| By Loc Le |

US Investigates Apple’s Business Practices Alleging Antitrust Violations

On March 21, 2024, the U.S. Department of Justice and 16 states filed a civil antitrust lawsuit against Apple in the United States District Court for the District of New Jersey. Per the 88-page complaint, the tech giant has been accused of monopolizing the smartphone market in violation of Section 2 of the Sherman Act. The basis of the lawsuit accuses Apple of illegally boxing out competitors, stifling innovation, and keeping prices artificially high. According to the Justice Department’s press release, Apple’s anticompetitive behavior has been demonstrated through core actions including:

• Blocking Innovative Super Apps: Apple has impeded the evolution of apps with extensive functionality that could facilitate seamless transitions between competing smartphone platforms.
• Suppressing Mobile Cloud Streaming Services: Apple has hindered the advancement of cloud-streaming apps and services which could have provided consumers with access to high-quality video games and other cloud-based applications without the necessity of investing in expensive smartphone hardware.
• Excluding Cross-Platform Messaging Apps: Apple has compromised the quality, innovation, and security of cross-platform messaging apps by effectively coercing its users into forcibly purchasing iPhones.
• Diminishing the Functionality of Non-Apple Smartwatches: Apple has restricted the capabilities of third-party smartwatches which places users who opt for alternatives to the Apple Watch at a disadvantage by imposing significant out-of-pocket expenses if they do not remain loyal to iPhones.
• Limiting Third Party Digital Wallets: Apple has deterred the development of cross-platform third-party digital wallets by prohibiting tap-to-pay functionality within third-party apps.

A Monopoly in the Smartphone Market?

Through the alleged undermining of certain apps, products, and services, Apple has caused users to be more dependent on the iPhone which hinders interoperability and raises costs for both consumers and developers. “Apple has locked its consumers into the iPhone while locking its competitors out of the market,” said Deputy Attorney General Lisa Monaco. As a result, Apple is able to siphon extra money from consumers, developers, content creators, artists, publishers, small businesses, merchants, and others which depicts their power as a monopoly. Therefore, “the Justice Department and state Attorneys General are seeking relief to restore competition to these vital markets on behalf of the American public.”

The Legal Context and Concerns

As stated by Attorney General Merrick B. Garland, “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” and that “consumers should not have to pay higher prices because companies violate the antitrust laws.” Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division also added that the “lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets.” The other public officials participating in the lawsuit agree for similar reasons and have provided statements that seem to suggest that Apple is being used as a landmark example. “[The] action against Apple sends a strong signal to those seeking to box out competitors and stifle innovation – that the Justice Department is committed to using every tool available to advance economic justice and root out anticompetitive practices, wherever they arise,” said Acting Associate Attorney General Benjamin C. Mizer.

Apple Mounts a Defense

In response, Apple released a statement and has taken an adamant stance saying that the “lawsuit is wrong on the facts” and that the company will “vigorously defend against it.” Apple’s statement also argues how the lawsuit threatens the company’s identity and the principles that set its products apart in the fiercely competitive markets. And if the lawsuit were to succeed, Apple believes that it would “hinder our ability to create the kind of technology people expect from Apple – where hardware, software, and services intersect” and that “it would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.” 

The Legal Battle Ahead

Despite Apple’s arguments, the civil antitrust lawsuit underscores the deep concerns regarding the tech giant’s alleged monopolistic practices in the smartphone market. The accusations, ranging from anticompetitive behavior to artificially inflating prices, all resonate with broader criticisms of Apple’s control over its ecosystem and how the company’s alleged actions contribute to its dominance in the market at the expense of consumer choice and market competition. Therefore, this long-anticipated lawsuit marks a significant escalation in the ongoing scrutiny of Apple’s business practices. As the legal proceedings unfold, important precedents will be set regarding the regulation of digital platforms and the balance between innovation and competition in the technology industry.