Apple CEO Tim Cook testifies before Senate Homeland Security and Governmental Affairs Committee investigation

Getty Images

The US Justice Department sued Apple on Thursday, accusing it of using the market power of the iPhone to cut off competitors, setting off a years-long trial involving hundreds of lawyers and threatening Apple’s “walled garden” business model.

If the Justice Department wins, it could demand a number of changes to Apple’s business, and U.S. officials have not ruled out the possibility that An apple it may collide with “structural safeguards” or be smashed.

If Apple’s arguments prevail, the court may rule that it does appreciated 64% of US smartphone share is not a monopoly or that its behavior is not illegal, giving Apple new tools to fight future regulations.

But before any of that happens, we’re likely to see years of litigation, during which Apple will be forced to defend its business publicly, distract its executives with legal meetings, produce internal documents for the government, and potentially to face bad headlines that could damage its brand or image.

The DOJ case has yet to be assigned to a judge. In the short term, Apple may seek to change the trial venue outside of New Jersey and will likely seek to dismiss the case entirely.

All of those steps take different amounts of time, and it’s realistic that the trial could be scheduled for 2025, and the appeal won’t end until 2027, depending on which judge is assigned the case, said William Kovacic, director of the Center for Competition Law in George Washington University.

Often, companies accused of antitrust violations like Apple like to drag out the process, said John Newman, a law professor at the University of Miami and a former DOJ attorney.

“In general, defendants like to drag each other out forever,” Newman said. “Will the judge accept what the defendant offers, which is inevitably years and years and tons and tons of discovery?” Do you drag it out forever? Or can they really step up and try to control this?” he continued.

For example, Google was sued by the Department of Justice in a similar case in October 2020, and it took almost three years before it went to trial. Remedies have not been decided and have not gone through an appeal. The Justice Department’s case against Apple was inspired by a landmark case against Microsoft filed in 1998. It went to trial later that year, and the appeal was decided by 2001.

Potential distraction

Like the Microsoft trial, the Justice Department’s case against Apple attempts to raise a new landmark decision on US antitrust law, mostly by focusing on Apple’s entire ecosystem, not just a product, and whether the way operates, constitutes anti-competitive behaviour.

In a statement provided to CNBC on Thursday, Apple said the lawsuit “threatens who we are” and that it could harm its ability to make competing technology products.

Apple provided more details about why it doesn’t like this kind of litigation in its SEC filings. The company says that as laws and regulations change, including antitrust litigation, it must spend money to comply. “Forced” changes can hurt customer demand, according to the filing, and when laws or regulations change, it creates uncertainty for Apple.

Another challenge for Apple could be that a large, public process like this competes for executives’ time and attention, and more decisions at Apple may have to go through legal review before moving forward.

Companies facing antitrust cases often have to bring employees who have nothing to do with litigation into meetings to sort through company documents or help guide how the company will present evidence or technical arguments, said Kovacic, a former FTC commissioner. .

“In past big antitrust cases, the real danger for the company is that the focus of attention becomes winning the antitrust cases instead of winning customers and doing your job,” Kovacic said. β€œIt slows you down. It’s a real drag.”

For Apple, it has to deal not only with the Justice Department’s case, but also with new regulations in Europe and investigations in other countries around the world.

The US government has not said what it wants Apple to do to correct its allegations, but its initial filing on Thursday left the issue open with a broad request for a comprehensive correction.

One possibility involves forcing Apple to open up the iPhone to third-party stores, as it has in Europe. Many of the Justice Department’s other allegations, such as Apple’s alleged restrictions on smartwatches and third-party “super apps,” have no close recent parallels in other countries or markets. The Justice Department can also find remedies that aim to reorient the entire technology industry or future products.

“If and when this thing comes to trial, I would expect it won’t just be for smartphones, although that’s the heart of the story.” This is really a case for the future of smart devices,” Newman said.

Apple may, as it has done in the past, choose to preemptively make changes or adjustments to targeted products to avoid additional monitoring. For example, in JanuaryApple has partially opened its App Store to cloud gaming services, one of the key types of competitors the Justice Department says Apple is cutting out.

Discovery and postponement

Government lawyers will request internal, confidential Apple documents to support their case in a process called discovery. Apple’s business partners may also receive requests to show the government their own confidential documents. Companies generally fear disclosure because it’s unclear what will emerge, and Apple is particularly secretive about its internal documentation and strategy.

Documents discovered through discovery are often made public during the trial, exposing private discussions.

The government is likely to move to remove Apple executives, including the CEO Tim Cook or even call them to the witness stand during the trial. Cook took the stand during a recent antitrust lawsuit against Epic Games, for example.

But executive testimony or testimony can still be risky for tech companies, especially if executives can’t keep their egos in check β€” former Microsoft CEO Bill Gates was a famous irritant and showing utter contempt for the trial during a videotape of testimony by David Boyce in 1998 that was played at the trial.

“The lesson that the Gates deposition gives you is that if you’re a CEO, there’s a real art and skill to doing a good deposition,” Kovacic said. “It requires you to suppress some of your Master of the Universe impulses in the name of good work, and in this case listen very carefully to the instructions of your lawyers.”

Apple and the DOJ could also reach a settlement in which Apple makes some changes and the government withdraws the case before further disclosure or testimony. However, there are no public signs of reconciliation.

Apple declined to comment Thursday when asked if there had been settlement talks.

Don’t miss these stories from CNBC PRO: