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| People wait outside an Apple Store as Apple's new iPhone 15 officially goes on sale throughout China, in Shanghai, China September 22, 2023 |
WASHINGTON, March 21 (mod1s) - The U.S. Department of Justice and 15 states on Thursday sued Apple (AAPL.O), opens new tab as the government tightens down on Big Tech, saying the iPhone manufacturer monopolized the smartphone industry, damaged smaller competitors and pushed up costs.
Apple joins companies sued by authorities, including Alphabet's (GOOGL.O), opens new tab Google, Meta Platforms (META.O), opens new tab and Amazon.com (AMZN.O), opens new tab spanning the administrations of both former President Donald Trump and President Joe Biden.
"Consumers should not have to pay higher prices because companies violate the 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 alleged that Apple charges as much as $1,599 for an iPhone and earns greater profit than any others in the business. Officials also claimed Apple charges numerous business partners - from software developers to credit card firms and even its competitors such as Google - behind the scenes in ways that eventually boost costs for customers and push up Apple's profit.
Dating back to its time as a minor player in the personal computer industry, Apple's business model has historically been centered on charging consumers a premium for technological items where the firm controls practically all of the minutiae of how the gadget works and may be used. The Justice Department hopes to untangle that economic model by requiring Apple, which has a market value of $2.7 trillion, to provide people greater options over how applications may tap in to the hardware that Apple creates.
Shares of the iPhone manufacturer slid 4.1% to settle at $171.37 on Thursday.
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Apple refuted the charges made by the government.
"This lawsuit challenges who we are and the ideas that set Apple products different in extremely competitive marketplaces. If successful, it would hamper our ability to produce the sort of technology customers expect from Apple — where hardware, software, and services interact."
White House associate press secretary Michael Kikukawa said: "President Biden strongly supports fair and robust enforcement of the antitrust laws."
The Justice Department, which was also joined by the District of Columbia in the complaint, is demanding improvements at Apple. An official implied some type of split or decrease of the size of Apple was a possibility when they said "structural relief is also a form of equitable relief."
The 88-page lawsuit, filed in U.S. federal court in Newark, New Jersey, said it was focused on “freeing smartphone markets from Apple's anticompetitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing fees for developers, and preserving innovation for the future.”
In the lawsuit, the U.S. accused Apple of making it harder for consumers to block competitors and cited five examples where Apple used mechanisms to suppress technologies that would have increased competition among smartphones: so-called super apps, cloud stream game apps, messaging apps, smartwatches and digital wallets.
For example, the U.S. contends Apple made it more difficult for rival messaging applications and smartwatches to perform efficiently on its phones. It also contends that Apple's app store restrictions concerning streaming services for games have hindered competition.
The Justice Department intends to define the market as that of smartphones in the United States, where most experts say Apple holds somewhat more than half of the market. Apple spokespeople said they would attempt to convince the court to define the market as the worldwide smartphone market, where the iPhone has just one-fifth of customers.
The Justice Department quoted an email chain from Steve Jobs, the Apple co-founder who died in 2011, saying that it was "not fun to watch" how easily consumers could switch from iPhones to Android phones and vowing to "force" developers to use its payment systems in an effort to lock in both developers and consumers.
It is unclear what particular modifications the Justice Department desires. The case seeks a court to ban Apple from leveraging its control of app distribution, contracts and use of proprietary software interfaces to harm competitors and to require whatever else necessary "to restore competitive conditions in the markets affected by Apple’s unlawful conduct."
Apple has previously been subject to antitrust inquiries and orders in Europe, Japan and Korea, as well as litigation from business competitors such as Epic Games.
On Thursday Reuters reported that Apple, Meta Platforms and Alphabet's Google would be probed for suspected breaches of the European Union's Digital Markets Act that may lead to significant penalties by the end of the year, according to individuals with direct knowledge of the situation.
In Europe, Apple's App Store business model has been demolished by a new regulation dubbed the Digital Markets Act that went into force earlier this month. Apple wants to let developers create their own app shops - and, significantly, pay no commissions - but competitors such as Spotify (SPOT.N), opens new tab and Epic claim Apple is still making it too onerous to offer alternative app stores.