Washington
CNN
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The U.S. Department of Justice and more than a dozen states filed a major antitrust lawsuit against Apple on Thursday. It's the latest but largest in a recent spate of Big Tech companies facing monopolistic accusations from the U.S. government, which is cracking down on giant industries whose power has largely gone unchecked over the past few decades.
The long-awaited lawsuit comes after critics say Apple stifles competition with restrictive app store terms, high fees, and a “walled in” approach to hardware and software. This was brought forward after many years of claims. Apple famously makes its technology easier to use, but it does so by tightly controlling and sometimes restricting how third-party companies can interact with the tech giant's products and services. It will come true. In some cases, Apple provides better access and functionality for its products than its competitors. The company denies the lawsuit's allegations and says it intends to fight them.
“Apple is weakening apps, products, and services that are supposed to make users less dependent on their iPhones,” the Justice Department said in a press release. “Apple uses its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, retailers and more.”
For example, Apple allows iPhone customers to seamlessly send high-quality photos and videos to each other, but multimedia text to Android phones is slow and grainy. The company relented late last year and agreed to improve the quality standards it uses when interacting with Android phones via text messages, but it still keeps those messages inside a green bubble, a sort of Critics argue that it creates a class divide.
The company also provides its products with the ability to access certain parts of its hardware that are restricted from use by other companies. This unlocks an almost magical experience when interacting with your iPhone and AirTags, while competing products have much more limited functionality.
This year, European regulations forced Apple to give other companies access to the iPhone's tap-to-pay hardware chip, allowing them to create competing digital wallets. However, these regulations are limited to the European Union.
And Apple maintains a hefty 30% commission on most sales through its app store. This is a frequent complaint from companies trying to sell subscriptions, arguing that Apple's huge share of the smartphone market forces them to pay unnecessarily high fees.
“We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend it,” Apple said in a statement.
Thursday's lawsuit alleges that Apple illegally monopolizes the smartphone market with complex terms and conditions that damage everything from text messages to mobile payments. Among other things, the Justice Department says Apple uses its control over iOS (the iPhone operating system) to block innovative new apps and cloud streaming services from the public. Android Messages look worse on iPhone. It restricted how competing smartwatches could work with the iPhone. Interfered with a competitor's payment solution.
“By suppressing these and many other technologies, Apple does not make its products more attractive to users, but instead discourages innovation that threatens Apple's smartphone monopoly,” Thursday's complaint states. “By doing so, they are strengthening the outer shell around smartphone monopoly.”
Apple said in a statement that the lawsuit hinders its ability to deliver the attractive, consumer-friendly technologies that have made it one of the world's most valuable companies.
“At Apple, we innovate every day to make technology people love, and design products that work together seamlessly, protect people's privacy and security, and create magical experiences for users. ” the company said in a statement. “This lawsuit threatens who we are and the principles that make Apple products stand out in a fiercely competitive marketplace.”
For years, Apple has ignored legal challenges and criticism that its actions are anticompetitive. High consumer ratings and disciplined public relations and legal strategies reflect the precision with which Apple manufactures and oversees its products.
But the Justice Department's landmark lawsuit challenges Apple's extensive practices.
The lawsuit represents the Biden administration's latest effort to hold Big Tech giants accountable under U.S. antitrust laws. Apple is the only major tech company yet to be sued by the federal government for antitrust violations.
A 2020 House report found that the iPhone maker had “monopoly power” along with Meta, Google and Amazon, and singled out Apple by name.
The legal action could weigh on Apple's stock price, which currently values the company at just under $3 trillion, and could force changes in policy, business strategy, products and applications by the tech giant. . Even selling some assets isn't out of the question for Apple, the technology company founded by Steve Jobs in the 1970s.
Apple (AAPL) stock was down less than 1% on Thursday. The lawsuit was widely expected.
Along with two ongoing antitrust cases against Google, the Justice Department's case against Apple is likely to be emblematic of the Biden administration's commitment to competition and lowering prices. It's also a test of how far courts will go to apply decades-old antitrust laws to the modern digital economy.
The Apple case may be one of the most high-profile cases filed by Jonathan Canter, Biden's top Justice Department antitrust official. Mr. Cantor, who previously represented Google's rivals such as Microsoft and Yelp in private practice, is seen as part of a new generation of regulators.
Kanter, along with Lina Khan of the Federal Trade Commission, said the United States has tolerated a wave of consolidation and anti-competitive practices for decades, ultimately leading to higher prices, fewer choices and He argued that the country has been harming the nation through a decline in innovation.
Technology entrepreneur Eric Migikowski created Beeper to solve the “green bubble” problem for Android phone customers by allowing Android users to send messages to iPhone users without these restrictions. He said the app, called Mini, was quickly shut down by Apple.
“It lasted a total of three days before Apple started attacking us,” Migikowski said. “Technically, they have worked very hard to take steps to penalize Beeper Mini users by taking their connections offline and making them progressively less reliable.”
Such interactions have made Apple's app store the focus of antitrust claims.
In 2020, Apple engaged in a very public legal battle with Epic Games, the maker of the video game Fortnite.
Apple is not an illegal monopoly in the distribution of iOS apps, a federal court has ruled in the case, underscoring the difficulty of pursuing Apple for federal antitrust violations. However, Apple was fined for violating California competition law and changed some of its app store practices in response to a court order.
These rulings highlight future challenges for the Justice Department, which will need to present a strong legal theory for how Apple allegedly stifled competition, legal experts say. To tell. The Justice Department will also need to prove that the benefits Apple provided to consumers do not outweigh the alleged antitrust violations.
The US government isn't the only one pressuring Apple to change its business practices. In March, a new European Union law came into effect that forces Apple to make significant adjustments.
In a landmark move to comply with the EU's Digital Markets Act (DMA), Apple has announced that for the first time it will allow users in the trading bloc to download apps from third-party app stores.
But critics, including Epic, have already accused Apple of violating EU law. Just before the DMA came into effect, Epic complained to competition authorities that Apple had blocked it from launching its own app store on iOS. The European Commission is investigating.
Since its early days, Apple has pursued a reputation as an elite brand with great design. They often focus on a premium user experience and design aesthetics, which distinguishes their products from rivals like Microsoft and Google. This limited approach worked for years until a wave of complaints from app developers and consumers drew more attention to the potential downsides of Apple's restrictions.
When Apple was led by founder Steve Jobs, it was a cultural phenomenon competing for wingtips and sandals. “It's the difference between a suit and a T-shirt,” said James Bailey, professor of leadership development at George Washington University's School of Business. “Apple has been constantly innovating. They have always been one step ahead of the competition.”
But now, Bailey added, Apple's progress is more “incremental” than earth-shaking. “[CEO Tim] Mr. Cook has focused on financial management and increasing market share. ”
“Apple is financially healthy,” Bailey said, but the company's reputation for innovation has “diminished.”
This is a developing story and will be updated.
