Apple is being sued by the US Department of Justice; Accused of illegal monopoly in the smartphone market

The US Justice Department and 15 states on Thursday sued Apple as the government cracks down on Big Tech, claiming the iPhone maker has monopolized the smartphone market, hurt smaller rivals and raised prices.

Apple joins rivals sued by regulators, including Alphabet’s Google, Meta Platforms and Amazon.com in the administrations of both former President Donald Trump and President Joe Biden.

“Consumers should not have to pay higher prices because companies violate antitrust laws,” Attorney General Merrick Garland said in a statement. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”

The Justice Department said Apple charges up to $1,599 (roughly Rs. 1,33,200) for an iPhone and makes more profit than anyone else in the industry. Officials also said that Apple charges a variety of business partners — from software developers to credit card companies and even competitors like Google — behind the scenes in ways that ultimately raise prices for consumers and increase Apple’s bottom line.

Dating back to its days as a marginal player in the PC market, Apple’s business model has long been based on charging consumers a premium for technology products, where the company dictates nearly every detail of how the device works and can be used. The Justice Department is seeking to grow that business model by forcing Apple, which has a market value of $2.7 trillion (roughly Rs. 2,24,98,600 crore), to offer users more choices about how apps can be included in hardware designed by Apple.

Shares of the iPhone maker fell 4.1% to $171.37 (roughly Rs 14,300) on Thursday.

Requested changes

Apple has denied the government’s allegations.

“This lawsuit threatens who we are and the principles that distinguish Apple products in highly competitive markets. If we succeed, it will hinder our ability to create the technology that people expect from Apple – where hardware, software and services intersect.”

White House Assistant Press Secretary Michael Kikukawa said: “President Biden strongly supports fair and robust enforcement of antitrust laws.”

The Justice Department, which is also joined by the District of Columbia in the lawsuit, is seeking changes from Apple. An employee suggested some form of breakup or downsizing of Apple as a possibility when he noted that “structural relief is also a form of equitable relief.”

The 88-page lawsuit, filed in US federal court in Newark, New Jersey, says it is focused on “liberating the smartphone markets from Apple’s anti-competitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing developer fees and preserving innovation for the future.”

In the lawsuit, the US accused Apple of making it difficult for users to block competitors and cited five examples in which Apple used mechanisms to suppress technologies that would increase competition among smartphones: so-called super apps, cloud streaming gaming apps, messaging apps, smart watches and digital wallets.

For example, the US claims that Apple has made it difficult for rival messaging apps and smartwatches to run smoothly on its phones. It also alleged that Apple’s app store policies on game streaming services harmed competition.

The Justice Department sought to define the market as that of smartphones in the United States, where most analysts believe Apple has just over half the market. Apple officials said they would try to convince the court to define the market as a global smartphone market, where the iPhone has only one-fifth of users.

The Justice Department cited an email chain from Steve Jobs, the Apple co-founder who died in 2011, saying it was “not fun to watch” how easily users could switch from iPhones to Android phones and vowing to “enforce” developers to use their payment systems in an attempt to lock in both developers and users.

It’s unclear what specific changes the Justice Department wants. The complaint asks the court to prevent Apple from using its control over the distribution of applications, contracts and the use of proprietary software interfaces to undermine competitors and to order anything else necessary “to restore competitive conditions in the markets affected by the illegal conduct.” of Apple’.

Apple is already the subject of antitrust investigations and orders in Europe, Japan and Korea, as well as lawsuits from corporate rivals such as Epic Games.

Reuters reported on Thursday that Apple, Alphabet’s Meta Platforms and Google will be investigated for potential violations of the European Union’s Digital Markets Act, which could lead to hefty fines by the end of the year, according to people with direct knowledge of the matter. .

In Europe, Apple’s App Store business model was dismantled by a new law called the Digital Markets Act that came into effect earlier this month. Apple plans to allow developers to offer their own app stores — and, importantly, not pay commissions — but rivals like Spotify and Epic say Apple is still making it difficult to offer alternative app stores.

© Thomson Reuters 2024