The US Department of Justice, along with 15 states, filed a lawsuit against Apple on Thursday, alleging that the company has used its market power to increase prices for its services and harm smaller competitors. This is the latest move in the US government’s crackdown on Big Tech. Apple joins other corporate rivals, including Google, Meta Platforms, and Amazon.com, who have been sued by US regulators under the administrations of both former President Donald Trump and President Joe Biden. Attorney General Merrick Garland stated that “consumers should not have to pay higher prices because companies violate the antitrust laws” and that “if left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”
Apple’s business model, dating back to its days as a marginal player in the personal computer market, has always been based on charging users a premium for technology products where Apple dictates nearly all of the details of how the device works and can be used. The Justice Department seeks to unwind that business model by forcing Apple to offer users more choices around how apps can tap into the hardware that Apple designs. The Justice Department alleges that Apple uses its market power to extract more money from consumers, developers, artists, publishers, small businesses, and merchants. The 88-page lawsuit, filed in U.S. federal court in Newark, New Jersey, said it was focused on “freeing smartphone markets from Apple’s anticompetitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing fees for developers, and preserving innovation for the future.”
The US accuses Apple of making its products worse for consumers to block competitors and cited five examples where Apple used mechanisms to suppress technologies that would have increased competition among smartphones: so-called “super apps,” cloud stream game apps, messaging apps, smartwatches, and digital wallets. For example, the US alleges that Apple made it more difficult for competing messaging apps and smartwatches to work smoothly on its phones. They also allege that Apple’s app store policies around streaming services for games have hurt competition. Apple disagrees with the lawsuit, stating that “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 is unclear what specific changes the Justice Department seeks. The complaint asks a court to prevent Apple from using its control of app distribution, contracts, and use of private software interfaces to undermine rivals and to order anything else necessary “to restore competitive conditions in the markets affected by Apple’s unlawful conduct.” Apple has already been subject to antitrust probes and orders in Europe, Japan, and Korea, as well as lawsuits from corporate rivals such as Epic Games.
One of Apple’s most lucrative businesses, its App Store, which charges developers commissions of up to 30%, has already survived a lengthy legal challenge under US law by Epic. While the lawsuit found that Apple did not violate antitrust laws, a federal judge ordered Apple to allow links and buttons to pay for apps without using Apple’s in-app payment commission. During a press briefing, US Attorney General Merrick Garland stated that the Justice Department believes it can win. “We bring cases because we believe the facts on what justify them, and because we believe that we are likely to win those cases,” Garland said. Assistant Attorney General Jonathan Kanter of the antitrust division said the Justice Department would present evidence that Apple’s approach was not motivated purely by privacy and security concerns. “Our complaint explains that, in many instances, Apple’s conduct has made its ecosystem less private and less secure,” Kanter said. In Europe, Apple’s App Store business model has been dismantled by a new law called the Digital Markets Act that went into effect earlier this month. Apple plans to let developers offer their own app stores – and, importantly, pay no commissions – but rivals such as Spotify and Epic argue that Apple is still making it too difficult to offer alternative app stores. The rulings on Apple’s App Store forced the Justice Department to look at Apple’s other practices as the basis for a complaint.