- Written by Bernd Debusmann Jr. and Natalie Sherman
- BBC News, Washington
Watch: Apple accused of 'building barriers' to protect iPhones
The United States has filed a landmark lawsuit against Apple, accusing the tech giant of dominating the smartphone market and crushing competition.
The Justice Department alleges in the lawsuit that the company abused its control of the iPhone app store to “lock in” customers and developers.
The company has accused it of taking illegal steps to block apps it sees as threats and make rival products less attractive.
Apple has vowed to fight the lawsuit “vigorously” and denies the allegations.
The wide-ranging complaint, filed in federal court in New Jersey along with attorneys general from 16 states, represents one of the biggest challenges yet for Apple, which has fended off a growing number of complaints about its practices in recent years.
Apple alleges that it used a “set of shape-shifting rules” and restricted access to hardware and software to increase its own profits while raising costs for customers and stifling innovation.
“Apple has maintained its monopoly power in the smartphone market not just by staying ahead of the competition on merit, but by violating federal antitrust laws,” Attorney General Merrick Garland said at a press conference announcing the lawsuit. .
“Customers shouldn't have to pay higher prices just because a company breaks the law.”
The 88-page complaint focuses on five areas in which Apple allegedly abused its power.
For example, the U.S. alleges that Apple used its app review process to block the development of so-called super apps or streaming apps, which would reduce incentives for customers to keep using their iPhones. This was because they were concerned about this.
Apple also made it harder to connect iPhones to smartwatches made by rivals and blocked banks and other financial companies from accessing its tap-to-pay technology, making Apple Pay transactions more difficult. The company claims it has been able to earn billions of dollars in fees from the processing.
The complaint also focuses on how Apple distinguishes messages sent from rival phones with green bubbles and limits video and other features. Apple's move creates “social stigma” that helps the tech giant maintain its market dominance, the paper said.
Apple said its customers are loyal because they are happy and that under U.S. law it is free to choose its business partners. It has cited privacy and security concerns to justify the rule.
The company said it would ask the court to dismiss the lawsuit, but predicted it would fail.
“We believe this lawsuit is wrong based on the facts and the law, and we will vigorously defend it,” the company said in a statement.
Bill Baer, a visiting scholar at Brookings and a former antitrust official under the Obama administration, said the case hinges on questions of motive.
He said, “The antitrust law and the courts' interpretation of it is that once a monopolist becomes a monopolist, there is a problem if he engages in conduct that has no legitimate business reason other than to restrict competition and solidify his monopoly. There is.”
This is the third time Apple has been sued by the U.S. government since 2009 and the first antitrust complaint brought against the company under President Joe Biden's administration.
If the government wins the lawsuit, Apple could be forced to review its current contracts and practices, potentially leading to a breakup of the company.
Apple shares fell more than 4% as investors digested the impact of the legal battle.
Any potential changes will take years to materialize as the lawsuit makes its way through the courts.
Rebecca Allensworth, a professor at Vanderbilt University, called the case a “blockbuster” that follows other lawsuits the Justice Department has filed against big tech giants. Google, Meta, and Amazon also face similar lawsuits.
He said the core of this is to enhance functionality between smartphones and make technology and software more accessible to consumers and other businesses.
“It's not about breaking Apple into smaller units or separating departments,” she said.
Apple is facing increasing legal backlash over its iOS ecosystem and business practices.
The company is in a long-running legal battle with Epic Games, the developer of Fortnite.
According to the European Commission, the company prevented streaming services from informing users of payment options other than Apple's app store.
Competition Commissioner Margrethe Vestager said Apple had abused its dominant market position for a decade and ordered the tech giant to lift all restrictions. Apple said it would appeal the decision.
Anat Aron Beck, a business law professor at Case Western Reserve University in Ohio, said the Justice Department's new lawsuit is “much broader” than previous legal challenges in the EU.
“This is not just about the 30% app store fee, this is about the root of Apple's misconduct,” he said, adding that it was “about time” for the Justice Department to take action.
“Apple is systematically excluding rivals from the Apple ecosystem. In doing so, Apple is harming far too many startups, stakeholders, customers, and in my opinion, shareholders.” ” she said.
Apple's share of the U.S. smartphone market is more than 70%, and the company's share of the broader smartphone market is more than 65%, according to the Department of Justice.
