“One of the lessons from Gates’ deposition experience is that if you’re a CEO, there’s a real art and skill to doing a good job,” Kovacic said. “It requires you to do a good job. And suppress some ‘master of the universe’ impulses and listen very carefully to the guidance of an attorney in this situation.”
It’s also possible that Apple and the Justice Department could reach a settlement, with Apple making some changes and the government dropping the lawsuit pending further discovery or testimony. However, there are no public signs of reconciliation.
Apple declined to comment Thursday when asked whether settlement talks were underway.
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