• | 12:12 pm

US antitrust lawsuit accuses Apple of monopolizing smartphone market

The lawsuits says that Apple has monopoly power in the smartphone and performance smartphones markets, and it uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct

US antitrust lawsuit accuses Apple of monopolizing smartphone market
[Source photo: Chetan Jha/Press Insider]

The US Department of Justice and 15 states have sued Apple, alleging that the tech giant is monopolizing the smartphones market, and using its dominant position to make profits in violation of the antitrust law.

The 88-page complaint, filed in the US federal court in New Jersey, said Apple illegally maintains a monopoly over smartphones market by selectively imposing contractual restrictions on, and withholding critical access points from, developers.

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, it said.

Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others, the lawsuit, filed by the Justice Department and joined by 15 states and District of Columbia, alleged. 

Apple shares slid 4.1% on Thursday, erasing $113 billion in market value. 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, Bloomberg reported.

The lawsuit is seeking relief to restore competition to these vital markets on behalf of the American public.

“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. If left unchallenged, Apple will only continue to strengthen its smartphone monopoly. The Justice Department will vigorously enforce antitrust laws that protect consumers from higher prices and fewer choices. That is the Justice Department’s legal obligation and what the American people expect and deserve,” he added.

Apple has denied the allegations made in the lawsuit. 

“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,” the company said in a statement. 

Apple has faced allegations of violating antitrust laws not just in the US but also in the European Union. 

Earlier this month, Apple was fined over €1.8 billion (about $2 billion) by the European Commission for violating the EU’s antitrust rules over music streaming. The commission ruled that Apple abused its dominant position in the market for the distribution of music streaming apps to iPhone and iPad users through its App Store. 

US antitrust case against Apple

The DOJ complaint said that Apple, which occupies a share of 65% in the US smartphone market, has monopoly power in the smartphone and performance smartphones markets, and it uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct. 

The complaint alleges that Apple’s anticompetitive course includes blocking of innovative super apps, suppressing mobile cloud streaming services, excluding cross-platform messaging apps, diminishing the functionality of non-Apple smartwatches, and limiting 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.

Cupertino-headquartered Apple Inc. is the world’s second largest company with a market cap of $2.65 trillion. In fiscal year 2023, Apple generated annual net revenues of $383 billion and net income of $97 billion, more than any other company in the Fortune 500 and the individual GDPs of more than 100 smaller countries. 

The complaint claimed that Apple, which has cornered over 70% of the US performance smartphones market by revenue, builds its profits on more than just the sale of physical iPhones. Developers seeking to create a new app, product, or service for the Apple App Store must agree to pay up to 30% of the price back to Apple. Apple takes another 30% cut from any in-app purchase.

As part of these agreements, Apple imposes contractual restrictions that limit what features and functionality developers can offer iPhone customers, and limits the ability of third parties to tell iPhone users important information about pricing and purchases.

In addition, Apple selectively controls access to the application programming interfaces (APIs)—the points of connection between apps and Apple’s operating system, iOS— which allows it to stymie apps and accessories that might encourage consumers to consider choosing other smartphones. Apple selectively designates APIs as public or private to its own benefit, limiting the functionality developers can offer to iPhone users even when the same functionality is available in Apple’s apps.

Furthermore, the lawsuit notes, Apple has at times declined to improve its offerings, deciding on its own that something was “good enough.” Sometimes the company has rejected improvements because it did not want to make it easy for customers to switch to other mobile devices. This corporate behavior collectively hinders and suppresses competition well beyond smartphones, stretching into instant messaging, payment services, and smartwatches, threatening future innovations.

“Apple’s dominance in the smartphone market is not an accident,” said New Jersey Attorney General Platkin who joined other attorneys general in the lawsuit. 

“Instead, Apple has gone to great lengths to create a monopoly that affected not only the smartphone industry, but also the choice of apps, payment systems, smartwatches, and more. The end result is you pay more for an inferior product—all while Apple collects billions in profits. With today’s lawsuit, we are standing up for consumers across the country and putting a stop to this monopolistic behavior,” he said.

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