The Justice Department, along with over a dozen state attorneys general, has filed a lawsuit against Apple, alleging that the company holds an illegal monopoly in the smartphone market.
Attorney General Merrick Garland stated this morning that Apple “has maintained monopoly power in the smartphone market not by outperforming competitors on merit, but by breaching federal antitrust laws.
Consumers should not be subjected to higher prices due to corporate law violations.” He noted that Apple commands more than 70% of the high-performance smartphone market.
According to the lawsuit, the Justice Department and the states argue that “Apple has countered competitive threats not by lowering smartphone prices for consumers or offering better terms for developers, but by enforcing a series of shifting rules and restrictions in its App Store guidelines and developer agreements.
These practices allow Apple to levy higher fees, stifle innovation, degrade the user experience, and suppress competitive alternatives,” as stated by the Justice Department.
The lawsuit indicates that this strategy has been applied across various technologies, products, and services, including super apps, text messaging, smartwatches, and digital wallets.
This legal action represents the latest initiative under the Biden administration to limit the influence of major tech companies, with the DOJ and other regulatory bodies also pursuing lawsuits against Meta, Google, and Amazon.
Following the announcement, Apple’s stock price dropped by 3.54% within the first 90 minutes of trading.
Apple responded to the lawsuit, claiming it “endangers our essence and the values that distinguish Apple products in highly competitive markets. If successful, it could impede our capacity to develop the innovative technology that people anticipate from Apple—where hardware, software, and services converge.”
The company also warned that the lawsuit could establish a perilous precedent by enabling the government to excessively influence the design of consumer technology.”
The lawsuit also referenced the DOJ’s description of what it considers to be excessive pricing for consumers and app developers. It highlighted Apple’s 30% commission on iPhone App Store sales, a subject of antitrust hearings on Capitol Hill for some time.
“The lawsuit claims that Apple charges up to $1,599 for an iPhone, earning margins that are more than double those of other industry players,” the document reads. “It argues that when developers create a new app for iPhone users, Apple takes up to 30 percent of the sales price, despite not having contributed to the app’s content, product, or service.
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Furthermore, when a consumer purchases an additional service within that app, Apple again takes up to 30 percent, for a service it did not create or develop.
The lawsuit also notes that Apple imposes a fee on every ‘tap-to-pay’ transaction, adding a new cost for credit card use and receiving a portion of the advertising revenue from Google for searches made on iPhones.”
Garland asserted that Apple’s dominance over app developers has hindered the development of cloud streaming apps and has attempted to prevent users from becoming less reliant on its operating system and hardware.
“He also pointed out that Apple’s competitive practices include making it harder for iPhone users to communicate with users of non-Apple devices, as evidenced by issues with messaging and video quality,” he stated.
